<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
AIM Growth Series
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
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[ ] 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:
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4) Date Filed:
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<PAGE> 2
AIM ADVISOR LARGE CAP VALUE FUND
A PORTFOLIO OF AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
April 25, 2000
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your approval
of a proposed combination of AIM Advisor Large Cap Value Fund ("Large Cap Value
Fund") with AIM Basic Value Fund ("Basic Value Fund") (each a "Fund"). Large Cap
Value Fund is a series of AIM Advisor Funds, Inc. (the "Company"), an open-end
management investment company organized as a Maryland corporation. Basic Value
Fund is a series of AIM Growth Series (the "Trust"), an open-end management
investment company organized as a Delaware business trust. If the proposal is
approved and implemented, each shareholder of Large Cap Value Fund automatically
would become a shareholder of Basic Value Fund.
The Board of Directors of the Company believes that combining the two Funds
will benefit Large Cap Value Fund's shareholders by providing them with a
portfolio that has a broader investment mandate than Large Cap Value Fund. A I M
Advisors, Inc. ("AIM") serves as investment adviser to both Funds. INVESCO, Inc.
serves as sub-adviser to Large Cap Value Fund. The portfolio management team for
Basic Value Fund is experienced and has a performance record that is generally
superior to that of the portfolio management team for Large Cap Value Fund. To
achieve its investment objective of long-term growth of capital, Basic Value
Fund may invest in a wider variety of U.S. equity securities and foreign
securities. As a result, Basic Value Fund possesses greater flexibility than
Large Cap Value Fund to respond to opportunities in the marketplace. Basic Value
Fund's expenses are expected to decline following consummation of the proposed
combination, but are expected to be slightly higher than Large Cap Value Fund's
expenses. The accompanying document describes the proposed transaction and
compares the investment policies, operating expenses, and performance histories
of the Funds.
Shareholders of Large Cap Value Fund are being asked to approve an
Agreement and Plan of Reorganization by and among the Company, the Trust, and
AIM that will govern the reorganization of Large Cap Value Fund into Basic Value
Fund. After careful consideration, the Board of Directors of the Company has
unanimously approved the proposal and recommends that you read the enclosed
materials carefully and then vote FOR the proposal.
If you attend the meeting, you may vote your shares in person. If you
expect to attend the meeting in person, or have questions, please notify the
Company 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.
Your vote is important. Please take a moment now to sign and return your
proxy card in the enclosed postage-paid return envelope. If we do not hear from
you after a reasonable amount of time you may receive a telephone call from our
proxy solicitor, Shareholder Communications Corporation, reminding you to vote
your shares. You may also vote your shares on the Internet at the Fund's website
at http://www.aimfunds.com by following the instructions that appear on the
enclosed proxy insert.
Thank you for your cooperation and continued support.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 3
AIM ADVISOR LARGE CAP VALUE FUND
A PORTFOLIO OF AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 31, 2000
To THE SHAREHOLDERS OF AIM ADVISOR LARGE CAP VALUE FUND:
NOTICE IS HEREBY GIVEN that a special meeting of Shareholders ("Meeting")
of AIM Advisor Large Cap Value Fund ("Large Cap Value Fund"), an investment
portfolio of AIM Advisor Funds, Inc. (the "Company"), will be held at 11
Greenway Plaza, Suite 100, Houston, TX 77046-1173, on May 31, 2000, at 3:00
p.m., Central time, for the following purposes:
1. To approve an Agreement and Plan of Reorganization ("Agreement") by and
among the Company, acting on behalf of Large Cap Value Fund, AIM Growth Series,
acting on behalf of AIM Basic Value Fund and A I M Advisors, Inc., that provides
for the combination of Large Cap Value Fund and AIM Basic Value Fund ("Basic
Value Fund"), an investment portfolio of AIM Growth Series (the "Trust") (the
"Reorganization"). Pursuant to the Agreement, all of the assets of Large Cap
Value Fund will be transferred to Basic Value Fund, Basic Value Fund will assume
all of the liabilities of Large Cap Value Fund, and the Trust will issue to each
shareholder a number of full and fractional shares of the applicable class of
Basic Value Fund having an aggregate value that, on the effective date of the
Reorganization, is equal to the aggregate net asset value of the shareholder's
shares of common stock of the corresponding class of Large Cap Value Fund. The
value of each Large Cap Value Fund shareholder's account with Basic Value Fund
immediately after the Reorganization will be the same as the value of such
shareholder's account with Large Cap Value Fund immediately prior to the
Reorganization. The Reorganization has been structured as a tax-free
transaction. No initial sales charge will be imposed in connection with the
Reorganization; and
2. To transact such other business, not currently contemplated, that may
properly come before the Meeting, or any adjournment thereof, in the discretion
of the proxies or their substitutes.
Shareholders of record as of the close of business on April 3, 2000, are
entitled to notice of, and to vote at, the Meeting or any adjournment thereof.
SHAREHOLDERS ARE REQUESTED TO EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE MANAGEMENT OF
THE COMPANY. YOU MAY ALSO VOTE YOUR SHARES THROUGH A WEB SITE ESTABLISHED FOR
THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY INSERT. YOUR
VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL MEETING.
PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE SUBSEQUENT
EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE OF
REVOCATION TO THE COMPANY AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING
IN PERSON AT THE SPECIAL MEETING.
/s/ CAROL F. RELIHAN
Carol F. Relihan
Senior Vice President and Secretary
April 25, 2000
<PAGE> 4
AIM ADVISOR LARGE CAP VALUE FUND
PORTFOLIO OF AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
AIM BASIC VALUE FUND
PORTFOLIO OF AIM GROWTH SERIES
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: APRIL 25, 2000
This document is being furnished in connection with a special meeting of
shareholders of AIM Advisor Large Cap Value Fund ("Large Cap Value Fund"), an
investment portfolio of AIM Advisor Funds, Inc. (the "Company"), a Maryland
corporation, to be held at 11 Greenway Plaza, Suite 100, Houston, TX 77046 on
May 31, 2000, at 3:00 p.m., Central time (such meetings and any adjournments
thereof are referred to as the "Meeting"). At the Meeting, the shareholders of
Large Cap Value Fund are being asked to consider and approve an Agreement and
Plan of Reorganization (the "Agreement") by and among the Company, acting on
behalf of Large Cap Value Fund, AIM Growth Series (the "Trust"), a Delaware
business trust, acting on behalf of AIM Basic Value Fund ("Basic Value Fund"),
and A I M Advisors, Inc. ("AIM"). The Agreement provides for the combination of
Large Cap Value Fund with Basic Value Fund (each a "Fund") (the
"Reorganization"). The Agreement is attached as Appendix I to this Combined
Proxy Statement and Prospectus ("Proxy Statement/Prospectus"). THE BOARD OF
DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE AGREEMENT AS BEING IN THE
BEST INTEREST OF LARGE CAP VALUE FUND'S SHAREHOLDERS.
Pursuant to the Agreement, all of the assets of Large Cap Value Fund will
be transferred to Basic Value Fund, Basic Value Fund will assume all of the
liabilities of Large Cap Value Fund, and the Trust will issue a number of full
and fractional shares of the applicable class of Basic Value Fund having an
aggregate value that, on the effective date of the Reorganization, is equal to
the aggregate net asset value of the shareholder's shares of common stock of the
corresponding class of Large Cap Value Fund. The value of each Large Cap Value
Fund shareholder's account with Basic Value Fund immediately after the
Reorganization will be the same as the value of such shareholder's account with
Large Cap Value Fund immediately prior to the Reorganization. The Reorganization
has been structured as a tax-free transaction. No initial sales charge will be
imposed in connection with the Reorganization.
Basic Value Fund is a diversified series of the Trust, which is an open-end
management investment company. Basic Value Fund's investment objective is
long-term growth of capital. Basic Value Fund seeks to achieve its investment
objective by investing all of its investable assets in the Value Portfolio (the
"Portfolio") which, in turn, normally invests at least 65% of its total assets
in equity securities of U.S. issuers that have market capitalizations of greater
than $500 million and that the portfolio managers believe to be undervalued in
relation to long-term earning power or other factors.
Prior to the closing date of the Reorganization, it is anticipated that the
master-feeder structure in which Basic Value Fund invests in the Portfolio will
be eliminated, and Basic Value Fund will invest directly in its portfolio
securities ("Restructuring"). Such Restructuring is conditioned on Basic Value
Fund's shareholders approving an investment advisory agreement with AIM. Unless
otherwise specified, the information in this Proxy Statement/Prospectus
regarding Basic Value Fund assumes that the Restructuring is consummated.
This Proxy Statement/Prospectus sets forth the information that a
shareholder of Large Cap Value Fund should know before voting on the Agreement.
It should be read and retained for future reference.
<PAGE> 5
The current Prospectus of Large Cap Value Fund, dated May 3, 1999, as
revised December 15, 1999, and supplemented March 22, 2000, together with the
related Statement of Additional Information, dated May 3, 1999, as revised July
1, 1999, and supplemented October 1, 1999 and January 24, 2000, together with
the Annual Report to Shareholders for the fiscal year ended December 31, 1999,
are on file with the Securities and Exchange Commission (the "SEC") and are
incorporated by reference into this Proxy Statement/Prospectus. The current
Prospectus of Basic Value Fund, dated May 3, 1999, as revised October 25, 1999,
and supplemented February 11, 2000, February 25, 2000 and March 22, 2000,
together with the related Statement of Additional Information, dated May 3,
1999, as supplemented September 13, 1999, October 6, 1999, February 11, 2000 and
March 22, 2000, together with the Annual Report to Shareholders for the fiscal
year ended December 31, 1999, are on file with the SEC and are incorporated by
reference into this Proxy Statement/Prospectus. It is anticipated that, prior to
the closing of the Reorganization, Basic Value Fund will have collapsed its
master-feeder structure, entered into an investment advisory contract, changed
its investment objective to non-fundamental, and amended its fundamental
investment restrictions. A copy of the Prospectus of Basic Value Fund is
attached as Appendix II to this Proxy Statement/Prospectus. Such documents are
available without charge by writing to A I M Fund Services, Inc., P.O. Box 4739,
Houston, Texas 77210-4739 or by calling (800) 347-4246. The SEC maintains a web
site at http://www.sec.gov that contains the prospectuses and statements of
additional information described above, material incorporated by reference, and
other information about the Company. Additional information about Large Cap
Value Fund and Basic Value Fund may also be obtained on the web at
http://www.aimfunds.com.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(ii)
<PAGE> 6
[AIM LOGO APPEARS HERE]
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION TITLE PAGE
- ------------- ----
<S> <C>
INTRODUCTION................................................ 1
REASONS FOR THE REORGANIZATION.............................. 2
Background and Reasons for the Reorganization............. 2
Board Considerations...................................... 2
SYNOPSIS.................................................... 4
The Reorganization........................................ 4
Comparison of Large Cap Value Fund and Basic Value Fund... 4
RISK FACTORS................................................ 8
Equity Securities Risk.................................... 8
Foreign Securities Risk................................... 8
Small- and Mid-Cap Companies Risk......................... 8
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES............ 8
Investment Objectives of Basic Value Fund and Large Cap
Value Fund............................................. 8
Investment Policies of Basic Value Fund and Large Cap
Value Fund............................................. 9
Portfolio Management...................................... 9
Management Discussion and Analysis of Performance......... 10
FINANCIAL HIGHLIGHTS........................................ 10
ADDITIONAL INFORMATION ABOUT THE AGREEMENT.................. 12
Terms of the Reorganization............................... 12
The Reorganization........................................ 12
Other Terms............................................... 13
Federal Tax Considerations................................ 13
Accounting Treatment...................................... 14
RIGHTS OF SHAREHOLDERS...................................... 14
Liability of Shareholders................................. 14
Election of Trustees/Directors; Terms..................... 15
Removal of Trustees/Directors............................. 15
Meeting of Shareholders................................... 15
Liability of Trustees/Directors and Officers;
Indemnification........................................ 16
Termination............................................... 16
Voting Rights of Shareholders............................. 16
Dissenters' Rights........................................ 16
Amendments to Organization Documents...................... 17
OWNERSHIP OF LARGE CAP VALUE FUND AND BASIC VALUE FUND
SHARES.................................................... 17
Ownership of Officers and Trustees/Directors.............. 18
CAPITALIZATION.............................................. 19
LEGAL MATTERS............................................... 19
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 19
ADDITIONAL INFORMATION ABOUT LARGE CAP VALUE FUND AND BASIC
VALUE FUND................................................ 20
EXPERTS..................................................... 20
APPENDIX I....................Agreement and Plan of Reorganization
APPENDIX II.....................Prospectus of AIM Basic Value Fund
APPENDIX III.....Discussion of Performance of AIM Basic Value Fund
</TABLE>
(iii)
<PAGE> 7
The AIM Family of Funds, the AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Link, AIM Institutional Funds, aimfunds.com,
Invest with Discipline, La Familia AIM de Fondos, La Familia AIM de Fondos and
Design, Invierta con Disciplina, AIM Funds, AIM Funds and Design and AIM
Investor, are registered service marks and AIM Bank Connection and AIM Internet
Connect are service marks of A I M Management Group Inc.
(iv)
<PAGE> 8
INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of the Company from the
shareholders of Large Cap Value Fund for use at the Meeting.
All properly executed and unrevoked proxies received in time for the
Meeting will be voted in accordance with the instructions contained therein. If
no instructions are given, shares represented by proxies will be voted FOR the
proposal to approve the Agreement and in accordance with management's
recommendation on other matters. The presence in person or by proxy of one-third
of the outstanding shares of common stock of Large Cap Value Fund at the Meeting
will constitute a quorum ("Quorum"). If a Quorum is not present at the Meeting
or a Quorum is present but sufficient votes to approve the proposal described
herein ("Proposal") are not received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority of
the shares represented at the Meeting in person or by proxy. The persons named
as proxies will vote those proxies that they are entitled to vote FOR the
Proposal in favor of such an adjournment and will vote those proxies required to
be voted AGAINST the Proposal against such adjournment. In addition, if you
sign, date and return the proxy card, but give no voting instructions, the duly
appointed proxies may, in their discretion, vote upon such other matters as may
come before the Meeting.
Approval of the Agreement requires the affirmative vote of a majority of
the shares cast by shareholders of Large Cap Value Fund at the Meeting.
Abstentions and broker non-votes will be counted as shares present at the
Meeting for quorum purposes, but will not be considered votes cast at the
Meeting. Broker non-votes arise from a proxy returned by a broker holding shares
for a customer which indicates that the broker has not been authorized by the
customer to vote on a proposal. Any person giving a proxy has the power to
revoke it at any time prior to its exercise by executing a superseding proxy or
by submitting a written notice of revocation to the Secretary of the Company. To
be effective, such revocation must be received by the Secretary of the Company
prior to the Meeting and must indicate your name and account number. In
addition, although mere attendance at the Meeting will not revoke a proxy, a
registered shareholder present at the Meeting may withdraw his proxy and vote in
person. Shareholders may also transact any other business not currently
contemplated that may properly come before the Meeting in the discretion of the
proxies or their substitutes.
Shareholders of record as of the close of business on April 3, 2000 (the
"Record Date"), are entitled to vote at the Meeting. On the Record Date, there
were 6,735,738.841 shares of Large Cap Value Fund outstanding. Each share is
entitled to one vote for each full share held, and a fractional vote for a
fractional share held. To the knowledge of the Trust's management, as of the
Record Date, there were no beneficial owners of 5% or more of the outstanding
shares of any class of Large Cap Value Fund, except as indicated below in
"Ownership of Large Cap Value Fund and Basic Value Fund Shares."
The Company has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the Meeting.
The Company expects to solicit proxies principally by mail, but the Company or
SCC may also solicit proxies by telephone, facsimile, telegraph, or personal
interview. The Company officers and employees of AIM who assist in proxy
solicitation will not receive any additional or special compensation for any
such efforts. The cost of shareholder solicitation incurred in connection with
the Reorganization is anticipated to be approximately $5,300 and will be borne
by Large Cap Value Fund and Basic Value Fund. The Company will request
broker/dealer firms, custodians, nominees, and fiduciaries to forward proxy
material to the beneficial owners of the shares held of record by such persons.
The Company may reimburse such brokers/dealer firms, custodians, nominees, and
fiduciaries for their reasonable expenses incurred in connection with such proxy
solicitation.
The Company intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about April 25, 2000.
1
<PAGE> 9
REASONS FOR THE REORGANIZATION
BACKGROUND AND REASONS FOR THE REORGANIZATION
The Company was organized in 1989 as a Maryland corporation, and is
registered with the SEC as an open-end, series, management investment company.
The Company was known as INVESCO Advisor Funds, Inc. prior to August 4, 1997,
and EBI Funds, Inc. prior to January 16, 1996. Large Cap Value Fund is a
diversified series of the Company. AIM became the investment adviser to each of
the Company's funds, including Large Cap Value Fund, on August 4, 1997. INVESCO,
Inc. ("INVESCO"), an affiliated company of AIM, currently serves as sub-adviser
to Large Cap Value Fund.
The Trust was organized in 1985 as a Massachusetts business trust. The
Trust was reorganized on May 29, 1998, as a Delaware business trust, and is
registered with the SEC as an open-end, series, management investment company.
Prior to May 29, 1998, the Trust was known as G.T. Global Growth Series. Basic
Value Fund, formerly AIM America Value Fund and prior thereto, GT Global America
Value Fund, is a diversified series of the Trust. AIM became the investment
adviser to Basic Value Fund on September 8, 1998, after it acquired the parent
of the prior adviser, Chancellor LGT Asset Management, Inc.
AIM proposes the Reorganization because Basic Value Fund has greater
investment flexibility and superior performance as compared to Large Cap Value
Fund. Basic Value Fund's expenses are currently higher than those of Large Cap
Value Fund. Basic Value Fund's expenses are expected to decline following
consummation of the proposed combination, but are expected to be slightly higher
than Large Cap Value Fund's expenses. AIM expects that the Reorganization would
provide benefits to both Large Cap Value Fund and Basic Value Fund by increasing
investment choices and possibly helping to achieve cost savings. As of February
16, 2000, Basic Value Fund had approximately $155.7 million in assets, and Large
Cap Value Fund had approximately $140.8 million.
BOARD CONSIDERATIONS
AIM, the investment adviser to Basic Value Fund and Large Cap Value Fund
has proposed the Reorganization and recommended that the Board of Directors of
the Company approve the Reorganization. Based upon AIM's recommendation and
extensive inquiry into a number of factors with respect to the Reorganization,
the Board of Directors of the Company, including a majority of directors who are
not "interested persons" ("Independent Directors") as that term is defined in
the Investment Company Act of 1940 ("1940 Act"), has determined that the
Reorganization is in the best interests of the shareholders of Large Cap Value
Fund, that the terms of the Reorganization are fair and reasonable, and that the
interests of Large Cap Value Fund's shareholders will not be diluted as a result
of the Reorganization.
At a meeting of the Board of Directors held on March 8, 2000, AIM proposed
that the Board of Directors approve the Reorganization of Large Cap Value Fund
into Basic Value Fund. The Board received from AIM written materials that
described the structure and tax consequences of the Reorganization and contained
information concerning Large Cap Value Fund and Basic Value Fund, including
comparative total return and fee and expense information, a comparison of the
investment objectives and primary investment policies of Large Cap Value Fund
and Basic Value Fund, pro forma expense ratios, and biographical information on
the portfolio managers of the Portfolio.
The Board made an extensive inquiry into a number of factors with respect
to the Reorganization, including: (1) the compatibility of the Funds' investment
objectives, policies, and restrictions; (2) the effect of the Reorganization on
the expense ratio of Basic Value Fund and that expense ratio relative to each
Fund's current expense ratio; (3) the capabilities, experience, and performance
of the portfolio management team for Basic Value Fund; (4) the Funds' respective
investment performances; (5) the relationship of risk versus return for the
Funds; (6) the net effect to the assets of Large Cap Value Fund of redemptions
exceeding new investments; (7) the costs to be incurred by each Fund as a result
of the Reorganization; (8) the tax consequences of the Reorganization; (9)
possible alternatives to the Reorganization, including continuing to operate
Large Cap Value Fund on a stand-alone basis or liquidating Large Cap Value Fund;
and (10) the potential benefits of the Reorganization to other persons,
especially AIM and its affiliates.
2
<PAGE> 10
In considering the Reorganization, the Board considered the fact that Basic
Value Fund has a broader investment mandate than Large Cap Value Fund and can
invest in a wider variety of U.S. equity and foreign securities than can Large
Cap Value Fund. AIM noted its belief that Basic Value Fund's ability to invest
more extensively in U.S. equity and foreign securities gives it greater
flexibility than Large Cap Value Fund to effectively respond to opportunities in
the markets. Such flexibility could, over the long term, benefit shareholders.
The Board noted that although investment in Basic Value Fund involves greater
risk than in investment in Large Cap Value Fund, Basic Value Fund has exhibited
superior performance than Large Cap Value Fund. The Board also noted that
redemptions from Large Cap Value Fund currently exceed new investments in the
Fund.
The Board noted that although the expense ratios of Basic Value Fund are
higher than Large Cap Value Fund, and the pro forma expense ratio of the
combined Basic Value Fund is slightly higher than that of Large Cap Value Fund
for Class A, Class B and Class C shares, as shown below, AIM has contractually
agreed to waive fees and reimburse expenses to limit Basic Value Fund's total
annual operating expenses (excluding interest, taxes, dividend expense on short
sales and extraordinary items) of Class A, Class B and Class C to 1.32%, 1.97%
and 1.97%, (Large Cap Value Fund's current expense accrual rates) respectively,
until June 30, 2001. The Board was further advised that the expense ratio of
Basic Value Fund also could decrease if, as a result of the Reorganization, the
combined Fund experienced increased sales of its shares.
COMPARATIVE OPERATING EXPENSES (NET OF WAIVERS) FOR THE YEAR ENDED DECEMBER
31, 1999
<TABLE>
<CAPTION>
AIM ADVISOR LARGE CAP
VALUE FUND AIM BASIC VALUE FUND PRO FORMA
--------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Expense Ratio..... 1.26% 1.95% 1.95% 1.69% 2.34% 2.34% 1.32% 1.97% 1.97%
</TABLE>
The Board also considered the capabilities, experience, and performance of
the portfolio management team of Basic Value Fund and the performance of Large
Cap Value Fund in relation to the performance of Basic Value Fund. AIM advised
the Board that, while past performance is no guarantee of future results, the
portfolio management team of Basic Value Fund produced superior investment
performance than the portfolio management team of Large Cap Value Fund. As of
December 31, 1999, the Morningstar ratings and Lipper Inc. rankings for Large
Cap Value Fund and Basic Value Fund were as follows:
Morningstar Rating(1)
<TABLE>
<CAPTION>
OVERALL 3-YEAR 5-YEAR 10-YEAR
------- ------ ------ -------
<S> <C> <C> <C> <C>
Large Cap Value Fund.................................. 2 2 2 2
Basic Value Fund...................................... 3 3 n/a n/a
</TABLE>
Lipper Rank (Percentile)(2)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR 5-YEAR 10-YEAR
------- ------ ------ -------
<S> <C> <C> <C> <C>
Large Cap Value Fund.................................. 87% 71% 82% 76%
Basic Value Fund...................................... 15% 38% n/a n/a
</TABLE>
- ---------------
(1) Under the Morningstar rating system, the top 10% of funds in a category
receive 5 stars, the next 22.5% receive 4 stars, the middle 35% receive 3
stars, the next 22.5% receive 2 stars, and the bottom 10% receive a single
star.
(2) Under the Lipper ranking system, the lower the percentile rank the better
the performance.
AIM also advised the Board that it expected to receive some immediate
benefits from the Reorganization. AIM expects to realize some administrative
benefit from the combination of Large Cap Value Fund and Basic Value Fund as a
result of economies of scale. In addition, AIM currently pays an affiliated
sub-adviser a portion of the advisory fees that it receives from Large Cap Value
Fund, and AIM Distributors,
3
<PAGE> 11
an affiliate of AIM, voluntarily waives fees for Large Cap Value Fund. As a
result of the Reorganization, AIM (or an affiliate) would no longer waive any
portion of its fees, and AIM would retain its entire advisory fee. However, AIM
will receive a lower advisory and administration fee when the assets of Large
Cap Value Fund become assets of Basic Value Fund. The effective rate of current
advisory and administration fees for Basic Value Fund for the fiscal year ended
December 31, 1999, was 0.73%. The effective rate of current advisory and
administration fees for Large Cap Value Fund for the same period was 0.75%.
However, AIM noted that it could benefit in the future if the combined assets of
Basic Value Fund grow faster after the proposed Reorganization than the assets
of Large Cap Value Fund and Basic Value Fund separately would have grown in the
absence of the Reorganization.
The Board noted that no initial sales or other charges would be imposed on
any Basic Value Fund shares issued to Large Cap Value Fund shareholders in
connection with the Reorganization. Finally, the Board reviewed the principal
terms of the Agreement. The Board also noted that Large Cap Value Fund would be
provided with an opinion of counsel that the Reorganization would be tax-free to
Large Cap Value Fund and its shareholders.
On the basis of the information provided to the Board and on their
evaluation of the Reorganization, the Board determined that the proposed
Reorganization will not dilute the interests of shareholders of Large Cap Value
Fund or Basic Value Fund and is in the best interest of the shareholders of
Large Cap Value Fund in view of Basic Value Fund's broader investment mandate
and greater flexibility to invest. Therefore, the Board recommended the approval
of the Agreement by the shareholders of Large Cap Value Fund at a special
meeting.
SYNOPSIS
THE REORGANIZATION
The Reorganization will result in the combination of Large Cap Value Fund
with Basic Value Fund. Large Cap Value Fund is a portfolio of the Company, a
Maryland corporation. Basic Value Fund is a portfolio of the Trust, a Delaware
business trust.
If shareholders of Large Cap Value Fund approve the Agreement and other
closing conditions are satisfied, all of the assets of Large Cap Value Fund will
be transferred to Basic Value Fund, Basic Value Fund will assume all of the
liabilities of Large Cap Value Fund, and the Trust will issue Class A shares of
Basic Value Fund to Large Cap Value Fund's Class A shareholders, Class B shares
of Basic Value Fund to Large Cap Value Fund's Class B shareholders, and Class C
shares of Basic Value Fund to Large Cap Value Fund's Class C shareholders. The
shares of Basic Value Fund issued in the Reorganization will have an aggregate
net asset value equal to the value of Large Cap Value Fund's net assets
transferred to Basic Value Fund. Shareholders will not pay any initial sales
charge for shares of Basic Value Fund received in connection with the
Reorganization. The value of each shareholder's account with Basic Value Fund
immediately after the Reorganization will be the same as the value of such
shareholder's account with Large Cap Value Fund immediately prior to the
Reorganization. A copy of the Agreement is attached as Appendix I to this Proxy
Statement/Prospectus. See "Additional Information About the Agreement" herein.
The Company will receive an opinion of Kirkpatrick & Lockhart LLP, the
Trust's counsel, to the effect that the Reorganization will constitute a
tax-free reorganization within the meaning of section 368(a)(1) of the Internal
Revenue Code of 1986, as amended ("Code"). Accordingly, no gain or loss will be
recognized to either Fund or their shareholders as a result of the
Reorganization. See "Additional Information About the Agreement -- Federal Tax
Considerations" herein.
COMPARISON OF LARGE CAP VALUE FUND AND BASIC VALUE FUND
INVESTMENT OBJECTIVES AND POLICIES
The investment objective and policies of Large Cap Value Fund are similar
to the investment objective and policies of Basic Value Fund with which it will
combine.
4
<PAGE> 12
Basic Value Fund seeks to provide long-term growth of capital by investing
at least 65% of its total assets in equity securities of U.S. issuers that have
market capitalizations of greater than $500 million and that the portfolio
managers believe to be undervalued in relation to long-term earning power or
other factors. Large Cap Value Fund seeks to achieve a high total return on
investment through growth of capital and current income, without regard to
federal income tax considerations, by investing primarily in equity securities
of issuers with market capitalizations among the largest 800 publicly traded
U.S. corporations.
INVESTMENT ADVISORY SERVICES
AIM serves as investment adviser, and INVESCO serves as sub-adviser, to
Large Cap Value Fund. AIM also serves as investment adviser to the Portfolio,
and it is anticipated that AIM will serve as Basic Value Fund's investment
adviser. INVESCO does not act as sub-adviser for Basic Value Fund; the
Reorganization will end INVESCO's role in the management of Large Cap Value
Fund's assets.
PERFORMANCE
Set forth below are average annual total returns for the periods indicated
for Basic Value Fund and Large Cap Value Fund. The average annual total return
figures take into account sales charges applicable to purchases of Class A
shares or redemptions of Class B or Class C shares of the Funds. Past
performance cannot guarantee future results.
<TABLE>
<CAPTION>
LARGE CAP VALUE FUND BASIC VALUE FUND
--------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1 Year Ended Dec. 31, 1999................. (5.52)% (5.08)% (1.58)% 24.75% 26.13% n/a
3 Years Ended Dec. 31, 1999................ 12.37% n/a 13.65% 19.33% 20.12% n/a
5 Years Ended Dec. 31, 1999................ n/a n/a 17.51% n/a n/a n/a
10 Years Ended Dec. 31, 1999............... n/a n/a 12.97% n/a n/a n/a
</TABLE>
EXPENSES
Set forth below is a comparison of annual operating expenses as a
percentage of net assets ("Expense Ratio") for the Class A, Class B, and Class C
shares of Large Cap Value Fund and Basic Value Fund for the year ended December
31, 1999. The pro forma estimated Expense Ratios of Basic Value Fund giving
effect to the Reorganization is also provided.
<TABLE>
<CAPTION>
BASIC VALUE FUND
LARGE CAP VALUE FUND BASIC VALUE FUND PRO FORMA ESTIMATED
--------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum sales load on
purchase of shares (as
a % of offering
price)(1)............. 5.50% None None 5.50% None None 5.50% None None
Deferred Sales Charge
(as a % of original
purchase price or
redemption proceeds,
as applicable)(1)..... None 5.00% 1.00% None 5.00% 1.00% None 5.00% 1.00%
ANNUAL OPERATING
EXPENSES (AS A % OF
NET ASSETS)
Management Fees......... 0.75% 0.75% 0.75% 0.72% 0.72% 0.72% 0.73% 0.73% 0.73%
Rule 12b-1
Distribution.......... 0.35% 1.00% 1.00% 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
</TABLE>
5
<PAGE> 13
<TABLE>
<CAPTION>
BASIC VALUE FUND
LARGE CAP VALUE FUND BASIC VALUE FUND PRO FORMA ESTIMATED
--------------------------- --------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Plan Payments(2)........
All Other Expenses(3)... 0.26% 0.20% 0.20% 0.64% 0.64% 0.64% 0.31% 0.31% 0.31%
----- ---- ---- ----- ---- ---- ------ ---- ----
Total Annual Fund
Operating Expenses.... 1.36% 1.95% 1.95% 1.71% 2.36% 2.36% 1.39% 2.04% 2.04%
Fee Waiver(4)........... (0.10)% --% --% (0.02)% (0.02)% (0.02)% (0.07)% (0.07)% (0.07)%
----- ---- ---- ----- ---- ---- ------ ---- ----
Net Expenses............ 1.26% 1.95% 1.95% 1.69% 2.34% 2.34% 1.32% 1.97% 1.97%
</TABLE>
- ---------------
(1) Sales charge waivers are available for Class A and reduced sales charge
purchase plans are available for Class A shares. The maximum 5% contingent
deferred sales charges ("CDSC") on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter, reaching zero after six years. The maximum CDSCs on
Class C shares apply to redemptions only during the first year after
purchase.
(2) 12b-1 distribution fees include asset-based sales charges.
(3) "Other expenses" include custody, transfer agent, legal and audit fees and
other operating expenses.
(4) AIM Distributors has contractually agreed to limit Large Cap Value Fund's
Class A shares' Rule 12b-1 distribution plan payments to 0.25%. AIM has
agreed to reimburse incremental master-feeder expenses incurred by Basic
Value Fund. Further, AIM has contractually agreed to waive fees and
reimburse expenses to limit Basic Value Fund's Proforma total annual
operating expenses (excluding interest, taxes, dividend expense on short
sales and extraordinary items) of Class A, Class B and Class C to 1.32%,
1.97% and 1.97%, respectively, until June 30, 2001.
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES
An investor would have directly or indirectly paid the following expenses
on a $10,000 investment under the existing and estimated fees and expenses
stated above, assuming a 5% annual return. To the extent fees are waived, the
expenses will be lower.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS(3)
---- ------ ------ --------
<S> <C> <C> <C> <C>
LARGE CAP VALUE FUND
Class A shares(1)......................................... $681 $ 957 $1,254 $2,095
Class B shares:
Assuming complete redemption at end of period(2)....... $698 $ 912 $1,252 $2,122
Assuming no redemption................................. $198 $ 612 $1,052 $2,122
Class C shares
Assuming complete redemption at end of period(2)....... $298 $ 612 $1,052 $2,275
Assuming no redemption................................. $198 $ 612 $1,052 $2,275
BASIC VALUE FUND
Class A shares(1)......................................... $714 $1,059 $1,427 $2,458
Class B shares:
Assuming complete redemption at end of period(2)....... $739 $1,036 $1,460 $2,535
Assuming no redemption................................. $239 $ 736 $1,260 $2,535
Class C shares
Assuming complete redemption at end of period(2)....... $339 $ 736 $1,260 $2,696
Assuming no redemption................................. $239 $ 736 $1,260 $2,696
COMBINED FUND
Class A shares(1)......................................... $684 $ 966 $1,269 $2,127
Class B shares:
Assuming complete redemption at end of period(2)....... $707 $ 940 $1,298 $2,202
</TABLE>
6
<PAGE> 14
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS(3)
---- ------ ------ --------
<S> <C> <C> <C> <C>
Assuming no redemption................................. $207 $ 640 $1,098 $2,202
Class C shares
Assuming complete redemption at end of period(2)....... $307 $ 640 $1,098 $2,369
Assuming no redemption................................. $207 $ 640 $1,098 $2,369
</TABLE>
- ---------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes payment of the applicable CDSC.
(3) For Class B shares, this number reflects the conversion to Class A shares
eight years following the end of the calendar month in which the purchase
was made.
SALES CHARGES
No sales charges are applicable to shares of Basic Value Fund received in
connection with the Reorganization.
The Class A shares of both Basic Value Fund and Large Cap Value Fund are
sold subject to a maximum initial sales charge of 5.50%. Class B shares of both
Funds are sold subject to a maximum contingent deferred sales charge ("CDSC") of
5.00% of the lesser of the net asset value ("NAV") at time of purchase or sale,
which declines to zero after six years. The Class C shares of both Funds are
sold without initial sales charges but are subject to a maximum CDSC of 1.00% of
the lesser of the NAV at time of purchase or sale, only during the first year.
For purposes of calculating the CDSC, the holding period for the Class B and
Class C shares distributed to Class B and Class C shareholders of Large Cap
Value Fund, respectively, will be treated as having the same period that the
shares of Large Cap Value Fund previously held. New purchases of Class A, Class
B, and Class C shares of Basic Value Fund by any shareholders will be subject to
their terms, including, for example, for Class A shares, the 5.50% initial sales
charge. As is currently the case for both Funds, no CDSC will be applied to
redemptions of Class B shares that represent reinvested dividends or other
distributions, nor will Class A shares so acquired be subject to any initial
sales charge.
DISTRIBUTION; PURCHASE, EXCHANGE AND REDEMPTION
Shares of Basic Value Fund and Large Cap Value Fund are distributed by
A I M Distributors, Inc. ("AIM Distributors"). The Class A shares of Basic Value
Fund and Large Cap Value Fund pay a fee in the amount of 0.35% of average daily
net assets to AIM Distributors for distribution services. AIM Distributors has
contractually agreed to waive 0.10% of the fee relating to Class A shares of
Large Cap Value Fund. The Class B and Class C shares of Basic Value Fund and
Large Cap Value Fund pay AIM Distributors fees at an annual rate of 1.00% of the
average daily net assets attributable to the Class B and Class C shares,
respectively, for distribution services. For more information, see the
discussion under the heading "Shareholder Information -- Distribution and
Service (12b-1) Fees" in the Basic Value Fund Prospectus attached as Appendix II
to this Proxy Statement/Prospectus.
7
<PAGE> 15
Purchase and redemption procedures are the same for Basic Value Fund and
Large Cap Value Fund. Shares of Basic Value Fund and Large Cap Value Fund may be
exchanged for shares of other funds within The AIM Family of Funds--Registered
Trademark-- of the same class, as provided in each Fund's prospectus. No initial
sales charge will be imposed on the shares being acquired, and no CDSC will be
imposed on the shares being disposed of, through an exchange. However, a CDSC
may apply to redemptions of an AIM Fund's Class B or Class C shares acquired
through an exchange. Exchanges will be subject to minimum investment and other
requirements of the Fund into which exchanges are made.
RISK FACTORS
Basic Value Fund and Large Cap Value Fund are subject to substantially
similar investment risks as a result of their investment in equity securities of
U.S. issuers and foreign securities. Basic Value Fund is subject to additional
risk as a result of its investment in a greater percentage of equity securities
of small- and mid-cap U.S. issuers. The principal risks to Basic Value Fund from
investing in equity securities, foreign securities, and small- and mid-cap
companies are discussed herein.
EQUITY SECURITIES RISK
The prices of equity securities change in response to many factors,
including the historical and prospective earnings of the issuer, the value of
its assets, general economic conditions, interest rates, investor perceptions,
and market liquidity.
Equity securities, particularly common stock, generally represent the most
junior position in an issuer's capital structure and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims have been satisfied.
FOREIGN SECURITIES RISK
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity, and the potential lack of strict
financial and accounting controls and standards.
SMALL-AND MID-CAP COMPANIES RISK
Small-cap companies and, to a lesser degree, mid-cap companies may be more
vulnerable than larger companies to adverse business, economic, or market
developments. Smaller companies may have more limited product lines, markets, or
financial resources than companies with larger capitalizations, and may be more
dependent on a relatively small management group. In addition, smaller companies
may not be well known to the investing public, may not have institutional
ownership, and may have only cyclical, static, or moderate growth prospects.
Most small-cap company stocks pay low or no dividends. Securities of
small-cap companies are generally less liquid and their prices more volatile
than those of securities of larger companies. The securities of some small-cap
companies may not be widely traded, and Basic Value Fund's position in
securities of such companies may be substantial in relation to the market for
such securities. Accordingly, it may be difficult for Basic Value Fund to
dispose of securities of these small-cap companies at prevailing market prices
in order to meet redemptions.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES OF BASIC VALUE FUND AND LARGE CAP VALUE FUND
Basic Value Fund seeks long-term growth of capital.
Large Cap Value Fund seeks high total return on investment through growth
of capital and current income, without regard to federal income tax
considerations.
8
<PAGE> 16
INVESTMENT POLICIES OF BASIC VALUE FUND AND LARGE CAP VALUE FUND
Under normal market conditions, Basic Value Fund invests at least 65% of
its total assets in equity securities, including common stocks, preferred
stocks, convertible debt securities, and warrants to acquire such securities, of
U.S. issuers that have market capitalizations of greater than $500 million and
that the portfolio managers believe to be undervalued in relation to long-term
earning power or other factors. Basic Value Fund may also invest up to 35% of
its total assets in equity securities of U.S. issuers that have market
capitalizations of less than $500 million and in investment-grade
non-convertible debt securities, U.S. government securities, and high-quality
money market instruments, all of which are issued by U.S. issuers. It may also
invest up to 25% of its total assets in foreign securities.
In managing Basic Value Fund, the portfolio managers seek to identify those
companies whose prospects and growth potential are undervalued by investors and
that provide the potential for attractive returns. The portfolio managers
allocate investments among fixed-income securities based on their views as to
the best values then available in the marketplace. The portfolio managers
consider whether to sell a particular security when any of those factors
materially change.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, Basic Value Fund may temporarily
hold all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, or high-quality debt securities. As a result,
Basic Value Fund may not achieve its investment objective.
Under normal market conditions, Large Cap Value Fund invests at least 65%
of its investments in equity securities including common stocks and, to a lesser
extent, convertible securities, of selected companies with market
capitalizations among the largest 800 publicly traded U.S. corporations. The
portfolio managers may also invest up to 10% of its total assets in non-Canadian
foreign securities and unsponsored American Depositary Receipts (ADRs). The
portfolio managers may also invest up to 25% of Large Cap Value Fund's total
assets in Canadian securities and sponsored ADRs.
In order to identify the securities having the best relative values, the
portfolio managers start with a list of securities of the 800 largest publicly
traded U.S. corporations, which they reduce to a proprietary database system and
fundamental analysis. The portfolio managers consider whether to sell a
particular security when it no longer qualifies for the list of eligible
securities.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, Large Cap Value Fund may
temporarily hold all or a portion of its assets in cash, money market
instruments, shares of affiliated money market funds, bonds, or other debt
securities. As a result, Large Cap Value Fund may not achieve its investment
objective.
PORTFOLIO MANAGEMENT
Michael C. Harhai and R. Terrence Irrgang are primarily responsible for the
day-to-day management of the Large Cap Value Fund. Mr. Harhai has been portfolio
manager for Large Cap Value Fund and has been associated with INVESCO and/or its
affiliates, an indirect wholly owned subsidiary of AMVESCAP PLC, since 1993. Mr.
Irrgang has been portfolio manager for Large Cap Value Fund and has been
associated with INVESCO and/or its affiliates since 1992.
Bret W. Stanley, Evan G. Harrel and Matthew W. Seinsheimer are primarily
responsible for the day-to-day management of the Basic Value Fund. Mr. Stanley
has been portfolio manager for Basic Value Fund since 1998 and has been
associated with AIM and/or its affiliates since 1998. From 1994 to 1998, he was
Vice President and portfolio manager with Van Kampen American Capital Asset
Management, Inc. Mr. Harrel has been portfolio manager for Basic Value Fund
since 1998 and has been associated with AIM and/or its affiliates since 1998.
From 1994 to 1998, he was Vice President and portfolio manager with Van Kampen
American Capital Asset Management, Inc. Mr. Seinsheimer has been portfolio
manager for Basic Value Fund since 2000 and has been associated with AIM and/or
its affiliates since 1998. From 1995 to 1998, he was portfolio manager for
American Indemnity Company.
9
<PAGE> 17
MANAGEMENT DISCUSSION AND ANALYSIS OF PERFORMANCE
A discussion of the performance of Basic Value Fund for the twelve month
period ended December 31, 1999, is set forth in Appendix III to this Proxy
Statement/Prospectus.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand Basic
Value Fund's financial performance. Certain information reflects financial
results for a single Basic Value Fund share.
The total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in Basic Value Fund (assuming
reinvestment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose
report, along with Basic Value Fund's financial statements, is included in Basic
Value Fund's annual report, which is available upon request.
Total return information in this table may be affected by special market
factors, including Basic Value Fund's investments in initial public offerings,
which may have a magnified impact on Basic Value Fund due to its small asset
base. There is no guarantee that, as Basic Value Fund's assets grow, it will
continue to experience substantially similar performance.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------
OCTOBER 18
YEAR ENDED DECEMBER 31, TO
------------------------------------ DECEMBER 31,
1999(a) 1998 1997(a) 1996(a) 1995(a)
------- ------ ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 18.13 $17.25 $14.65 $12.76 $ 11.43
------- ------ ------ ------ -------
Income from investment operations:
Net investment income (loss)............... 0.05 0.04 0.09 (0.01) 0.03
Net gains on securities (both realized and
unrealized)............................. 5.75 1.16 3.87 1.94 1.30
------- ------ ------ ------ -------
Total from investment operations... 5.80 1.20 3.96 1.93 1.33
------- ------ ------ ------ -------
Less distributions:
Dividends from net investment income....... -- -- (0.03) -- --
Distributions from net realized gains...... (0.09) (0.32) (1.33) (0.04) --
------- ------ ------ ------ -------
Total distributions................ (0.09) (0.32) (1.36) (0.04) --
------- ------ ------ ------ -------
Net asset value, end of period............... $ 23.84 $18.13 $17.25 $14.65 $ 12.76
------- ------ ------ ------ -------
Total return (b)................... 32.04% 7.02% 27.23% 15.12% 11.64%
------- ------ ------ ------ -------
Ratios/supplemental data:
Net assets, end of period (000's omitted).... $70,791 $9,074 $7,688 $2,529 $ 870
------- ------ ------ ------ -------
Ratio of expenses to average net assets:
With fee waivers and/or reimbursements..... 1.69%(c) 1.74% 1.99% 2.00% 2.00%(d)
Without fee waivers and/or
reimbursements.......................... 1.71%(c) 2.11% 2.97% 5.51% 50.54%(d)
Ratio of net investment income (loss) to
average net assets:
With fee waivers and/or reimbursements..... 0.23%(c) 0.25% 0.56% (0.10)% 1.10%(d)
Without fee waivers and/or
reimbursements.......................... 0.21%(c) (0.08)% (0.42)% (3.61)% (47.44)%(d)
Ratio of interest expense to average net
assets..................................... -- -- 0.03% -- --
Portfolio turnover rate...................... 63% 148% 93% 256% --
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average net assets of $31,870,865.
(d) Annualized.
10
<PAGE> 18
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------
OCTOBER 18
YEAR ENDED DECEMBER 31, TO
------------------------------------------- DECEMBER 31,
1999(a) 1998 1997(a) 1996(a) 1995(a)
---------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................. $ 17.79 $ 17.04 $ 14.54 $12.75 $ 11.43
---------- ------- ------- ------ -----------
Income from investment operations:
Net investment income (loss)....... (0.09) (0.08) (0.01) (0.10) 0.01
Net gains on securities (both
realized and unrealized)........ 5.62 1.15 3.83 1.93 1.31
---------- ------- ------- ------ -----------
Total from investment
operations............... 5.53 1.07 3.82 1.83 1.32
---------- ------- ------- ------ -----------
Less distributions:
Dividends from net investment
income.......................... -- -- -- -- --
Distributions from net realized
gains........................... (0.09) (0.32) (1.32) (0.04) --
---------- ------- ------- ------ -----------
Total distributions........ (0.09) (0.32) (1.32) (0.04) --
---------- ------- ------- ------ -----------
Net asset value, end of period....... $ 23.23 $ 17.79 $ 17.04 $14.54 $ 12.75
---------- ------- ------- ------ -----------
Total return (b)........... 31.13% 6.34% 26.44% 14.35% 11.55%
---------- ------- ------- ------ -----------
Ratios/supplemental data:
Net assets, end of period (000's
omitted)........................... $ 55,785 $17,406 $16,717 $5,503 $ 1,254
---------- ------- ------- ------ -----------
Ratio of expenses to average net
assets:
With fee waivers and/or
reimbursements.................. 2.34%(c) 2.39% 2.64% 2.65% 2.65%(d)
Without fee waivers and/or
reimbursements.................. 2.36%(c) 2.76% 3.62% 6.16% 51.19%(d)
Ratio of net investment income (loss)
to average net assets:
With fee waivers and/or
reimbursements.................. (0.42)%(c) (0.40)% (0.09)% (0.75)% 0.45%(d)
Without fee waivers and/or
reimbursements.................. (0.44)%(c) (0.72)% (1.07)% (4.26)% (48.09)%(d)
Ratio of interest expense to average
net assets......................... -- -- 0.03% -- --
Portfolio turnover rate.............. 63% 148% 93% 256% --
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are based on average net assets of $31,150,693.
(d) Annualized.
<TABLE>
<CAPTION>
CLASS C
------------
MAY 3 TO
DECEMBER 31,
1999(a)
------------
<S> <C>
Net asset value, beginning of period........................ $ 21.07
-------
Income from investment operations:
Net investment income (loss).............................. (0.06)
Net gains on securities (both realized and unrealized).... 2.31
-------
Total from investment operations.................. 2.25
-------
Less distributions:
Dividends from net investment income...................... --
Distributions from net realized gains on investments...... (0.09)
-------
Total distributions............................... (0.09)
</TABLE>
11
<PAGE> 19
<TABLE>
<CAPTION>
CLASS C
------------
MAY 3 TO
DECEMBER 31,
1999(a)
------------
<S> <C>
Net asset value, end of period.............................. $ 23.23
-------
Total return(b)................................... 10.72%
-------
Ratios/supplemental data:
Net assets, end of period (000's omitted)................... $ 7,669
-------
Ratio of expenses to average net assets:
With fee waivers and/or reimbursements.................... 2.34%(c)
Without fee waivers and/or reimbursements................. 2.36%(c)
Ratio of net investment income (loss) to average net assets:
With fee waivers and/or reimbursements.................... (0.42)%(c)
Without fee waivers and/or reimbursements................. (0.44)%(c)
Ratio of interest expense to average net assets............. --
Portfolio turnover rate..................................... 63%
</TABLE>
- ---------------
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) Ratios are annualized and based on average net assets of $2,389,446.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Agreement. Significant provisions of the Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreement, a copy of which is attached as Appendix I to this
Proxy Statement/Prospectus.
THE REORGANIZATION
Basic Value Fund will acquire all of the assets of Large Cap Value Fund in
exchange for shares of Basic Value Fund and the assumption by Basic Value Fund
of the liabilities of Large Cap Value Fund. Consummation of the Reorganization
(the "Closing") is expected to occur on June 19, 2000, at 8:00 a.m. Eastern Time
(the "Effective Time") on the basis of values calculated as of the close of the
customary trading session of the NYSE on June 16, 2000.
At the Effective Time, all of the assets of Large Cap Value Fund shall be
delivered to the Custodian for the account of Basic Value Fund in exchange for
the assumption by Basic Value Fund of all of the liabilities of any kind of
Large Cap Value Fund and delivery by AIM Growth Series directly to (i) the Large
Cap Value Fund Class A shareholders of a number of Basic Value Fund Class A
shares (including, if applicable, fractional shares rounded to the nearest
thousandth) and to (ii) the Large Cap Value Fund Class B shareholders of a
number of Basic Value Fund Class B shares (including, if applicable, fractional
shares rounded to the nearest thousandth) and to (iii) the Large Cap Value Fund
Class C shareholders of a number of Basic Value Fund Class C shares (including,
if applicable, fractional shares rounded to the nearest thousandth), having an
aggregate net asset value equal to the net value of the assets of Large Cap
Value Fund so transferred, assigned, and delivered.
12
<PAGE> 20
OTHER TERMS
The Agreement may be amended by mutual agreement of the Company and the
Trust notwithstanding shareholder approval thereof by Large Cap Value Fund's
shareholders, provided that following such approval no amendment shall be made
that has a material adverse effect on the interests of Large Cap Value Fund's
shareholders.
Both the Company and the Trust have made representations and warranties in
the Agreement that are customary in matters such as the Reorganization. The
obligations of the Company and the Trust pursuant to the Agreement with respect
to Large Cap Value Fund or Basic Value Fund are subject to various conditions,
including the following: (a) the assets of Large Cap Value Fund to be acquired
by Basic Value Fund with which it will be combined shall constitute at least 90%
of the fair market value of the net assets and at least 70% of the fair market
value of the gross assets held by Large Cap Value Fund immediately prior to the
Reorganization; (b) the Trust's Registration Statement on Form N-14 under the
Securities Act of 1933 (the "1933 Act") shall have been filed with the SEC and
such Registration Statement shall have become effective, and no stop-order
suspending the effectiveness of the Registration Statement shall have been
issued, and no proceeding for that purpose shall have been initiated or
threatened by the SEC (and not withdrawn or terminated); (c) the shareholders of
Large Cap Value Fund shall have approved the Agreement; and (d) the Company and
the Trust shall have received an opinion from Kirkpatrick & Lockhart LLP that
the Reorganization will not result in the recognition of gain or loss for
Federal income tax purposes for Large Cap Value Fund, Basic Value Fund, or their
shareholders.
Large Cap Value Fund and Basic Value Fund have each agreed to bear their
own expenses in connection with the Reorganization.
The Board of Directors of the Company may waive without shareholder
approval any default by the Trust or any failure by the Trust to satisfy any of
the conditions to the Company's obligations as long as such a waiver will not
have a material adverse effect on the benefits intended under the Agreement for
the shareholders of Large Cap Value Fund. The Agreement may be terminated and
the Reorganization may be abandoned by either the Company or the Trust at any
time by mutual agreement of the Company and the Trust, or by either party in the
event that Large Cap Value Fund shareholders do not approve the Agreement or if
the Closing does not occur on or before December 31, 2000.
FEDERAL TAX CONSIDERATIONS
The exchange of Large Cap Value Fund's Assets for Basic Value Fund shares
and Basic Value Fund's assumption of the liabilities of Large Cap Value Fund is
intended to qualify for federal income tax purposes as a tax-free reorganization
under section 368 of the Internal Revenue Code of 1986, as amended ("Code"). The
Trust will receive an opinion of Kirkpatrick & Lockhart LLP, its counsel,
substantially to the effect that:
(i) The acquisition of the assets of the Large Cap Value Fund by the
Basic Value Fund in exchange solely for the Basic Value Fund Shares
and the Basic Value Fund's assumption of the Large Cap Value Fund's
liabilities, followed by the distribution of those Shares pro rata to
the Large Cap Value Fund Shareholders constructively in exchange for
their Large Cap Value Fund Shares, as provided in the Agreement, will
qualify as a "reorganization" within the meaning of section 368(a) of
the Code, and each of the Large Cap Value Fund and the Basic Value
Fund will be a "party to a reorganization" within the meaning of
368(b) of the Code.
(ii) The Large Cap Value Fund will recognize no gain or loss on the
transfer of its assets to the Basic Value Fund in exchange solely for
Basic Value Fund Shares and the Basic Value Fund's assumption of the
Large Cap Value Fund's liabilities or on the distribution of those
Shares to the Large Cap Value Fund Shareholders.
(iii) The Basic Value Fund will recognize no gain or loss on its receipt of
the assets of the Large Cap Value Fund in exchange solely for Basic
Value Fund Shares and its assumption of the Large Cap Value Fund's
liabilities.
13
<PAGE> 21
(iv) The Basic Value Fund's basis for the assets of the Large Cap Value
Fund transferred to it will be the same as the Large Cap Value Fund's
basis therefor immediately before the Reorganization, and the Basic
Value Fund's holding period for those assets will include the Large
Cap Value Fund's holding period therefor.
(v) A Large Cap Value Fund Shareholder will recognize no gain or loss on
the receipt of Basic Value Fund Shares in constructive exchange for
all its Large Cap Value Fund Shares pursuant to the Reorganization.
(vi) A Large Cap Value Fund Shareholder's aggregate basis for the Basic
Value Fund Shares received thereby in the Reorganization will be the
same as the aggregate basis for its Large Cap Value Fund Shares to be
constructively surrendered in exchange therefor, and its holding
period for those Basic Value Fund Shares will include its holding
period for those Large Cap Value Fund Shares, provided the Large Cap
Value Fund Shareholder held the Large Cap Value Fund Shares as
capital assets at the Effective Time.
The opinion may state that no opinion is expressed as to the effect of the
Reorganization on the Funds or any shareholder with respect to any asset as to
which any unrealized gain or loss is required to be recognized for federal
income tax purposes at the end of a taxable year (or on the termination or
transfer thereof) under a mark-to-market system of accounting.
Utilization by Basic Value Fund after the Reorganization of
pre-Reorganization capital losses realized by Large Cap Value Fund could be
subject to limitation in future years under the Code.
Shareholders of Large Cap Value Fund should consult their tax advisers
regarding the effect, if any, of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to Basic Value Fund of the assets of Large Cap
Value Fund will be the same as the book cost basis of such assets to Large Cap
Value Fund.
RIGHTS OF SHAREHOLDERS
The Trust is a Delaware business trust and the Company is a Maryland
corporation. There are many similarities between the two forms of organization.
For example, the responsibilities, powers, and fiduciary duties of the directors
of the Company are substantially the same as those of the trustees of the Trust.
There are, however, certain differences between the two forms of
organization. The operations of the Trust, as a Delaware business trust, are
governed by its Agreement and Declaration of Trust, as amended (the "Declaration
of Trust") and Delaware law. The operations of the Company, a Maryland
corporation, are governed by its Articles of Incorporation, and amendments and
supplements thereto, and applicable Maryland law.
LIABILITY OF SHAREHOLDERS
Shareholders of a Maryland corporation generally do not have personal
liability for the corporation's obligations, except that a shareholder may be
liable to the extent that he receives any distributions which exceeds the amount
which he could properly receive under Maryland law or where such liability is
necessary to prevent fraud.
The Delaware Business Trust Act provides that shareholders of a Delaware
business trust shall be entitled to the same limitations of liability extended
to shareholders of private for-profit corporations. There is, however, a remote
possibility that, under certain circumstances, shareholders of a Delaware
business trust
14
<PAGE> 22
might be held personally liable for the trust's obligations to the extent the
courts of another state that does not recognize such limited liability were to
apply the laws of such state to a controversy involving such obligations. The
Trust's Declaration of Trust provides that shareholders of Basic Value Fund
shall not be subject to any personal liability for acts or obligations of Basic
Value Fund and that every written agreement, obligation, or other undertaking
made or issued by Basic Value Fund shall contain a provision to the effect that
shareholders are not personally liable thereunder. In addition, the Declaration
of Trust provides for indemnification out of Basic Value Fund's property for any
shareholder held personally liable solely by reason of his or her being or
having been a shareholder. Therefore, the risk of any shareholder incurring
financial loss beyond his investment due to shareholder liability is limited to
circumstances in which Basic Value Fund itself is unable to meet its obligations
and the express disclaimer of shareholder liabilities is determined not to be
effective. Given the nature of the assets and operations of Basic Value Fund,
the possibility of Basic Value Fund being unable to meet its obligations is
considered remote, and even if a claim were brought against Basic Value Fund and
a court determined that shareholders were personally liable, it would likely not
impose a material obligation on a shareholder.
ELECTION OF TRUSTEES/DIRECTORS; TERMS
The shareholders of the Company have elected the directors of the Company.
Each director serves until a successor is elected, subject to earlier death,
incapacitation, resignation, retirement or removal (see below). Shareholders may
elect successors to such directors only at annual or special meetings of
shareholders.
The shareholders of the Trust have elected the trustees of the Trust. Such
trustees serve for the life of AIM Growth Series, subject to the earlier death,
incapacitation, resignation, retirement or removal (see below). Shareholders may
elect successors to such trustees only at annual or special meetings of
shareholders.
REMOVAL OF TRUSTEES/DIRECTORS
A director of the Company may be removed by the affirmative vote of the
holders of a majority of the outstanding shares of the Company.
A trustee of the Trust may be removed at any time by vote of at least
two-thirds of the trustees or by vote of two-thirds of the outstanding shares of
the Trust. The Declaration of Trust provides that vacancies may be filled by
appointment by the remaining trustees.
MEETING OF SHAREHOLDERS
The Company is not required to hold annual meetings of shareholders and
does not intend to do so unless required by the 1940 Act. The Company's Bylaws
provide that a special meeting of shareholders may be called by the Chairman of
the Board of Directors, the President, a majority of the Board of Directors. In
addition, the Company's Bylaws provide that a special meeting of shareholders
may be called by the Secretary upon receipt of a request in writing, signed by
holders of shares entitled to cast at least 10% of the votes entitled to be cast
at the special meeting. Requests for special meetings must, among other things,
state the purpose of such meeting and the matters to be voted upon. No special
meeting need be called to consider any matter previously voted upon at a special
meeting called by the shareholders during the preceding twelve months, unless
requested by a majority of all shares entitled to vote at such meeting.
The Trust is not required to hold annual meetings of shareholders unless
required by the 1940 Act and does not intend to do so. The Bylaws of the Trust
provide that a majority of the trustees may call special meetings of
shareholders and the trustees shall call a special meeting of the shareholders
upon written request of the holders of not less than 10% of Basic Value Fund's
shares. Special meetings may be called for the purpose of electing trustees or
for any other action requiring shareholder approval, or for any matter deemed by
the trustees to be necessary or desirable.
15
<PAGE> 23
LIABILITY OF TRUSTEES/DIRECTORS AND OFFICERS; INDEMNIFICATION
Maryland law requires indemnification of a corporation's directors and
officers if a director or officer has been successful on the merits or otherwise
in the defense of certain proceedings unless limited by its charter. Maryland
law also permits indemnification for other matters unless it is established that
the act or omission giving rise to the proceeding was committed in bad faith, a
result of active and deliberate dishonesty, or one in which a director or
officer actually received an improper benefit. The Company's Articles of
Incorporation provides that the Company shall indemnify and advance expenses to
its currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by Maryland law.
Delaware law provides that trustees of a business trust shall not be liable
to the business trust or its shareholders for acting in good faith reliance on
the provisions of its governing instrument and that the trustees' liabilities
may be expanded or restricted by such instrument. Under the Trust's Declaration
of Trust, the trustees and officers of the Trust are not liable for any act or
omission or any conduct whatsoever in their capacity as trustees, except for
liability to the trust or shareholders due to willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
the office of trustee. Delaware law allows a business trust to indemnify and
hold harmless any trustee or other person against any and all claims and
demands. The Trust's Declaration of Trust provides for the indemnification of
its trustees and officers to the fullest extent permitted by Delaware law or
other applicable law.
TERMINATION
Maryland law provides that the Company may be dissolved by the vote of a
majority of the Board of Directors and two-thirds of the shares entitled to vote
on the dissolution.
The Trust or any series or class of shares of beneficial interest in the
Trust may be terminated by a majority shareholder vote of the Trust or the
affected series or class, respectively, or if there are fewer than 100
shareholders of record of the Trust or of such terminating series or class, the
trustees pursuant to written notice to the shares of the Trust or the affected
series or class.
VOTING RIGHTS OF SHAREHOLDERS
Shareholders of a Maryland corporation such as the Company are entitled to
vote on, among other things, those matters which effect fundamental changes in
the corporate structure (such as a merger, consolidation or sale of
substantially all of the assets of the corporation) as provided by Maryland
corporation law.
The Trust's Declaration of Trust grants shareholders power to vote only
with respect to the following: (i) election of trustees; (ii) removal of
trustees; (iii) approval of investment advisory contracts, as required by the
1940 Act; (iv) termination of the Trust or a series of class of its shares of
beneficial interest; (v) amendment of the Declaration of Trust; (vi) sale of all
or substantially all of the assets of the Trust or one of its investment
portfolios; (vii) merger or consolidation of the Trust or any of its investment
portfolios, with certain exceptions; and (viii) approval of such additional
matters as may be required by law or as the trustees, in their sole discretion,
shall determine.
DISSENTERS' RIGHTS
Under Maryland law, the Company shareholders may not demand the fair value
of their shares from the successor company in a transaction involving the
transfer of Large Cap Value Fund's assets, and are bound by the terms of the
transaction.
Neither Delaware law nor the Declaration of Trust confers upon the Trust's
shareholders appraisal or dissenters' rights.
16
<PAGE> 24
AMENDMENTS TO ORGANIZATION DOCUMENTS
Consistent with Maryland law, the Company reserves the right to amend,
alter, change, or repeal any provision contained in their Articles of
Incorporation in the manner now or hereafter prescribed by statute, including
any amendment that alters the contract rights, as expressly set forth in the
Articles of Incorporation, of any outstanding stock, and all rights conferred on
shareholders are granted subject to this reservation. The Board of Directors of
the Company may approve amendments to the Articles of Incorporation to classify
or reclassify unissued shares of a class of stock without shareholder approval.
Other amendments to the Company's Articles of Incorporation may be adopted if
approved by a vote of a majority of the shares at any meeting at which a quorum
is present. The Company's Bylaws provide that the Bylaws may be amended at any
regular meeting or special meeting of the stockholders provided that notice of
such amendment is contained in the notice of the special meeting. Except as to
any particular Bylaw which is specified as not subject to amendment by the Board
of Directors, the Bylaws may be also amended by the affirmative vote of a
majority of the Board of Directors at any regular or special meetings of the
Board.
Consistent with Delaware law, the Board of Trustees of the Trust may,
without shareholder approval, amend the Declaration of Trust at any time, except
that no amendment may be made which reduces the indemnification provided to
shareholders or former shareholders or which change the preferences, voting
powers, rights, and privileges of outstanding shares in a manner materially
adverse to the shareholders of such shares, without approval of the affected
shareholders. The trustees shall have the power to alter, amend, or repeal the
Bylaws of the Trust or adopt new Bylaws at any time.
OWNERSHIP OF LARGE CAP VALUE FUND AND BASIC VALUE FUND SHARES
Listed below is the name, address and percent ownership of each person who
as of April 3, 2000, to the knowledge of the Company, owned beneficially five
percent or more of any class of the outstanding shares of Large Cap Value Fund:
LARGE CAP VALUE FUND
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
RECORD BENEFICIALLY
-------- ------------
<S> <C> <C>
Class A Shares
James L. Cash............................................. -0- 5.02%
5703 155th Ave. NE
Redmond, WA 98052-5155
Class B Shares
Merrill Lynch Pierce Fenner & Smith....................... 7.91% -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C Shares
Merrill Lynch Pierce Fenner & Smith....................... 19.52% -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
- ---------------
* The Company has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
17
<PAGE> 25
Listed below is the name, address and percent ownership of each person who
as of April 3, 2000, to the knowledge of the Trust, owned beneficially five
percent or more of any class of the outstanding shares of Basic Value Fund:
BASIC VALUE FUND
<TABLE>
<CAPTION>
PERCENT
PERCENT OWNED OF
OWNED OF RECORD AND
RECORD BENEFICIALLY
-------- ------------
<S> <C> <C>
Class A Shares
Merrill Lynch Pierce Fenner & Smith....................... 9.20% -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Trukan Co................................................. 6.04% -0-*
P.O. Box 3699
Wichita, KS 67212
Class B Shares
Merrill Lynch Pierce Fenner & Smith....................... 14.09% -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East, 2nd Floor
Jacksonville, FL 32246
Class C Shares
Merrill Lynch Pierce Fenner & Smith....................... 27.95% -0-*
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.
OWNERSHIP OF OFFICERS AND TRUSTEES/DIRECTORS
To the best of the knowledge of the Company, the beneficial ownership of
shares of Large Cap Value Fund by officers or directors of the Company as a
group constituted less than one percent of the outstanding Class A, Class B and
Class C shares of such fund as of April 3, 2000. To the best of the knowledge of
the Trust, the beneficial ownership of shares of Basic Value Fund by officers or
trustees of the Trust as a group constituted less than one percent of the
outstanding Class A, Class B and Class C shares of such fund as of April 3,
2000.
18
<PAGE> 26
CAPITALIZATION
The following table shows the capitalization of each Fund as of December
31, 1999 and on a pro forma combined basis (unaudited) as of that date, giving
effect to the Reorganization.
<TABLE>
<CAPTION>
LARGE CAP VALUE FUND: BASIC VALUE FUND: PRO FORMA BASIC VALUE FUND
CLASS A CLASS A CLASS A COMBINED
--------------------- ----------------- --------------------------
<S> <C> <C> <C>
Net Assets......................... $12,011,184 $70,790,769 $82,801,953
Shares Outstanding................. 549,760 2,969,093 3,472,963
Net Asset Value Per Share.......... $ 21.85 $ 23.84 $ 23.84
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE FUND: BASIC VALUE FUND: PRO FORMA BASIC VALUE FUND
CLASS B CLASS B CLASS B COMBINED
--------------------- ----------------- --------------------------
<S> <C> <C> <C>
Net Assets......................... $6,572,901 $55,784,561 $62,357,462
Shares Outstanding................. 302,862 2,401,002 2,683,917
Net Asset Value Per Share.......... $ 21.70 $ 23.23 $ 23.23
</TABLE>
<TABLE>
<CAPTION>
LARGE CAP VALUE FUND: BASIC VALUE FUND: PRO FORMA BASIC VALUE FUND
CLASS C CLASS C CLASS C COMBINED
--------------------- ----------------- --------------------------
<S> <C> <C> <C>
Net Assets......................... $142,672,365 $7,669,005 $50,341,370
Shares Outstanding................. 6,575,037 330,070 6,472,055
Net Asset Value Per Share.......... $ 21.70 $ 23.23 $ 23.23
</TABLE>
LEGAL MATTERS
Certain legal matters concerning the Trust and its participation in the
Reorganization, the issuance of shares of Basic Value Fund in connection with
the Reorganization, and the tax consequences of the Reorganization will be
passed upon by Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Washington, D.C. 20036-1800, counsel to the Trust. Certain legal matters
concerning the Company and its participation in the Reorganization will be
passed upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st
Floor, Philadelphia, PA 19103-7599.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statements of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which the
Company and the Trust have filed with the SEC pursuant to the requirements of
the 1933 Act and the 1940 Act, to which reference is hereby made. The SEC file
number for the Company's registration statement containing the Prospectus and
Statement of Additional Information relating to Large Cap Value Fund is
Registration No. 2-87377. Such Prospectus and Statement of Additional
Information are incorporated herein by reference. The SEC file number for the
Trust's registration statement containing the Prospectus and Statement of
Additional Information relating to Basic Value Fund is Registration No. 2-57526.
Such Prospectus and Statement of Additional Information are incorporated herein
by reference.
The Company and the Trust are subject to the informational requirements of
the 1940 Act and in accordance therewith files reports and other information
with the SEC. Reports, proxy statements, registration statements and other
information filed by the Company and the Trust (including the Registration
Statement of the Trust relating to the Basic Value Fund on Form N-14 of which
this Proxy Statement/Prospectus is a part and which is hereby incorporated by
reference) may be inspected without charge and copied at the public reference
facilities maintained by the SEC at Room 1014, Judiciary Plaza, 450 Fifth
Street, NW, Washington, DC 20549, and at the following regional offices of the
SEC: 7 World Trade Center, New York, NY 10048; and 500 West Madison Street, l4th
Floor, Chicago, IL 6066l. Copies of such material may also be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549 at the prescribed rates. The SEC maintains an internet web site at
http://www.sec.gov that contains information regarding the Company, the Trust,
and other registrants that file electronically with the SEC.
19
<PAGE> 27
ADDITIONAL INFORMATION ABOUT LARGE CAP VALUE FUND AND BASIC VALUE FUND
For more information with respect to the Trust and Basic Value Fund
concerning the following topics, please refer to the Basic Value Fund Prospectus
as indicated: (i) see "Investment Objectives and Strategies" and "Fund
Management" for further information regarding the Trust and Basic Value Fund;
(ii) see discussion in "Investment Objectives and Strategies," "Fund
Management," and "Other Information" for further information regarding
management of Basic Value Fund; (iii) see "Fund Management" and "Other
Information" for further information regarding the shares of Basic Value Fund;
(iv) see "Fund Management," "Other Information," and "Shareholder Information"
for further information regarding the purchase, redemption and repurchase of
shares of Basic Value Fund.
For more information with respect to the Company and Large Cap Value Fund
concerning the following topics, please refer to the Large Cap Value Fund
Prospectus as indicated: (i) see "Investment Objectives and Strategies" and
"Fund Management" for further information regarding the Company and Large Cap
Value Fund; (ii) see discussion in "Investment Objectives and Strategies," "Fund
Management," and "Other Information" for further information regarding
management of Large Cap Value Fund; (iii) see "Fund Management" and "Other
Information" for further information regarding the shares of Large Cap Value
Fund; (iv) see "Fund Management," "Other Information," and "Shareholder
Information" for further information regarding the purchase, redemption and
repurchase of shares of Large Cap Value Fund.
EXPERTS
The audited financial statements of Basic Value Fund incorporated by
reference herein and in its Statement of Additional Information have been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report
hereon is included in the Fund's Annual Report to Shareholders for the fiscal
year ended December 31, 1999. The financial statements audited by
PricewaterhouseCoopers LLP have been incorporated herein by reference in
reliance on its report given on its authority as experts in auditing and
accounting.
The audited financial statements of Large Cap Value Fund incorporated by
reference herein and in its Statement of Additional Information have been
audited by KPMG LLP, independent accountants, whose report thereon is included
in the Fund's Annual Reports to Shareholders for the fiscal year ended December
31, 1999. The financial statements audited by KPMG LLP have been incorporated
herein by reference in reliance on its report given on its authority as experts
in auditing and accounting.
20
<PAGE> 28
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
AIM ADVISOR LARGE CAP VALUE FUND
AND
AIM BASIC VALUE FUND
MARCH 22, 2000
<PAGE> 29
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 DEFINITIONS...................................... I-1
Section 1.1 Definitions.................................. I-1
ARTICLE 2 TRANSFER OF ASSETS............................... I-4
Section 2.1 Reorganizations.............................. I-4
Section 2.2 Computation of Net Asset Value............... I-4
Section 2.3 Closing of Acquired Fund's Share Transfer
Books.................................................. I-4
Section 2.4 Delivery..................................... I-5
Section 2.5 Termination of Series........................ I-5
Section 2.6 Issuance of Acquiring Fund Shares............ I-5
Section 2.7 Investment Securities........................ I-5
Section 2.8 Liabilities.................................. I-5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF AAF............ I-6
Section 3.1 Organization; Authority...................... I-6
Section 3.2 Registration and Regulation of AAF........... I-6
Section 3.3 Financial Statements......................... I-6
Section 3.4 No Material Adverse Changes; Contingent
Liabilities............................................ I-6
Section 3.5 Acquired Fund Shares; Liabilities; Business
Operations............................................. I-6
Section 3.6 Accountants.................................. I-7
Section 3.7 Binding Obligation........................... I-7
Section 3.8 No Breaches or Defaults...................... I-7
Section 3.9 Authorizations or Consents................... I-7
Section 3.10 Permits...................................... I-7
Section 3.11 No Actions, Suits or Proceedings............. I-7
Section 3.12 Contracts.................................... I-8
Section 3.13 Properties and Assets........................ I-8
Section 3.14 Taxes........................................ I-8
Section 3.15 Benefit and Employment Obligations........... I-9
Section 3.16 Brokers...................................... I-9
Section 3.17 Voting Requirements.......................... I-9
Section 3.18 State Takeover Statutes...................... I-9
Section 3.19 Books and Records............................ I-9
Section 3.20 Prospectus and Statement of Additional
Information............................................ I-9
Section 3.21 No Distribution.............................. I-9
Section 3.22 Liabilities.................................. I-9
Section 3.23 Value of Shares.............................. I-9
Section 3.24 Shareholder Expenses......................... I-9
Section 3.25 Intercompany Indebtedness.................... I-9
Section 3.26 Diversification of Assets.................... I-9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF AGS............ I-10
Section 4.1 Organization; Authority....................... I-10
Section 4.2 Registration and Regulation of AGS............ I-10
Section 4.3 Financial Statements.......................... I-10
Section 4.4 No Material Adverse Changes; Contingent
Liabilities............................................ I-10
Section 4.5 Registration of Acquiring Fund Shares......... I-10
Section 4.6 Accountants................................... I-11
Section 4.7 Binding Obligation............................ I-11
Section 4.8 No Breaches or Defaults....................... I-11
Section 4.9 Authorizations or Consents.................... I-11
</TABLE>
(i)
<PAGE> 30
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 4.10 Permits...................................... I-11
Section 4.11 No Actions, Suits or Proceedings............. I-12
Section 4.12 Taxes........................................ I-12
Section 4.13 Brokers...................................... I-12
Section 4.14 Representations Concerning the
Reorganization......................................... I-12
Section 4.15 Prospectus and Statement of Additional
Information............................................ I-13
Section 4.16 Value of Shares.............................. I-13
Section 4.17 Intercompany Indebtedness; Consideration..... I-13
ARTICLE 5 COVENANTS........................................ I-13
Section 5.1 Conduct of Business.......................... I-13
Section 5.2 Announcements................................ I-14
Section 5.3 Expenses..................................... I-14
Section 5.4 Further Assurances........................... I-14
Section 5.5 Notice of Events............................. I-14
Section 5.6 Access to Information........................ I-14
Section 5.7 Consents, Approvals and Filings.............. I-15
Section 5.8 Submission of Agreement to Shareholders...... I-15
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION....... I-15
Section 6.1 Conditions Precedent of AGS.................. I-15
Section 6.2 Mutual Conditions............................ I-16
Section 6.3 Conditions Precedent of AAF.................. I-16
ARTICLE 7 TERMINATION OF AGREEMENT......................... I-17
Section 7.1 Termination.................................. I-17
Section 7.2 Survival After Termination................... I-17
ARTICLE 8 MISCELLANEOUS.................................... I-17
Section 8.1 Survival of Representations and Warranties... I-17
Section 8.2 Governing Law................................ I-17
Section 8.3 Binding Effect, Persons Benefitting, No
Assignment............................................. I-18
Section 8.4 Obligations of AGS and AAF................... I-18
Section 8.5 Amendments................................... I-18
Section 8.6 Enforcement.................................. I-18
Section 8.7 Interpretation............................... I-18
Section 8.8 Counterparts................................. I-18
Section 8.9 Entire Agreement; Schedules.................. I-18
Section 8.10 Notices...................................... I-18
Section 8.11 Representations by AIM Advisors.............. I-19
Schedule 6.1(d) Opinion of Counsel to AGS
Schedule 6.2(g) Tax Opinion
Schedule 6.3(d) Opinion of Counsel to AAF
</TABLE>
(ii)
<PAGE> 31
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of March 22, 2000 (this
"Agreement"), by and among AIM Advisor Funds, Inc., a Maryland corporation
("AAF"), acting on behalf of AIM Advisor Large Cap Value Fund, a series of AAF
(the "Acquired Fund"), AIM Growth Series, a Delaware business trust ("AGS"),
acting on behalf of AIM Basic Value Fund, a series of AGS the ("Acquiring
Fund"), and A I M Advisors, Inc. ("AIM Advisors"), a Delaware corporation.
WITNESSETH
WHEREAS, AAF is an investment company registered with the Securities and
Exchange Commission (the "SEC") under the Investment Company Act of 1940 (the
"Investment Company Act") that offers separate series of its shares representing
interests in its investment portfolio; and
WHEREAS, the Acquired Fund is a series of AAF; and
WHEREAS, AGS is an investment company registered with the SEC under the
Investment Company Act that offers separate series of its shares representing
interests in its investment portfolios; and
WHEREAS, the Acquiring Fund is a series of AGS; and
WHEREAS, AIM Advisors provides investment advisory services to both the
Acquired Fund and the Acquiring Fund; and
WHEREAS, the Acquired Fund desires to provide for its reorganization
through the transfer of all of its assets to the Acquiring Fund in exchange
solely for the assumption by the Acquiring Fund of all of its liabilities and
the issuance by AGS of shares of the Acquiring Fund in the manner set forth in
this Agreement; and
WHEREAS, this Agreement is intended to be, and is adopted by the parties
as, a "plan of reorganization" within the meaning of the regulations under
Section 368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, AAF, AGS and AIM
Advisors agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. For all purposes of this Agreement, the following
terms shall have the respective meanings set forth in this Section 1.1 (such
definitions to be equally applicable to both the singular and plural forms of
the terms herein defined):
"AAF" means AIM Advisor Funds, Inc., a Maryland corporation.
"AAF Registration Statement" means the registration statement on Form
N-1A of AAF, as amended, Registration No. 811-3886.
"Acquired Fund" means AIM Advisor Large Cap Value Fund, a separate
series of AAF.
"Acquired Fund Class A Shareholders" means the holders of record as of
the Effective Time of Class A Shares.
"Acquired Fund Class A Shares" means Class A shares of common stock of
the Acquired Fund issued by AAF.
"Acquired Fund Class B Shareholders" means the holders of record as of
the Effective Time of Class B Shares.
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<PAGE> 32
"Acquired Fund Class B Shares" means Class B shares of common stock of
the Acquired Fund issued by AAF.
"Acquired Fund Class C Shareholders" means the holders of record as of
the Effective Time of Class C Shares.
"Acquired Fund Class C Shares" means Class C shares of common stock of
the Acquired Fund issued by AAF.
"Acquired Fund Financial Statements" shall have the meaning set forth
in Section 3.3 of this Agreement.
"Acquired Fund Net Value" means the value of the Assets less the
amount of the liabilities determined pursuant to Section 2.2(c) of this
Agreement.
"Acquired Fund Shareholders" means the holders of record as of the
Effective Time of the issued and outstanding capital stock of the Acquired
Fund.
"Acquired Fund Shareholders Meeting" means a meeting of the
shareholders of the Acquired Fund convened in accordance with applicable
law and the Articles of Incorporation of AAF to consider and vote upon the
approval of this Agreement and the Reorganization contemplated by this
Agreement.
"Acquired Fund Shares" means the Acquired Fund's Class A shares, Class
B shares, and Class C shares.
"Acquiring Fund" means AIM Basic Value Fund, a separate series of AGS.
"Acquiring Fund Class A Shares" means Class A shares of beneficial
interest in the Acquiring Fund issued by AGS.
"Acquiring Fund Class B Shares" means Class B shares of beneficial
interest in the Acquiring Fund issued by AGS.
"Acquiring Fund Class C Shares" means Class C shares of beneficial
interest in the Acquiring Fund issued by AGS.
"Acquiring Fund Financial Statements" shall have the meaning set forth
in Section 4.3 of this Agreement.
"Acquiring Fund Shares" means shares of beneficial interest in the
Acquiring Fund issued by AGS pursuant to Section 2.6 of this Agreement.
"Advisers Act" means the Investment Advisers Act of 1940, as amended,
and all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization, together
with all schedules attached hereto and all amendments hereto and thereof.
"AGS" means AIM Growth Series, a Delaware business trust.
"AGS Registration Statement" means the registration statement on Form
N-1A of AGS, as amended, Registration No. 811-2699.
"Assets" means all cash, cash equivalents, securities, receivables
(including interest and dividends receivable), claims and rights of action,
rights to register shares under applicable securities laws, books and
records, deferred and prepaid expenses shown as assets on the Acquired
Fund's books, and other property owned by the Acquired Fund at the
Valuation Time.
"Benefit Plan" means any material "employee benefit plan" (as defined
in Section 3(3) of ERISA) and any material bonus, deferred compensation,
incentive compensation, stock ownership, stock
I-2
<PAGE> 33
purchase, stock option, phantom stock, vacation, retirement, profit
sharing, welfare plans or other plan, arrangement or understanding
maintained or contributed to by AAF on behalf of the Acquired Fund, or
otherwise providing benefits to any current or former employee, officer or
trustee of AAF.
"Closing" means the transfer of the Assets to the Acquiring Fund, the
assumption of the Liabilities by the Acquiring Fund and the issuance of the
Acquiring Fund Shares directly to the Acquired Fund Shareholders as
described in Section 2.1 of this Agreement.
"Closing Date" means June 19, 2000, or such other date as the parties
may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended, and all
rules and regulations adopted pursuant thereto.
"Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of each Fund.
"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations adopted pursuant thereto.
"Fund" means the Acquired Fund or the Acquiring Fund.
"Governmental Authority" means any foreign, U.S. or state government,
government agency, department, board, commission (including the SEC) or
instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including the National Association of
Securities Dealers, Inc., the Commodity Futures Trading Commission, the
National Futures Association, the Investment Management Regulatory
Organization Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Liabilities" means all of the Acquired Fund's liabilities, debts,
obligations, and duties of whatever kind or nature, whether absolute,
accrued, contingent, or otherwise, whether or not arising in the ordinary
course of business, whether or not determinable at the Valuation Time, and
whether or not specifically referred to in this Agreement.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a change in
the condition (financial or otherwise), properties, assets or prospects of
an entity having an adverse monetary effect in an amount equal to or
greater than $50,000.
"Permit" shall have the meaning set forth in Section 3.10 of this
Agreement.
"Person" means an individual or a corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"Reorganization" means the acquisition of all of the Assets by the
Acquiring Fund in consideration of the assumption by the Acquiring Fund of
all of the Liabilities and the issuance by AGS of Acquiring Fund Shares
directly to Acquired Fund Shareholders as described in this Agreement, and
the termination of the Acquired Fund's status as a designated series of
shares of AAF.
"Required Shareholder Vote" shall have the meaning set forth in
Section 3.17 of this Agreement.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
I-3
<PAGE> 34
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or
levy -- including income taxes (including alternative minimum tax),
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross
receipts taxes, value added taxes, employment taxes, excise taxes, ad
valorem taxes, property taxes, withholding taxes, payroll taxes, or
windfall profit taxes -- together with any related penalties, fines,
additions to tax or interest, imposed by the United States or any state,
county, local or foreign government or subdivision or agency thereof.
"Valuation Time" means the close of regular trading on the NYSE on the
Closing Date.
ARTICLE 2
TRANSFER OF ASSETS
SECTION 2.1 Reorganization. At the Effective Time, all of the Assets shall
be delivered to the Custodian for the account of the Acquiring Fund in exchange
for the assumption by the Acquiring Fund of all of the Liabilities and delivery
by AGS directly to (a) the Acquired Fund Class A Shareholders of a number of the
Acquiring Fund Class A Shares (including, if applicable, fractional shares
rounded to the nearest thousandth) determined by dividing the Acquired Fund Net
Value attributable to the Acquired Fund Class A Shares by the net asset value of
an Acquiring Fund Class A Share as of the Valuation Time, (b) the Acquired Fund
Class B Shareholders of a number of the Acquiring Fund Class B Shares
(including, if applicable, fractional shares rounded to the nearest thousandth)
determined by dividing the Acquired Fund Net Value attributable to the Acquired
Fund Class B Shares by the net asset value of an Acquiring Fund Class B Share as
of the Valuation Time, and (c) the Acquired Fund Class C Shareholders of a
number of the Acquiring Fund Class C Shares (including, if applicable,
fractional shares rounded to the nearest thousandth) determined by dividing the
Acquired Fund Net Value attributable to the Acquired Fund Class C Shares by the
net asset value of an Acquiring Fund Class C Share as of the Valuation Time.
Upon delivery of the Assets, the Acquiring Fund will receive good and marketable
title thereto free and clear of all Liens.
SECTION 2.2 Computation of Net Asset Value. (a) The net asset value of
each class of the Acquiring Fund Shares, and the Acquired Fund Net Value, shall,
in each case, be determined as of the Valuation Time.
(b) The net asset value of each class of the Acquiring Fund Shares shall be
computed in accordance with the policies and procedures of the Acquiring Fund as
described in the AGS Registration Statement.
(c) The Acquired Fund Net Value shall be computed in accordance with the
policies and procedures of the Acquired Fund as described in the AAF
Registration Statement.
(d) All computations pursuant to paragraphs (b) and (c) shall be made by
agreement of AAF and AGS. The parties agree to use commercially reasonable
efforts to resolve any material pricing differences between the prices of
portfolio securities determined in accordance with their respective pricing
policies and procedures.
(e) If, immediately before the Valuation Time, (i) the NYSE is closed to
trading or trading thereon is restricted or (ii) trading or the reporting of
trading on the NYSE or elsewhere is disrupted, so that accurate appraisal of the
Acquired Fund's Net Value and the net asset value per share of the Acquiring
Fund's Shares is impracticable, the Effective Time shall be postponed until the
first Business Day after the day when such trading shall have been fully resumed
and such reporting shall have been restored.
SECTION 2.3 Closing of Acquired Fund's Share Transfer Books. The share
transfer books of the Acquired Fund will be permanently closed as of the
Valuation Time, and only requests for the redemption of Acquired Fund Shares
received in proper form prior to the Valuation Time shall be accepted by the
Acquired Fund. Redemption requests thereafter received by the Acquired Fund
shall be deemed to be redemption
I-4
<PAGE> 35
requests for Acquiring Fund Shares to be distributed to the Acquired Fund
Shareholders under this Agreement (assuming that the transactions contemplated
by this Agreement have been consummated).
SECTION 2.4 Delivery. (a) The Assets shall be delivered by AAF to the
Custodian on the Closing Date. No later than three (3) business days preceding
the Closing Date, AAF shall instruct the Custodian to transfer the Assets to the
account of the Acquiring Fund at the Effective Time. The Assets so delivered
shall be duly endorsed in proper form for transfer in such condition as to
constitute a good delivery thereof, in accordance with the custom of brokers,
and shall be accompanied by all necessary state stock transfer stamps, if any,
or a check for the appropriate purchase price thereof. Cash held by the Acquired
Fund shall be delivered at the Effective Time and shall be in the form of
currency or wire transfer in Federal funds, payable to the order of the account
of the Acquiring Fund at the Custodian.
(b) If, on the Closing Date, the Acquired Fund is unable to make delivery
in the manner contemplated by Section 2.4(a) of securities purchased by it prior
to the Closing Date that have not yet been delivered to the Acquired Fund or its
broker, then AGS shall waive the delivery requirements of Section 2.4(a) with
respect to such undelivered securities if the Acquired Fund has delivered to the
Custodian by or on the Closing Date, and with respect to such undelivered
securities, executed copies of an agreement of assignment and escrow agreement
and due bills executed on behalf of said broker or brokers, together with such
other documents as may be required by AGS or the Custodian, including brokers'
confirmation slips.
SECTION 2.5 Termination of Series. As soon as reasonably practicable, but
in all events within six months, after the Closing Date, the status of the
Acquired Fund as a designated series of shares of AAF shall be terminated;
provided, however, that such termination shall not be required if the
Reorganization is not consummated.
SECTION 2.6 Issuance of Acquiring Fund Shares. At the Effective Time, (a)
each Acquired Fund Class A Shareholder shall be issued that number of full and
fractional Acquiring Fund Class A Shares having a net asset value equal to the
Acquired Fund Net Value attributable to the Acquired Fund Class A Shares then
held by such Acquired Fund Shareholder; (b) each Acquired Fund Class B
Shareholder shall be issued that number of full and fractional Acquiring Fund
Class B Shares having a net asset value equal to the Acquired Fund Net Value
attributable to the Acquired Fund Class B Shares then held by such Acquired Fund
Shareholder; and (c) each Acquired Fund Class C Shareholder shall be issued that
number of full and fractional Acquiring Fund Class C Shares having a net asset
value equal to the Acquired Fund Net Value attributable to the Acquired Fund
Class C Shares then held by such Acquired Fund Shareholder. All issued and
outstanding capital stock of the Acquired Fund shall thereupon be canceled on
the books of AAF. AAF shall provide instructions to the transfer agent of AGS
with respect to the Acquiring Fund Shares to be issued to each Acquired Fund
Shareholder. AGS shall have no obligation to inquire as to the validity,
propriety or correctness of any such instruction, but shall, in each case,
assume that such instruction is valid, proper and correct. AGS shall record on
its books the ownership of each class of Acquiring Fund Shares by Acquired Fund
Shareholders and shall forward a confirmation of such ownership to each of them.
No redemption or repurchase of such Acquiring Fund Shares credited to former
Acquired Fund Shareholders in respect of Acquired Fund shares represented by
unsurrendered shares certificates shall be permitted until such certificates
have been surrendered to AGS for cancellation, or if such certificates are lost
or misplaced, until lost certificate affidavits have been executed and delivered
to AGS.
SECTION 2.7 Investment Securities. AIF's fund accounting and pricing agent
shall deliver at the Closing a certificate of an authorized officer thereof
verifying that the information (including adjusted basis and holding period, by
lot) concerning the Assets, including all portfolio securities, as reflected on
the Acquiring Fund's books immediately following the Closing does or will
conform to such information on the Acquired Fund's books immediately before the
Closing.
SECTION 2.8 Liabilities. The Acquired Fund shall use reasonable best
efforts to discharge all of its known Liabilities, so far as may be possible,
prior to the Closing Date.
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<PAGE> 36
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AAF
AAF, on behalf of the Acquired Fund, represents and warrants to AGS that:
SECTION 3.1 Organization; Authority. AAF is duly organized, validly
existing and in good standing under the Maryland General Corporation Law, with
all requisite corporate power and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 3.2 Registration and Regulation of AAF. AAF is duly registered
with the SEC as an investment company under the Investment Company Act, the
Acquired Fund is a duly established and designated series thereof, and all
Acquired Fund Shares that have been or are being offered for sale have been duly
registered under the Securities Act and have been duly registered, qualified or
are exempt from registration or qualification under the securities laws of each
state or other jurisdiction in which such shares have been or are being offered
for sale, and no action has been taken by AAF to revoke or rescind any such
registration or qualification. The Acquired Fund is in compliance in all
material respects with all applicable laws, rules and regulations, including,
without limitation, the Investment Company Act, the Securities Act, the Exchange
Act and all applicable state securities laws. The Acquired Fund is in compliance
in all material respects with the investment policies and restrictions
applicable to it set forth in the AAF Registration Statement currently in
effect. The value of the net Assets is determined using portfolio valuation
methods that comply in all material respects with the requirements of the
Investment Company Act and the policies of the Acquired Fund, and all purchases
and redemptions of Acquired Fund Shares have been effected at the net asset
value per share calculated in such manner.
SECTION 3.3 Financial Statements. The books of account and related records
of the Acquired Fund fairly reflect in reasonable detail its assets, liabilities
and transactions in accordance with generally accepted accounting principles
applied on a consistent basis. The audited financial statements for the fiscal
year ended December 31, 1999, of the Acquired Fund previously delivered to AGS
(the "Acquired Fund Financial Statements") present fairly in all material
respects the financial position of the Acquired Fund as at the dates indicated
and the results of operations and changes in net assets for the periods then
ended in accordance with generally accepted accounting principles applied on a
consistent basis for the periods then ended.
SECTION 3.4 No Material Adverse Changes; Contingent Liabilities. Since
December 31, 1999, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities, other than
changes resulting from any change in general conditions in the financial or
securities markets or the performance of any investments made by the Acquired
Fund or occurring in the ordinary course of business, of the Acquired Fund or
the status of the Acquired Fund as a regulated investment company under the
Code. There are no contingent Liabilities not disclosed in the Acquired Fund
Financial Statements that are required to be disclosed in accordance with
generally accepted accounting principles.
SECTION 3.5 Acquired Fund Shares; Liabilities; Business
Operations. (a) The Acquired Fund Shares have been duly authorized and validly
issued and are fully paid and non-assessable.
(b) AAF's management is unaware of any plan or intention of Acquired Fund
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of their
Acquired Fund Shares before the Reorganization to any person "related" (within
the meaning of Section 1.368-1(e)(3) of the Income Tax Regulations under the
Code) to either Fund or (b) any portion of the Acquiring Fund Shares to be
received by them in the Reorganization to any person related (within such
meaning) to Acquiring Fund.
(c) At the time of its Reorganization, the Acquired Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Acquired Fund Shares, except
for the right of investors to acquire Acquired Fund Shares at net asset value in
the normal course of its business as a series of an open-end management
investment company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the Closing Date,
the Acquired Fund will have conducted its "historic business" (within the
meaning of Section 1.368-1(d)(2) of the Income Tax
I-6
<PAGE> 37
Regulations under the Code) in a substantially unchanged manner. In anticipation
of the Reorganization, the Acquired Fund will not dispose of assets that, in the
aggregate, will result in less than 50% of its "historic business assets"
(within the meaning of Section 1.368-1(d)(3) of those regulations) being
transferred to the Acquiring Fund.
(e) AAF does not have, and has not had during the six months prior to the
date of this Agreement, any employees, and shall not hire any employees from and
after the date of this Agreement through the Closing Date.
SECTION 3.6 Accountants. KPMG LLP, which has reported upon the Acquired
Fund Financial Statements for the fiscal year ended December 31, 1999, are
independent public accountants as required by the Securities Act and the
Exchange Act.
SECTION 3.7 Binding Obligation. This Agreement has been duly authorized,
executed and delivered by AAF on behalf of the Acquired Fund and, when this
Agreement has been duly authorized, executed and delivered by AGS on behalf of
the Acquiring Fund and approved by the Acquired Fund's shareholders, will
constitute the legal, valid and binding obligation of AAF enforceable against
AAF in accordance with its terms from and with respect to the revenues of the
Acquired Fund and the Assets, except as the enforceability hereof may be limited
by bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights generally, or by general equity principles (whether
applied in a court of law or a court of equity and including limitations on the
availability of specific performance or other equitable remedies).
SECTION 3.8 No Breaches or Defaults. The execution and delivery of this
Agreement by AAF on behalf of the Acquired Fund and the performance by AAF of
its obligations hereunder have been duly authorized by all necessary corporate
action on the part of AAF, other than the Acquired Fund's shareholders'
approval, and do not, and on the Closing Date will not, (i) result in any
violation of the Articles of Incorporation or by-laws of AAF and (ii) result in
a breach of any of the terms or provisions of, or constitute (with or without
the giving of notice or the lapse of time or both) a default under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation or imposition of
any Lien upon any property of the Acquired Fund or the Assets (except for such
breaches or defaults or Liens that would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect) under (A)
any indenture, mortgage or loan agreement or any other material agreement or
instrument to which AAF is a party or by which it may be bound and which relates
to the Assets or to which any property of the Acquired Fund may be subject; (B)
any Permit; or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over AAF or
any property of the Acquired Fund. The Acquired Fund is not under the
jurisdiction of a court in a proceeding under Title 11 of the United States Code
or similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.9 Authorizations or Consents. Other than those that shall have
been obtained or made on or prior to the Closing Date and those that must be
made after the Closing Date to comply with Section 2.5 of this Agreement, no
authorization or approval or other action by, and no notice to or filing with,
any Governmental Authority will be required to be obtained or made by AAF in
connection with its due execution and delivery of this Agreement and its
consummation of the transactions contemplated hereby.
SECTION 3.10 Permits. AAF has in full force and effect all approvals,
consents, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights of Governmental Authorities (collectively, "Permits")
necessary for it to conduct its business as presently conducted as it relates to
the Acquired Fund, and there has occurred no default under any Permit, except
for the absence of Permits and for defaults under Permits the absence or default
of which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of AAF there are no
proceedings relating to the suspension, revocation or modification of any
Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 3.11 No Actions, Suits or Proceedings. (a) There is no pending
action, litigation or proceeding, nor, to the knowledge of AAF, has any
litigation been overtly threatened in writing or, if
I-7
<PAGE> 38
probable of assertion, orally, against AAF before any Governmental Authority
that questions the validity or legality of this Agreement or of the actions
contemplated hereby or that seeks to prevent the consummation of the
transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of AAF, threatened in
writing or, if probable of assertion, orally, against AAF affecting any
property, asset, interest or right of the Acquired Fund, that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Acquired Fund. There are not in existence on the date hereof
any plea agreements, judgments, injunctions, consents, decrees, exceptions or
orders that were entered by, filed with or issued by Governmental Authority
relating to AAF's conduct of the business of the Acquired Fund affecting in any
significant respect the conduct of such business. AAF is not, and has not been
to its knowledge, the target of any investigation by the SEC or any state
securities administrator with respect to its conduct of the business of the
Acquired Fund.
SECTION 3.12 Contracts. AAF is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party and that involves or affects the Assets, by which the
assets, business, or operations of the Acquired Fund may be bound or affected,
or under which it or the assets, business or operations of the Acquired Fund
receives benefits, and which default could reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect, and, to the knowledge of
AAF there has not occurred any event that, with the lapse of time or the giving
of notice or both, would constitute such a default.
SECTION 3.13 Properties and Assets. AAF, on behalf of the Acquired Fund,
has good and marketable title to all properties and assets reflected in the
Acquired Fund Financial Statements as owned by it, free and clear of all Liens,
except as described in the Acquired Fund Financial Statements.
SECTION 3.14 Taxes. (a) The Acquired Fund is a "fund" as defined in
Section 851(g)(2) of the Code and has elected to be a regulated investment
company under Subchapter M of the Code. The Acquired Fund has qualified for
treatment as such for each taxable year since inception that has ended prior to
the Closing Date and will continue to satisfy the requirements of Subchapter M
of the Code to maintain such qualification for the period beginning on the first
day of its current taxable year and ending on the Closing Date. The Acquired
Fund has no earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M of the Code did not apply to it. In order to (i)
insure continued qualification of the Acquired Fund for treatment as a regulated
investment company for tax purposes and (ii) eliminate any tax liability of the
Acquired Fund arising by reason of undistributed investment company taxable
income or net capital gain, AAF will declare on or prior to the Closing Date to
the shareholders of the Acquired Fund a dividend or dividends that, together
with all previous dividends, shall have the effect of distributing (A) all of
the Acquired Fund's investment company taxable income (determined without regard
to any deductions for dividends paid) for the taxable year ended December 31,
1999, and for the short taxable year beginning on January 1, 2000, and ending on
the Closing Date and (B) all of the Acquired Fund's net capital gain recognized
in its taxable year ended December 31, 1999, and in such short taxable year
(after reduction for any capital loss carryover).
(b) The Acquired Fund has timely filed all Returns required to be filed by
it, and all Taxes with respect thereto have been paid, except where the failure
so to file or so to pay would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. Adequate provision has been made
in the Acquired Fund Financial Statements for all Taxes in respect of all
periods ended on or before the date of such financial statements, except where
the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiency for any Taxes has been proposed, assessed or asserted in writing by
any taxing authority against the Acquired Fund, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding
nor are any written requests for such waivers pending, and no Returns of the
Acquired Fund are currently being or have been audited with respect to income
taxes or other Taxes by any Federal, state, local or foreign Tax authority.
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(c) To the best knowledge of AAF, the fiscal year of the Acquired Fund has
not been changed for tax purposes since the date on which it commenced
operations.
SECTION 3.15 Benefit and Employment Obligations. On or prior to the
Closing Date, the Acquired Fund will have no obligation to provide any
post-retirement or post-employment benefit to any Person, including under any
Benefit Plan, and will have no obligation to provide unfunded deferred
compensation or other unfunded or self-funded benefits to any Person.
SECTION 3.16 Brokers. No broker, finder or similar intermediary has acted
for or on behalf of AAF in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is
entitled to any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or understanding with
AAF or any action taken by it.
SECTION 3.17 Voting Requirements. The vote of a majority of the
outstanding Acquired Fund Shares entitled to vote cast at a meeting at which a
quorum is present (the "Required Shareholder Vote") is the only vote of Acquired
Fund Shareholders necessary to approve this Agreement and the Reorganization
contemplated by this Agreement.
SECTION 3.18 State Takeover Statutes. No state takeover statute or similar
statute or regulation applies to the Reorganization, this Agreement or any of
the transactions contemplated by this Agreement.
SECTION 3.19 Books and Records. The books and records of AAF relating to
the Acquired Fund, reflecting, among other things, the purchase and sale of
Acquired Fund Shares, the number of issued and outstanding shares owned by the
Acquired Fund's shareholders and the states or other jurisdictions in which such
shares were offered and sold, are complete and accurate in all material
respects.
SECTION 3.20 Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for the Acquired Fund
as of the date on which they were issued did not contain, and as supplemented by
any supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.
SECTION 3.21 No Distribution. The Acquiring Fund Shares are not being
acquired for the purpose of any distribution thereof, other than in accordance
with the terms of this Agreement.
SECTION 3.22 Liabilities. The Liabilities were incurred by the Acquired
Fund in the ordinary course of its business and are associated with the Assets.
The fair market value of the Assets on a going concern basis will equal or
exceed the sum of the Liabilities to be assumed by the Acquiring Fund plus the
amount of Liabilities, if any, to which the Assets will be subject.
SECTION 3.23 Value of Shares. The fair market value of the Acquiring Fund
Shares received by each Acquired Fund Shareholder in the Reorganization will be
approximately equal to the fair market value of its Acquired Fund Shares
constructively surrendered in exchange therefor.
SECTION 3.24 Shareholder Expenses. The Acquired Fund Shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.
SECTION 3.25 Intercompany Indebtedness. There is no intercompany
indebtedness between the Funds that was issued or acquired, or will be settled,
at a discount.
SECTION 3.26 Diversification of Assets. Not more than 25% of the value of
the Acquired Fund's total assets (excluding cash, cash items and U.S. government
securities) is invested in the stock and securities of any one issuer, and not
more than 50% of the value of such assets is invested in the stock and
securities of five or fewer issuers.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AGS
AGS, on behalf of the Acquiring Fund, represents and warrants to AAF as
follows:
SECTION 4.1 Organization; Authority. AGS is duly organized, validly
existing and in good standing under the Delaware Business Trust Act, with all
requisite trust power and authority to enter into this Agreement and perform its
obligations hereunder.
SECTION 4.2 Registration and Regulation of AGS. AGS is duly registered
with the SEC as an investment company under the Investment Company Act, and the
Acquiring Fund is a duly established and designated series thereof. The
Acquiring Fund is in compliance in all material respects with all applicable
laws, rules and regulations, including, without limitation, the Investment
Company Act, the Securities Act, the Exchange Act and all applicable state
securities laws. The Acquiring Fund is in compliance in all material respects
with the applicable investment policies and restrictions set forth in the AGS
Registration Statement. The value of the net assets of the Acquiring Fund is
determined using portfolio valuation methods that comply in all material
respects with the requirements of the Investment Company Act and the policies of
the Acquired Fund and all purchases and redemptions of Acquired Fund Shares have
been effected at the net asset value per share calculated in such manner.
SECTION 4.3 Financial Statements. The books of account and related records
of the Acquiring Fund fairly reflect in reasonable detail its assets,
liabilities and transactions in accordance with generally accepted accounting
principles applied on a consistent basis. The audited financial statements for
the fiscal year ended December 31, 1999, of the Acquiring Fund previously
delivered to AAF (the "Acquiring Fund Financial Statements") present fairly in
all material respects the financial position of the Acquiring Fund as at the
dates indicated and the results of operations and changes in net assets for the
periods then ended in accordance with generally accepted accounting principles
applied on a consistent basis for the periods then ended.
SECTION 4.4 No Material Adverse Changes; Contingent Liabilities. Since
December 31, 1999, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of the
Acquiring Fund or the status of the Acquiring Fund as a regulated investment
company under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by the Acquiring Fund or occurring in the ordinary course of
business of the Acquiring Fund or AGS. There are no contingent liabilities of an
Acquiring Fund not disclosed in the Acquiring Fund Financial Statements which
are required to be disclosed in accordance with generally accepted accounting
principles.
SECTION 4.5 Registration of Acquiring Fund Shares. (a) The shares of
beneficial interest in AGS are divided into six portfolios, including the
Acquiring Fund. The Acquiring Fund currently has three classes of shares, Class
A shares, Class B shares and Class C shares. Under its Agreement and Declaration
of Trust, AGS is authorized to issue an unlimited number of shares of the
Acquiring Fund.
(b) The Acquiring Fund Shares to be issued pursuant to Section 2.6 shall on
the Closing Date be duly registered under the Securities Act by a Registration
Statement on Form N-14 of AGS then in effect.
(c) The Acquiring Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of its
Reorganization, the Acquiring Fund shall not have outstanding any warrants,
options, convertible securities or any other type of right pursuant to which any
Person could acquire Acquiring Fund Class A Shares, Acquiring Fund Class B
Shares, or Acquiring Fund Class C Shares, except for the right of investors to
acquire Acquiring Fund Class A Shares, Acquiring Fund Class B Shares, or
Acquiring Fund Class C Shares at net asset value in the normal course of its
business as a series of an open-end management investment company operating
under the Investment Company Act.
(d) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus") which forms a part of AGS's Registration Statement on
Form N-14 shall be furnished to AAF and the Acquired
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Fund Shareholders entitled to vote at the Acquired Fund Shareholders Meeting.
The Combined Proxy Statement/Prospectus and related Statement of Additional
Information of the Acquiring Fund, when they become effective, shall conform to
the applicable requirements of the Securities Act and the Investment Company Act
and shall not include any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading, provided, however, that no representation or warranty
is made with respect to written information provided by AAF for inclusion in the
Combined Proxy Statement/ Prospectus.
(e) The shares of the Acquiring Fund which have been or are being offered
for sale (other than the Acquiring Fund Shares to be issued in connection with
the Reorganization) have been duly registered under the Securities Act by the
AGS Registration Statement and have been duly registered, qualified or are
exempt from registration or qualification under the securities laws of each
state or other jurisdiction in which such shares have been or are being offered
for sale, and no action has been taken by AGS to revoke or rescind any such
registration or qualification.
SECTION 4.6 Accountants. PricewaterhouseCoopers LLP, which has reported
upon the Acquiring Fund Financial Statements for the period ended December 31,
1999, are independent public accountants as required by the Securities Act and
the Exchange Act.
SECTION 4.7 Binding Obligation. This Agreement has been duly authorized,
executed and delivered by AGS on behalf of the Acquiring Fund and, assuming this
Agreement has been duly executed and delivered by AAF, constitutes the legal,
valid and binding obligation of AGS, enforceable against AGS in accordance with
its terms from and with respect to the revenues and assets of the Acquiring
Fund, except as the enforceability hereof may be limited by bankruptcy,
insolvency, reorganization or similar laws relating to or affecting creditors'
rights generally, or by general equity principles (whether applied in a court of
law or a court of equity and including limitations on the availability of
specific performance or other equitable remedies).
SECTION 4.8 No Breaches or Defaults. The execution and delivery of this
Agreement by AGS on behalf of the Acquiring Fund and performance by AGS of its
obligations hereunder have been duly authorized by all necessary corporate
action on the part of AGS and (i) do not, and on the Closing Date will not,
result in any violation of the Agreement and Declaration of Trust or by-laws of
AGS and (ii) do not, and on the Closing Date will not, result in a breach of any
of the terms or provisions of, or constitute (with or without the giving of
notice or the lapse of time or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
material benefit under, or result in the creation or imposition of any Lien upon
any property or assets of the Acquiring Fund (except for such breaches or
defaults or Liens that would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect) under (A) any indenture, mortgage
or loan agreement or any other material agreement or instrument to which AGS is
a party or by which it may be bound and which relates to the assets of the
Acquiring Fund or to which any properties of the Acquiring Fund may be subject;
(B) any Permit; or (C) any existing applicable law, rule, regulation, judgment,
order or decree of any Governmental Authority having jurisdiction over AGS or
any property of the Acquiring Fund. AGS is not under the jurisdiction of a court
in a proceeding under Title 11 of the United States Code or similar case within
the meaning of Section 368(a)(3)(A) of the Code.
SECTION 4.9 Authorizations or Consents. Other than those which shall have
been obtained or made on or prior to the Closing Date, no authorization or
approval or other action by, and no notice to or filing with, any Governmental
Authority will be required to be obtained or made by AGS in connection with the
due execution and delivery by AGS of this Agreement and the consummation by AGS
of the transactions contemplated hereby.
SECTION 4.10 Permits. AGS has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
the Acquiring Fund, and there has occurred no default under any Permit, except
for the absence of Permits and for defaults under Permits the absence or default
of which would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. To the knowledge of AGS there are no
proceedings relating to the suspension, revocation or modification of any
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Permit, except for such that would not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
SECTION 4.11 No Actions, Suits or Proceedings. (a) There is no pending
action, suit or proceeding, nor, to the knowledge of AGS, has any litigation
been overtly threatened in writing or, if probable of assertion, orally, against
AGS before any Governmental Authority which questions the validity or legality
of this Agreement or of the transactions contemplated hereby, or which seeks to
prevent the consummation of the transactions contemplated hereby, including the
Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of AGS, threatened in
writing or, if probable of assertion, orally, against AGS, affecting any
property, asset, interest or right of the Acquiring Fund, that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Acquiring Fund. There are not in existence on the date
hereof any plea agreements, judgments, injunctions, consents, decrees,
exceptions or orders that were entered by, filed with or issued by Governmental
Authority relating to AGS's conduct of the business of the Acquiring Fund
affecting in any significant respect the conduct of such business. AGS is not,
and has not been, to the knowledge of AGS, the target of any investigation by
the SEC or any state securities administrator with respect to its conduct of the
business of the Acquiring Fund.
SECTION 4.12 Taxes. (a) The Acquiring Fund is a "fund" as defined in
Section 851(g)(2) of the Code and has elected to be treated as a regulated
investment company under Subchapter M of the Code. The Acquiring Fund has
qualified for treatment as such for each taxable year since inception that has
ended prior to the Closing Date and will continue to satisfy the requirements of
Part I of Subchapter M of the Code to maintain such qualification for its
current taxable year. The Acquired Fund has no earnings or profits accumulated
in any taxable year in which the provisions of Subchapter M of the Code did not
apply to it.
(b) The Acquiring Fund has timely filed all Returns required to be filed by
it and all Taxes with respect thereto have been paid, except where the failure
so to file or so to pay, would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. Adequate provision has been
made in the Acquiring Fund Financial Statements for all Taxes in respect of all
periods ending on or before the date of such financial statements, except where
the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, assessed or asserted in writing
by any taxing authority against the Acquiring Fund, and no deficiency has been
proposed, assessed or asserted, in writing, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding
nor are any written requests for such waivers pending and no Return of the
Acquiring Fund is currently being or has been audited with respect to income
taxes or other Taxes by any Federal, state, local or foreign Tax authority.
(c) The fiscal year of the Acquiring Fund has not been changed for tax
purposes since the date on which it commenced operations.
SECTION 4.13 Brokers. No broker, finder or similar intermediary has acted
for or on behalf of AGS in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is
entitled to any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or understanding with
AGS or any action taken by it.
SECTION 4.14 Representations Concerning the Reorganization. (a) The
Acquiring Fund does not directly or indirectly own, nor at the Effective Time
will it directly or indirectly own, nor has it at any time during the five-year
period ending on the Closing Date directly or indirectly owned, any shares of
the Acquired Fund.
(b) AGS has no plan or intention to issue additional Acquiring Fund Shares
following the Reorganization except for shares issued in the ordinary course of
Acquiring Fund's business as a series of an open-end investment company; nor
does AGS have any plan or intention to redeem or otherwise reacquire any of the
Acquiring Fund Shares issued in the Reorganization, except to the extent that
the Acquiring Fund
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is required by the Investment Company Act to redeem any of its shares presented
for redemption at net asset value in the ordinary course of its business as a
series of an open-end, management investment company.
(c) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the Assets other than in the ordinary course of its business
and to the extent necessary to maintain its status as a "regulated investment
company" under the Code.
(d) Following the Reorganization, the Acquiring Fund will continue the
"historic business" (within the meaning of Section 1.368-1(d)(2) of the Income
Tax Regulations under the Code) of the Acquired Fund and will use a significant
portion of the Acquired Fund's "historic business assets" (within the meaning of
Section 1.368-1(d)(3) of those regulations) in a business.
(e) There is no plan or intention for the Acquiring Fund to be dissolved or
merged into another business trust or a corporation or any "fund" thereof
(within the meaning of Section 851(g)(2) of the Code) following the
Reorganization.
SECTION 4.15 Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for the Acquiring
Fund as of the date on which they were issued did not contain, and as
supplemented by any supplement thereto dated prior to or on the Closing Date do
not contain, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
SECTION 4.16 Value of Shares. The fair market value of the Acquiring Fund
Shares received by each Acquired Fund Shareholder in the Reorganization will be
approximately equal to the fair market value of its Acquired Fund Shares
constructively surrendered in exchange therefor.
SECTION 4.17 Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between the Funds that was issued or acquired, or will
be settled, at a discount. No consideration other than the Acquiring Fund Shares
(and the Acquiring Fund's assumption of the Liabilities, including for this
purpose all Liabilities to which the Assets are subject) will be issued in
exchange for the Assets in connection with the Reorganization. The fair market
value of the Assets on a going concern basis will equal or exceed the sum of the
Liabilities to be assumed by the Acquiring Fund plus the amount of Liabilities,
if any, to which the Assets will be subject.
ARTICLE 5
COVENANTS
SECTION 5.1 Conduct of Business. (a) From the date of this Agreement up to
and including the Closing Date (or, if earlier, the date upon which this
Agreement is terminated pursuant to Article 7), AAF shall conduct the business
of the Acquired Fund only in the ordinary course and substantially in accordance
with past practices, shall use its reasonable best efforts to preserve intact
its business organization and material assets and to maintain the rights,
franchises and business and customer relations necessary to conduct the business
of the Acquired Fund in the ordinary course in all material respects and shall
invest the Assets in a manner that ensures compliance with Section 3.14(a) of
this Agreement. Without limiting the generality of the foregoing, AAF shall not
do any of the following with respect to the Acquired Fund without the prior
written consent of AGS, which consent shall not be unreasonably withheld:
(i) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for its capital stock;
(ii) amend its Articles of Incorporation or by-laws;
(iii) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or series or division thereof or
any assets that are material, individually or in the aggregate, to the
Acquired Fund taken as a whole, except purchases of assets in the ordinary
course of business consistent with past practice;
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(iv) sell, lease or otherwise dispose of any of its material
properties or assets, or mortgage or otherwise encumber or subject to any
Lien any of its material properties or assets, other than in the ordinary
course of business;
(v) incur any indebtedness for borrowed money or guarantee any
indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Acquired
Fund, guarantee any debt securities of another Person, enter into any "keep
well" or other agreement to maintain any financial statement condition of
another Person, or enter into any arrangement having the economic effect of
any of the foregoing;
(vi) settle or compromise any material income tax liability or make
any material tax election;
(vii) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business;
(viii) change its method of accounting, except as required by changes
in generally accepted accounting principles as concurred in by its
independent auditors, or change its fiscal year;
(ix) make or agree to make any material severance, termination,
indemnification or similar payments except pursuant to existing agreements;
or
(x) adopt any Benefit Plan.
(b) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), AGS shall conduct the business of the Acquiring Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business relations
necessary to conduct the business operations of the Acquiring Fund in the
ordinary course in all material respects.
SECTION 5.2 Announcements. AAF and AGS shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement and the transactions contemplated by this Agreement,
and neither AAF nor AGS shall issue any such press release or make any public
statement without the prior written approval of the other party to this
Agreement, such approval not to be unreasonably withheld, except as may be
required by law.
SECTION 5.3 Expenses. The Acquired Fund and the Acquiring Fund shall each
bear the expenses it incurs in connection with this Agreement and the
Reorganization and other transactions contemplated hereby.
SECTION 5.4 Further Assurances. Each of the parties hereto shall execute
such documents and other papers and perform such further acts as may be
reasonably required to carry out the provisions hereof and the transactions
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its reasonable best efforts to fulfill or obtain the fulfillment of the
conditions precedent to the consummation of the Reorganization, including the
execution and delivery of any documents, certificates, instruments or other
papers that are reasonably required for the consummation of the Reorganization.
SECTION 5.5 Notice of Events. AGS shall give prompt notice to AAF, and AAF
shall give prompt notice to AGS, of (a) the occurrence or nonoccurrence of any
event which to the knowledge of AGS or to the knowledge of AAF, the occurrence
or non-occurrence of which would be likely to result in any of the conditions
specified in (i) in the case of AAF, Sections 6.1 and 6.2 or (ii) in the case of
AGS, Sections 6.2 and 6.3, not being satisfied so as to permit the consummation
of the Reorganization and (b) any material failure on its part, or on the part
of the other party hereto of which it has knowledge, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.5 shall not limit or otherwise affect the remedies available hereunder
to any party.
SECTION 5.6 Access to Information. (a) AAF will, during regular business
hours and on reasonable prior notice, allow AGS and its authorized
representatives reasonable access to the books and records of AAF
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pertaining to the Assets and to officers of AAF knowledgeable thereof; provided,
however, that any such access shall not significantly interfere with the
business or operations of AAF.
(b) AGS will, during regular business hours and on reasonable prior notice,
allow AAF and its authorized representatives reasonable access to the books and
records of AGS pertaining to the assets of the Acquiring Fund and to officers of
AGS knowledgeable thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of AGS.
SECTION 5.7 Consents, Approvals and Filings. Each of AAF and AGS shall
make all necessary filings, as soon as reasonably practicable, including,
without limitation, those required under the Securities Act, the Exchange Act,
the Investment Company Act and the Advisers Act, in order to facilitate prompt
consummation of the Reorganization and the other transactions contemplated by
this Agreement. In addition, each of AAF and AGS shall use its reasonable best
efforts, and shall cooperate fully with each other (i) to comply as promptly as
reasonably practicable with all requirements of Governmental Authorities
applicable to the Reorganization and the other transactions contemplated herein
and (ii) to obtain as promptly as reasonably practicable all necessary permits,
orders or other consents of Governmental Authorities and consents of all third
parties necessary for the consummation of the Reorganization and the other
transactions contemplated herein. Each of AAF and AGS shall use reasonable
efforts to provide such information and communications to Governmental
Authorities as such Governmental Authorities may request.
SECTION 5.8 Submission of Agreement to Shareholders. AAF shall take all
action necessary in accordance with applicable law and its Articles of
Incorporation and by-laws to convene the Acquired Fund Shareholders Meeting. AAF
shall, through its Board of Directors, recommend to the Acquired Fund
Shareholders approval of this Agreement and the transactions contemplated by
this Agreement. AAF shall use its reasonable best efforts to hold the Acquired
Fund Shareholders Meeting as soon as practicable after the date hereof.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
SECTION 6.1 Conditions Precedent of AGS. The obligation of AGS to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by AGS.
(a) The representations and warranties of AAF on behalf of the Acquired
Fund set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing Date with the
same effect as though all such representations and warranties had been made as
of the Closing Date.
(b) AAF shall have complied with and satisfied in all material respects all
agreements and conditions relating to the Acquired Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) AGS shall have received at the Closing Date (i) a certificate, dated as
of the Closing Date, from an officer of AAF, in such individual's capacity as an
officer of AAF and not as an individual, to the effect that the conditions
specified in Section 6.1(a) and (b) have been satisfied and (ii) a certificate,
dated as of the Closing Date, from the Secretary or Assistant Secretary of AAF
certifying as to the accuracy and completeness of the attached Articles of
Incorporation and by-laws of AAF, and resolutions, consents and authorizations
of or regarding AAF with respect to the execution and delivery of this Agreement
and the transactions contemplated hereby.
(d) AGS shall have received the signed opinion of Ballard Spahr Andrews &
Ingersoll, LLP, counsel to AAF, or other counsel reasonably acceptable to AGS,
in form and substance reasonably acceptable to counsel for AGS, as to the
matters set forth in Schedule 6.1(d).
(e) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
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SECTION 6.2 Mutual Conditions. The obligations of AAF and AGS to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following further conditions, any one or more (other
than that is paragraph (d)) may be waived in writing by AAF and AGS, but only if
and to the extent that such waiver is mutual.
(a) All filings required to be made prior to the Closing Date with, and all
consents, approvals, permits and authorizations required to be obtained on or
prior to the Closing Date from Governmental Authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by AAF and AGS shall have been made or
obtained, as the case may be; provided, however, that such consents, approvals,
permits and authorizations may be subject to conditions that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) This Agreement, the Reorganization of the Acquired Fund and related
matters shall have been approved and adopted at the Acquired Fund Shareholders
Meeting by the shareholders of the Acquired Fund on the record date by the
Required Shareholder Vote.
(c) The Assets to be acquired by the Acquiring Fund shall constitute at
least 90% of the fair market value of the net assets, and at least 70% of the
fair market value of the gross assets, held by the Acquired Fund immediately
prior to the Reorganization. For purposes of this Section 6.2(c), assets used by
the Acquired Fund to pay the expenses it incurs in connection with this
Agreement and the Reorganization and to effect all shareholder redemptions and
distributions -- except (i) redemptions pursuant to the Investment Company Act
not made as part of the Reorganization and (ii) distributions made to conform to
its policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code -- after the date of this Agreement shall be included
as assets held by the Acquired Fund immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent injunction or
other order issued by any Governmental Authority preventing the consummation of
the Reorganization on the Closing Date shall be in effect; provided, however,
that the party or parties invoking this condition shall use reasonable efforts
to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by AGS with respect to
the Acquiring Fund Shares to be issued to Acquired Fund Shareholders in
connection with the Reorganization shall have become effective under the
Securities Act and no stop order suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the Securities Act.
(f) AAF and AGS shall have received on or before the Closing Date an
opinion of Kirkpatrick & Lockhart LLP in form and substance reasonably
acceptable to AAF and AGS, as to the matters set forth on Schedule 6.2(f). In
rendering such opinion, such counsel may rely as to factual matters, exclusively
and without independent verification, on the representations made in this
Agreement, which such counsel may treat as representations made to it, or in
separate letters addressed to such counsel and any certificates delivered
pursuant to this Agreement. Such opinion may state that no opinion is expressed
as to the effect of the Reorganization on either Fund or any Acquired Fund
Shareholder with respect to any Asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.
(g) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
SECTION 6.3 Conditions Precedent of AAF. The obligation of AAF to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may
be waived in writing by AAF.
(a) The representations and warranties of AGS on behalf of the Acquiring
Fund participating in the Reorganization set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date with the same effect as though all such representations
and warranties had been made as of the Closing Date.
I-16
<PAGE> 47
(b) AGS shall have complied with and satisfied in all material respects all
agreements and conditions relating to the Acquiring Fund participating in the
Reorganization set forth herein on its part to be performed or satisfied at or
prior to the Closing Date.
(c) AAF shall have received on the Closing Date (i) a certificate, dated as
of the Closing Date, from an officer of AGS, in such individual's capacity as an
officer of AGS and not as an individual, to the effect that the conditions
specified in Sections 6.3(a) and (b) have been satisfied and (ii) a certificate,
dated as of the Closing Date, from the Secretary or Assistant Secretary of AGS
certifying as to the accuracy and completeness of the attached Agreement and
Declaration of Trust and by-laws, as amended, of AGS and resolutions, consents
and authorizations of or regarding AGS with respect to the execution and
delivery of this Agreement and the transactions contemplated hereby.
(d) AAF shall have received the signed opinion of Kirkpatrick & Lockhart
LLP, counsel to AGS, or other counsel reasonably acceptable to AAF, in form and
substance reasonably acceptable to counsel for AGS, as to the matters set forth
on Schedule 6.3(d).
ARTICLE 7
TERMINATION OF AGREEMENT
SECTION 7.1 Termination. (a) This Agreement may be terminated in whole or
with respect to the Reorganization described herein on or prior to the Closing
Date as follows:
(i) by mutual written consent of AAF and AGS; or
(ii) at the election of AAF or AGS:
(A) if the Closing Date shall not be on or before November 30,
2000, or such later date as the parties hereto may agree upon, unless
the failure to consummate the Reorganization is the result of a willful
and material breach of this Agreement by the party seeking to terminate
this Agreement;
(B) if, upon a vote at the Acquired Fund Shareholders Meeting or
any adjournment thereof, the Required Shareholder Vote shall not have
been obtained as contemplated by Section 5.8; or
(C) if any Governmental Authority shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the Reorganization and such order,
decree, ruling or other action shall have become final and
nonappealable.
(b) The termination of this Agreement shall be effectuated by the delivery
by the terminating party to the other party of a written notice of such
termination.
SECTION 7.2 Survival After Termination. If this Agreement is terminated in
accordance with Section 7.1 hereof and the Reorganization of the Acquired Fund
is not consummated, this Agreement shall become void and of no further force and
effect with respect to the Reorganization and the Acquired Fund, except for the
provisions of Section 5.3.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 Survival of Representations and Warranties. The
representations, warranties and covenants in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement shall survive the
consummation of the transactions contemplated hereunder for a period of one (1)
year following the Closing Date.
SECTION 8.2 Governing Law. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware applicable to
contracts made and to be performed wholly within such state.
I-17
<PAGE> 48
SECTION 8.3 Binding Effect, Persons Benefiting, No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and the respective successors and assigns of the parties and such Persons.
Nothing in this Agreement is intended or shall be construed to confer upon any
entity or Person other than the parties hereto and their respective successors
and permitted assigns any right, remedy or claim under or by reason of this
Agreement or any part hereof. Without the prior written consent of the parties
hereto, this Agreement may not be assigned by any of the parties hereto.
SECTION 8.4 Obligations of AGS and AAF. (a) AAF and AGS hereby acknowledge
and agree that the Acquiring Fund is a separate investment portfolio of AGS,
that AGS is executing this Agreement on behalf of the Acquiring Fund, and that
any amounts payable by AGS under or in connection with this Agreement shall be
payable solely from the revenues and assets of the Acquiring Fund. AAF further
acknowledges and agrees that this Agreement has been executed by a duly
authorized officer of AGS in his or her capacity as an officer of AGS intending
to bind AGS as provided herein, and that no officer, director or shareholder of
AGS shall be personally liable for the liabilities or obligations of AGS
incurred hereunder.
(b) AAF and AGS hereby acknowledge and agree that the Acquired Fund is a
separate investment portfolio of AAF, that AAF is executing this Agreement on
behalf of the Acquired Fund and that any amounts payable by AAF under or in
connection with this Agreement shall be payable solely from the revenues of the
Acquired Fund and the Assets. AGS further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of AAF in his or her
capacity as an officer of AAF intending to bind AAF as provided herein, and that
no officer, trustee or shareholder of AAF shall be personally liable for the
liabilities of AAF incurred hereunder.
SECTION 8.5 Amendments. This Agreement may be amended, modified, or
supplemented at any time, notwithstanding approval thereof by the Acquired Fund
Shareholders, in any manner mutually agreed upon in writing by the parties;
provided that following such approval no such amendment shall have a material
adverse effect on the Acquired Fund Shareholders' interests.
SECTION 8.6 Enforcement. The parties agree irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States or
any state having jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.
SECTION 8.7 Interpretation. When a reference is made in this Agreement to
a Section or Schedule, such reference shall be to a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". Each
representation and warranty contained in Article 3 or 4 that relates to a
general category of a subject matter shall be deemed superseded by a specific
representation and warranty relating to a subcategory thereof to the extent of
such specific representation or warranty.
SECTION 8.8 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and each of which shall constitute one
and the same instrument.
SECTION 8.9 Entire Agreement; Schedules. This Agreement, including the
Schedules, certificates and lists referred to herein, and any documents executed
by the parties simultaneously herewith or pursuant thereto, constitute the
entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, written or oral, between the parties with respect to such
subject matter.
SECTION 8.10 Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered by hand or by overnight courier, two days after being
sent by registered mail, return receipt requested, or when sent by telecopier
(with receipt confirmed), provided, in the case of a telecopied notice, a copy
is also sent by registered mail, return receipt
I-18
<PAGE> 49
requested, or by courier, addressed as follows (or to such other address as a
party may designate by notice to the other):
(a) If to AAF:
AIM Advisor Funds, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
with a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Attn: William H. Rheiner, Esq.
Fax: (215) 864-8999
(b) If to AGS:
AIM Growth Series
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attn: Carol F. Relihan, Esq.
Fax: (713) 993-9185
with a copy to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Attn: Arthur J. Brown, Esq.
Fax: (202) 778-9100
SECTION 8.11 Representations by AIM Advisors. In its capacity as
investment adviser to the Acquired Fund, AIM Advisors represents to AGS that to
the best of its knowledge the representations and warranties of AAF and the
Acquired Fund contained in this Agreement are true and correct as of the date of
this Agreement. In its capacity as investment adviser to the Acquiring Fund, AIM
Advisors represents to AAF that to the best of its knowledge the representations
and warranties of AGS and the Acquiring Fund contained in this Agreement are
true and correct as of the date of this Agreement. For purposes of this Section
8.11, the best knowledge standard shall be deemed to mean that the officers of
AIM Advisors who have substantive responsibility for the provision of investment
advisory services to AAF and AGS do not have actual knowledge to the contrary
after due inquiry.
I-19
<PAGE> 50
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM Advisor Funds, Inc., acting on
behalf of AIM Advisor Large Cap Value
Fund
By: /s/ ROBERT H. GRAHAM
-------------------------------------
AIM Growth Series, acting
on behalf of AIM Basic Value Fund
By: /s/ ROBERT H. GRAHAM
-------------------------------------
A I M Advisors, Inc.
By: /s/ ROBERT H. GRAHAM
-------------------------------------
I-20
<PAGE> 51
SCHEDULE 6.1(d)
OPINION OF COUNSEL TO AAF
1. AAF is a corporation validly existing and in good standing under the
Maryland General Corporation Law.
2. AAF is an open-end, management investment company registered under the
Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AAF have
been duly authorized and approved by all requisite corporate action on the part
of AAF. The Agreement has been duly executed and delivered by AAF and
constitutes the valid and binding obligation of AAF.
4. The Acquired Fund Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are non-assessable.
5. To the best of our knowledge, AAF is not required to submit any notice,
report or other filing with or obtain any authorization, consent or approval
from any governmental authority or self regulatory organization prior to the
consummation of the transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer who is
the current primary contact for AAF or who has devoted substantive attention on
behalf of AAF during the preceding twelve months and who is still currently
employed by or is currently a member of this firm, no litigation or governmental
proceeding is pending or threatened in writing against the Acquiring Fund (i)
with respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
I-21
<PAGE> 52
SCHEDULE 6.2(F)
TAX OPINION
(i) The acquisition of the Assets by the Acquiring Fund in exchange solely
for the Acquiring Fund Shares and the Acquiring Fund's assumption of the
Liabilities, followed by the distribution of those Shares pro rata to the
Acquired Fund Shareholders constructively in exchange for their Acquired Fund
Shares, as provided in the Agreement, will qualify as a "reorganization" within
the meaning of section 368(a) of the Code, and each Fund will be a "party to a
reorganization" within the meaning of 368(b) of the Code.
(ii) The Acquired Fund will recognize no gain or loss on the transfer of
the Assets to the Acquiring Fund in exchange solely for Acquiring Fund Shares
and the Acquiring Fund's assumption of the Liabilities or on the distribution of
those shares to the Acquired Fund Shareholders.
(iii) The Acquiring Fund will recognize no gain or loss on its receipt of
the Assets in exchange solely for Acquiring Fund Shares and its assumption of
the Liabilities.
(iv) The Acquiring Fund's basis for the Assets will be the same as the
Acquired Fund's basis therefor immediately before the Reorganization, and the
Acquiring Fund's holding period for the Assets will include the Acquired Fund's
holding period therefor.
(v) An Acquired Fund Shareholder will recognize no gain or loss on the
receipt of Acquiring Fund Shares in constructive exchange for all its Acquired
Fund Shares pursuant to the Reorganization.
(vi) An Acquired Fund Shareholder's aggregate basis for the Acquiring Fund
Shares received thereby in the Reorganization will be the same as the aggregate
basis for its Acquired Fund Shares to be constructively surrendered in exchange
therefor, and its holding period for those Acquiring Fund Shares will included
its holding period for those Acquired Fund Shares, provided the Acquired Fund
Shareholder held the Acquired Fund Shares as capital assets at the Effective
Time.
I-22
<PAGE> 53
SCHEDULE 6.3(d)
OPINION OF COUNSEL TO AGS
1. AGS is duly organized and validly existing as a business trust under the
Delaware Business Trust Act.
2. AGS is an open-end, management investment company registered under the
Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AGS have
been duly authorized and approved by all requisite trust action on the part of
AGS. The Agreement has been duly executed and delivered by AGS and constitutes
the valid and binding obligation of AGS.
4. The Acquired Fund Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are non-assessable.
5. To the best of our knowledge, AGS is not required to submit any notice,
report or other filing with or obtain any authorization, consent or approval
from any governmental authority or self regulatory organization prior to the
consummation of the transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer who is
the current primary contact for AGS or who has devoted substantive attention on
behalf of AGS during the preceding twelve months and who is still currently
employed by or is currently a member of this firm, no litigation or governmental
proceeding is pending or threatened in writing against the Acquired Fund (i)
with respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
I-23
<PAGE> 54
Appendix II
CLASS A, CLASS B AND CLASS C SHARES OF
AIM BASIC VALUE FUND
Supplement dated March 22, 2000
to the Prospectus dated May 3, 1999
as revised October 25, 1999 and supplemented February 11, 2000
and February 25, 2000
At a meeting held on March 14, 2000, the Board of Trustees of AIM Growth
Series (the "Trust"), on behalf of AIM Basic Value Fund (the "Fund"), voted
to request shareholders to approve certain proposals relating to the
restructuring of the Fund.
The Fund currently invests all of its investable assets in the Value
Portfolio (the "Portfolio"). The Board approved a restructuring of the Fund
which will eliminate the Fund's current master-feeder structure and cause
the Fund to redeem its interest in the Portfolio. The Portfolio will then
be terminated. The Fund's investment strategies will be the same as the
Portfolio's current investment strategies. The Fund's portfolio managers
will be the current portfolio mangers of the Portfolio. The Board is
requesting shareholder approval of the following items related to the
restructuring:
- A new advisory agreement between the Trust and A I M
Advisors, Inc. ("AIM"). The Board has concluded that
the terms of the new advisory agreement are
substantially the same as the advisory portion of the
current advisory agreement with the Portfolio, except:
(1) AIM would directly manage the Fund's investments
and would receive an annual fee for the investment
advisory services that it provides to the Fund at a
rate equal to the combined rate of the fee charged to
the Portfolio and the fee charged to the Fund for
administrative services; (2) the proposed advisory
agreement adds provisions relating to certain
functions that would be performed by AIM in connection
with the Fund's securities lending program and for
which AIM would receive compensation; and (3) the
proposed advisory agreement clarifies non-exclusivity
provisions that are set forth in the current advisory
agreement;
- Changing the Fund's fundamental investment
restrictions. The proposed revisions to the Fund's
fundamental investment restrictions are described in a
supplement to the Fund's statement of additional
information;
- Making the Fund's investment objective
non-fundamental. The investment objective would not be
changed. If the investment objective of the Fund
becomes non-fundamental, it can be changed in the
future by the Board of Trustees of the Trust without
further approval by shareholders.
The Board of Trustees of the Trust has called a meeting of the Fund's
shareholders to be held in May 2000 to vote on these and other proposals.
Only shareholders of record as of April 3, 2000 will be entitled to vote at
the meeting. Proposals that are approved are expected to become effective
on or about June 5, 2000.
The Board has also approved a new administrative services agreement between
AIM and the Fund. The administrative and accounting services to be provided
to the Fund are substantially the same services that AIM provides to the
Portfolio and the Fund under the current agreements.
<PAGE> 55
AIM BASIC VALUE FUND
CLASS A, B AND C SHARES
Supplement dated February 25, 2000
to the Prospectus dated May 3, 1999,
as revised October 25, 1999 and as supplemented February 11, 2000
This supplement supersedes and replaces in its entirety the supplement dated
February 11, 2000.
Advisor Class shares of AIM Basic Value Fund converted to Class A shares of the
fund effective the close of business on February 11, 2000. Advisor Class shares
of the fund are no longer offered for sale or exchange.
The following replaces in its entirety the information appearing under the
heading "FUND MANAGEMENT - PORTFOLIO MANAGERS" on page 4 of the prospectus:
"The advisor uses a team approach to investment management. The
individual members of the team who are primarily responsible for the
day-to-day management of the portfolio, all of whom are officers of
A I M Capital Management, Inc., a wholly owned subsidiary of the
advisor, are
o Evan G. Harrel, Senior Portfolio Manager, who has been
responsible for the fund since 1998 and has been associated with
the advisor and/or its affiliates since 1998. From 1994 to 1998,
he was Vice President and portfolio manager with Van Kampen
American Capital Asset Management, Inc.
o Matthew W. Seinsheimer, Portfolio Manager, who has been
responsible for the fund since 2000 and has been associated with
the advisor and/or its affiliates since 1998. From 1995 to 1998,
he was Portfolio Manager for American Indemnity Company.
o Bret W. Stanley, Senior Portfolio Manager, who has been
responsible for the fund since 1998 and has been associated with
the advisor and/or its affiliates since 1998. From 1994 to 1998,
he was Vice President and portfolio manager with Van Kampen
American Capital Asset Management, Inc."
<PAGE> 56
AIM BASIC VALUE FUND
------------------------------------------------------------------------
AIM Basic Value Fund seeks to provide long-term growth of capital.
--Registered Trademark--
PROSPECTUS
MAY 3, 1999
AS REVISED OCTOBER 25, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 57
--------------------
AIM BASIC VALUE FUND
--------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-8
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 58
--------------------
AIM BASIC VALUE FUND
--------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is long-term growth of capital.
The fund seeks to meet this objective by investing all of its investable
assets in the Value Portfolio (the portfolio), which in turn normally invests at
least 65% of its total assets in equity securities of U.S. issuers that have
market capitalizations of greater than $500 million and that the portfolio
managers believe to be undervalued in relation to long-term earning power or
other factors.
The portfolio may also invest up to 35% of its total assets in equity
securities of U.S. issuers that have market capitalizations of less than $500
million and in investment-grade non-convertible debt securities, U.S. government
securities and high-quality money market instruments, all of which are issued by
U.S. issuers. The portfolio may also invest up to 25% of its total assets in
foreign securities.
In selecting investments, the portfolio managers seek to identify those
companies whose prospects and growth potential are undervalued by investors and
that provide the potential for attractive returns. The portfolio managers
allocate investments among fixed-income securities based on their views as to
the best values then available in the marketplace. The portfolio managers
consider whether to sell a particular security when any of those factors
materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the portfolio may temporarily
hold all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, or high-quality debt securities. As a result, the
fund or the portfolio may not achieve its investment objective.
The portfolio may engage in active and frequent trading of portfolio
securities to achieve its investment objective. If the portfolio does trade in
this way, it may incur increased transaction costs and brokerage commissions,
both of which can lower the actual return on your investment. Active trading may
also increase short-term capital gains and losses, which may affect the taxes
you have to pay.
If the fund's Board of Trustees determines that it is in the best interests of
the fund and its shareholders, the fund may redeem its investment in the
portfolio.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the portfolio invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions, and market liquidity.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The fund currently participates in the initial public offering (IPO) market,
and a significant portion of the fund's returns currently are attributable to
its investment in IPOs, which have a magnified impact due to the fund's small
asset base. As the fund's assets grow, it is probable that the effect of the
fund's investment in IPOs on its total returns will decline, which may reduce
the fund's total returns.
The value of your shares could be adversely affected if the computer systems
used by the portfolio's investment advisor and other service providers are
unable to distinguish the year 2000 from the year 1900.
The portfolio's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the portfolio invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 59
--------------------
AIM BASIC VALUE FUND
--------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance. Total return information in the bar chart
and table below may be affected by special market factors, including the fund's
investments in initial public offerings, which may have a magnified impact on
the fund due to its small asset base. There is no guarantee that, as the fund's
assets grow, it will continue to experience substantially similar performance.
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's Class A
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1996 ....................................... 15.12%
1997 ....................................... 27.23%
1998 ....................................... 7.02%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
15.01% (quarter ended September 30, 1997) and the lowest quarterly return was
- -12.63% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR INCEPTION DATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 1.15% 16.99% 10/18/95
Class B 1.34 17.69 10/18/95
Class C -- -- 5/3/99
Russell 1000--Registered Trademark-- Index(1) 27.02 28.08(2) 10/31/95(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Russell 1000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 1,000
largest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
(2) The average annual total return given is since the date closest to the
inception date of the classes with the longest performance history.
2
<PAGE> 60
--------------------
AIM BASIC VALUE FUND
--------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- ---------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets)(2) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.73% 0.73% 0.73%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other Expenses 1.03 1.03 1.03
Total Annual Fund
Operating Expenses 2.11 2.76 2.76
Expense Reimbursement(3) 0.36 0.36 0.36
Net Expenses 1.75 2.40 2.40
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) This fee table, and the expense example below, reflect the expenses of both
the fund and the portfolio.
(3) The investment advisor has contractually agreed to limit net expenses.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived
or expenses are reimbursed, the expenses will be lower. Although your actual
returns and costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $752 $1,175 $1,622 $2,857
Class B 779 1,156 1,659 2,934
Class C 379 856 1,459 3,090
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $752 $1,175 $1,622 $2,857
Class B 279 856 1,459 2,934
Class C 279 856 1,459 3,090
- ----------------------------------------------
</TABLE>
3
<PAGE> 61
--------------------
AIM BASIC VALUE FUND
--------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the investment advisor for the
Value Portfolio (the portfolio), and is responsible for its day-to-day
management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173. The advisor supervises all aspects of the portfolio's
operations and provides investment advisory services to the portfolio, including
obtaining and evaluating economic, statistical and financial information to
formulate and implement investment programs for the portfolio.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 125
investment portfolios, including the portfolio, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor and Chancellor LGT
Asset Management, Inc. (the advisor for the period January 1, 1998 through May
28, 1998) together received compensation of 0.76% of average daily net assets
consisting of a management and administrative fee of 0.73% and an accounting fee
of 0.03%.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the portfolio, all of whom are officers of A I M Capital Management, Inc., a
wholly owned subsidiary of the advisor, are
- - Evan G. Harrel, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was Vice President and portfolio manager
with Van Kampen American Capital Asset Management, Inc.
- - Bret W. Stanley, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, he was Vice President and portfolio manager
with Van Kampen American Capital Asset Management, Inc.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Basic Value Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually.
4
<PAGE> 62
--------------------
AIM BASIC VALUE FUND
--------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
Total return information in this table may be affected by special market
factors, including the fund's investments in initial public offerings, which may
have a magnified impact on the fund due to its small asset base. There is no
guarantee that, as the fund's assets grow, it will continue to experience
substantially similar performance.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------
OCTOBER 18,
YEAR ENDED DECEMBER 31, TO
------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.25 $14.65 $12.76 $11.43
Income from investment operations:
Net investment income (loss)(b) 0.04 0.09(c) (0.01)(c) 0.03(c)
Net gains on securities (both realized and
unrealized) 1.16 3.87 1.94 1.30
Total from investment operations 1.20 3.96 1.93 1.33
Less distributions:
Dividends from net investment income -- (0.03) -- --
Distributions from net realized gains (0.32) (1.33) (0.04) --
Total distributions (0.32) (1.36) (0.04) --
Net asset value, end of period $18.13 $17.25 $14.65 $12.76
Total return(d) 7.02% 27.23% 15.12% 11.64%
- ---------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $9,074 $7,688 $2,529 $ 870
Ratio of expenses to average net assets(c):
With expense reductions and/or reimbursement 1.74%(e) 1.99% 2.00% 2.00%(f)
Without expense reductions and/or
reimbursement 2.11%(e) 2.97% 5.51% 50.54%(f)
Ratio of net investment income (loss) to average
net assets(c):
With expense reductions and/or reimbursement 0.25%(e) 0.56% (0.10)% 1.10%(f)
Without expense reductions and/or
reimbursement (0.08)%(e) (0.42)% (3.61)% (47.44)%(f)
Ratio of interest expense to average net
assets(g) -- 0.03% -- --
Portfolio turnover rate(g) 148% 93% 256% --
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio changed investment advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.02), $(0.07), $(0.50), and $(1.11) for 1998-1995, respectively.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and is not annualized for periods less than
one year.
(e) Ratios are based on average net assets of $8,458,715.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
5
<PAGE> 63
--------------------
AIM BASIC VALUE FUND
--------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------
OCTOBER 18,
YEAR ENDED DECEMBER 31, TO
-------------------------- DECEMBER 31,
1998(a) 1997 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.04 $ 14.54 $12.75 $ 11.43
Income from investment operations:
Net investment income(b) (0.08) (0.01)(c) (0.10)(c) 0.01(c)
Net gains on securities (both realized and
unrealized) 1.15 3.83 1.93 1.31
Total from investment operations 1.07 3.82 1.83 1.32
Less distributions:
Dividends from net investment income -- -- -- --
Distributions from net realized gains (0.32) (1.32) (0.04) --
Total distributions (0.32) (1.32) (0.04) --
Net asset value, end of period $ 17.79 $ 17.04 $14.54 $ 12.75
Total return(d) 6.34% 26.44% 14.35% 11.55%
- -------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $17,406 $16,717 $5,503 $ 1,254
Ratio of expenses to average net assets:
With expense reductions and/or reimbursement 2.39%(e) 2.64% 2.65% 2.65%(f)
Without expense reductions and/or
reimbursement 2.76%(e) 3.62% 6.16% 51.19%(f)
Ratio of net investment income to average net
assets:
With expense reductions and/or reimbursement (0.40)%(e) (0.09)% (0.75)% 0.45%(f)
Without expense reductions and/or
reimbursement (0.72)%(e) (1.07)% (4.26)% (48.09)%(f)
Ratio of interest expense to average net
assets(g) -- 0.03% -- --
Portfolio turnover rate(g) 148% 93% 256% --
- -------------------------------------------------------------------------------------------
</TABLE>
(a) The Portfolio changed investment advisors on May 29, 1998.
(b) Before reimbursement the net investment loss per share would have been
$(0.15), $(0.17), $(0.59), and $(1.13) for 1998-1995, respectively.
(c) Calculated based upon average shares outstanding during the period.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) Ratios are based on average net assets of $18,806,810.
(f) Annualized.
(g) Portfolio turnover rates and ratio of interest expense to average net assets
are calculated on the basis of the Portfolio as a whole without
distinguishing between the classes of shares issued.
6
<PAGE> 64
-------------
THE AIM FUNDS
-------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within six charge on redemptions within
years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12b-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- ----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 25,000 5.50% 5.82%
$ 25,000 but less than $ 50,000 5.25 5.54
$ 50,000 but less than $ 100,000 4.75 4.99
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
A-1 MCF--10/99
<PAGE> 65
-------------
THE AIM FUNDS
-------------
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- ----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 50,000 4.75% 4.99%
$ 50,000 but less than $ 100,000 4.00 4.17
$100,000 but less than $ 250,000 3.75 3.90
$250,000 but less than $ 500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- ----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- ----------------------------------------------------------
<S> <C> <C>
Less than $ 100,000 1.00% 1.01%
$100,000 but less than $ 250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- ----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a 13-month period. The amount you agree
to purchase determines the initial sales charge you pay. If the full face
amount of the LOI is not invested by the end of the 13-month period, your
account will be adjusted to the higher initial sales charge level for the
amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
MCF--10/99 A-2
<PAGE> 66
-------------
THE AIM FUNDS
-------------
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM Mid
Cap Opportunities Fund and AIM Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ 0 ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 250 50
All other accounts 500 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed account application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed account application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number.
Then, use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name:
A I M Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
By AIM Internet Connect(SM) Open your account using one of the Select the AIM Internet Connect option
methods described above. on your completed account application
or complete an AIM Internet
Connect Authorization Form. Mail the
application or form to the transfer
agent. Once your request for this option
has been processed (which may take up
to 10 days), you may place your purchase
order at www.aimfunds.com. The
maximum purchase amount per
transaction is $100,000. You may
not purchase shares in AIM
prototype retirement accounts on
the internet.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A-3 MCF--10/99
<PAGE> 67
-------------
THE AIM FUNDS
-------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through tax-sheltered
retirement plans made available to corporations, individuals and employees of
non-profit organizations and public schools. A plan document must be adopted
to establish a retirement plan. You may use AIM Funds-sponsored retirement
plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans, 401(k)
plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit Sharing
plans, or another sponsor's retirement plan. The plan custodian of the AIM
Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
Generally, we will not charge you any fees to redeem your shares. However, if
you acquired Class A shares of AIM Developing Markets Fund in connection with
the reorganization of AIM Eastern Europe Fund, you will be charged a redemption
fee of 2% of the net asset value of those shares, which will be paid to AIM
Developing Markets Fund, if you redeem your shares within the first year after
the reorganization. Your broker or financial consultant may charge service fees
for handling redemption transactions. Your shares also may be subject to a
contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF
AIM MONEY MARKET FUND ACQUIRED BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES OR CLASS C
SHARES ACQUIRED BY EXCHANGE FROM AIM CASH
RESERVE SHARES OF AIM MONEY MARKET FUND
We will begin the holding period for purposes of calculating the CDSC on Class B
shares or Class C shares acquired by exchange from AIM Cash Reserve Shares of
AIM Money Market Fund at the time of the exchange into Class B shares or Class C
shares.
REDEMPTION OF CLASS B SHARES ACQUIRED BY
EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--10/99 A-4
<PAGE> 68
-------------
THE AIM FUNDS
-------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record (if there has been no change communicated
to us within the last 30 days) or transferred electronically
to a pre-authorized checking account; (2) you do not hold
physical share certificates; (3) you can provide proper
identification information; (4) the proceeds of the
redemption do not exceed $50,000; and (5) you have not
previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not be redeemed by telephone. The transfer agent
must receive your call during the hours the New York Stock
Exchange (NYSE) is open for business in order to effect the
redemption at that day's closing price.
By AIM Internet Connect Place your redemption request at www.aimfunds.com. You will
be allowed to redeem by internet if (1) you do not hold
physical share certificates; (2) you can provide proper
identification information; (3) the proceeds of the
redemption do not exceed $50,000; and (4) you have
established the internet trading option. AIM prototype
retirement accounts may not be redeemed on the internet. The
transfer agent must confirm your transaction during the
hours the NYSE is open for business in order to effect the
redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
REDEMPTION BY INTERNET
If you redeem by internet, we will transmit your redemption proceeds
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine and are not
liable for internet instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the NYSE, we generally will transmit payment on the next business day.
A-5 MCF--10/99
<PAGE> 69
-------------
THE AIM FUNDS
-------------
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You may exchange AIM Cash Reserve Shares of AIM
Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for Class B
shares or Class C shares of another AIM Fund, but only if the AIM Cash Reserve
Shares were purchased directly and not acquired by exchange. You may be required
to pay an initial sales charge when exchanging from a Fund with a lower initial
sales charge than the one into which you are exchanging. If you exchange from
Class A shares not subject to a CDSC into Class A shares subject to those
charges, you will be charged a CDSC when you redeem the exchanged shares. The
CDSC charged on redemption of those shares will be calculated starting on the
date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited
MCF--10/99 A-6
<PAGE> 70
-------------
THE AIM FUNDS
-------------
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund), but only if
you acquired the original shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
(5) AIM Cash Reserve Shares of AIM Money Market Fund for Class B shares and
Class C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be available for sale in your
state of residence;
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange;
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange; and
- - You are limited to a maximum of 10 exchanges per calendar year, because
excessive short-term trading or market-timing activity can hurt fund
performance. If you exceed that limit, or if an AIM Fund or the distributor
determines, in its sole discretion, that your short-term trading is excessive
or that you are engaging in market-timing activity, it may reject any
additional exchange orders. An exchange is the movement out of (redemption)
one AIM Fund and into (purchase) another AIM Fund.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
BY INTERNET
You will be allowed to exchange by internet if (1) you do not hold physical
share certificates; (2) you can provide proper identification information; and
(3) you have established the internet trading option.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:
- REJECT OR CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND;
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE AUTOMATIC INVESTMENT PLAN AND
SYSTEMATIC WITHDRAWAL PLAN OPTIONS ON THE SAME ACCOUNT; OR
- WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS PROSPECTUS.
A-7 MCF--10/99
<PAGE> 71
-------------
THE AIM FUNDS
-------------
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
NYSE, events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Directors or Trustees of the AIM Fund. The
effect of using fair value pricing is that an AIM Fund's net asset value will be
subject to the judgment of the Board of Directors or Trustees or its designee
instead of being determined by the market. Because some of the AIM Funds may
invest in securities that are primarily listed on foreign exchanges, the value
of those funds' shares may change on days when you will not be able to purchase
or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THIS
PROSPECTUS.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--10/99 A-8
<PAGE> 72
--------------------
AIM BASIC VALUE FUND
--------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Fund Services, Inc.
P.O. Box 4739
Houston, TX 77210-4739
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports only)
</TABLE>
- --------------------------------------------------------------------------------
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
- ----------------------------------
AIM Basic Value Fund
SEC 1940 Act file number: 811-2699
- ----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com BVA-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 73
APPENDIX III
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND ENJOYS STELLAR YEAR
DESPITE SHIFTING MARKETS
HOW DID AIM BASIC VALUE FUND PERFORM DURING THE FISCAL YEAR?
For the fiscal year ended December 31, 1999, the fund had total returns of
32.04% for Class A shares, 31.13% for Class B shares and 32.45% for Advisor
Class shares. (These returns are at net asset value, which does not include
sales charges.) The fund finished the reporting period well ahead of both the
Russell 1000 Index and the Lipper Multi-Cap Value Fund Index, which had total
returns of 20.91% and 5.94%, respectively. The fund's performance is
particularly noteworthy given that growth outperformed value on the whole for
1999.
The fund's Class C shares, which commenced sales on May 3, 1999, had a
cumulative total return of 10.72% through December 31, excluding sales charges.
Total net assets in the fund shot up from $27.5 million a year ago to $136.2
million at the end of the reporting period.
GIVEN THAT GROWTH OUTPERFORMED VALUE DURING 1999, TO WHAT DO YOU ATTRIBUTE THE
FUND'S EXCELLENT PERFORMANCE?
The primary drivers of the fund's performance were technology and energy. Many
investment opportunities during 1999 were created by 1998's financial crisis,
when recession fears drove investors to dump such economically sensitive stocks
as semiconductors and oil services. We took advantage of this situation and
overweighted the fund in both sectors because the stocks were selling at a
significant discount to their intrinsic value and had an attractive long-term
outlook. Value investors who missed these opportunities were left with another
year of underperformance.
For the second year in a row, value funds as a group underperformed growth
funds by a wide margin. According to Morningstar Inc., a company that tracks
mutual fund performance, the average large growth fund was up 39% for the year,
compared to the average large value fund's return of 7% for the year. This
situation was also reflected in the performance of the Russell 1000 Value Index
vs. the S&P 500 Index, with returns of 7.35% and 21.03%, respectively, for the
year. However, AIM Basic Value Fund bucked this trend, as evidenced by its
performance.
WHAT ELSE HAPPENED IN THE MARKETS DURING THE YEAR?
With the worst of the global financial crisis past, the question throughout much
of 1999 was whether or not the Federal Reserve Board (the Fed) would need to
raise interest rates to forestall inflation. Inflation fears spawned volatility
in the markets, curbing high-flying technology, communications and financial
stocks in the spring and bringing on a resurgence of more cyclical stocks, like
energy and commodities. This environment was quite favorable for the fund.
By midsummer, major stock indexes reached new record highs, lifted by solid
corporate earnings, continued tame inflation and renewed vitality among tech
stocks. But investors' fears again dampened stocks in general as key economic
indicators showed the economy blazing ahead relentlessly. Consequently, a modest
correction in the third quarter caused the average domestic mutual fund to
decline by about 5.3%. The fund also felt the effects of the correction.
Ultimately, in three separate moves, the Fed raised the key federal funds rate
from 4.75% to 5.50%.
Despite persistent inflation fears, the U.S. economy continued to experience
a near-record level of consumer confidence. Markets reached a fever pitch by the
end of 1999, with indexes again reaching new highs by the close of the year.
However, these record-breaking performances masked a rather narrow
market--although the S&P 500 returned 14.9% for the fourth quarter, the average
stock in the index was up only 8.2% for the same period.
HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
Top sector weightings for the fund at the end of the fiscal year were as
follows: financials, 16.77%; health care, 13.50%; technology, 12.96%; and
energy, 9.21%.
-------------------------------------
THE PRIMARY DRIVERS OF THE FUND'S PER-
FORMANCE WERE TECHNOLOGY AND ENERGY.
-------------------------------------
FUND BEATS INDEXES
One-year total returns as of 12/31/99,
excluding sales charges
================================================================================
Class A shares 32.04%
Class B shares 31.13%
Advisor Class shares 32.45%
Russell 1000 Index 20.91%
Lipper Multi-Cap 5.94%
Value Index
================================================================================
GROWTH OF NET ASSETS
================================================================================
12/31/98 $27.5 million
12/31/99 $136.2 million
================================================================================
See important fund and index disclosures inside front cover.
AIM BASIC VALUE FUND
2
<PAGE> 74
ANNUAL REPORT / MANAGERS' OVERVIEW
Our 49 holdings were nearly equally weighted between mid- and large/mega-cap
companies.
We have been reducing the fund's technology exposure because of excessive
valuations. We think the fundamental outlook for technology is exciting, but
this is against a backdrop of unrealistic expectations, decelerating earnings
growth and accelerating global economic growth. We still believe technology is a
good investment for the long term, but today the best valuation opportunities
are outside technology.
We continue to find exciting values in the health-care services industry
following the aftermath of the Medicare cuts to balance the federal budget.
Another area of opportunity for the fund is in failed mergers and acquisitions.
In many cases, investors have overreacted to short-term integration problems,
which creates an opportunity for patient investors.
WHAT WERE SOME STANDOUT HOLDINGS FOR THE FUND?
Holdings from several different sectors enhanced the fund's performance.
Citigroup, one of the world's largest financial-services companies, has bounced
back substantially since 1998's global financial crisis eroded its stock along
with those of many other financial companies. Even though health-care stocks
have been in a slump in recent months, top fund holding Health Management
Associates has continued to grow by acquiring and operating hospitals in rural
areas of the southern United States.
In technology, the fund benefited from owning Computer Associates
International, an independent software company that likens its products to the
plumbing under a sink rather than the fancy faucet on top, and Philips
Electronics, maker of such well-known brands as Magnavox and Norelco and of
everything from televisions to light bulbs to semiconductors.
One new addition to our list of top holdings since our last report is
Transocean Sedco Forex, an offshore drilling contractor. The company, which
specializes in deepwater drilling, was formed in 1999 when Transocean Offshore
merged with Sedco Forex, a former division of oil giant Schlumberger (also a
fund holding).
WHAT IS YOUR NEAR-TERM OUTLOOK?
Many analysts expect the fast pace of U.S. economic growth to continue through
at least the first half of 2000. This has led to the belief that the Fed will
need to raise interest rates at least once--if not more--to slow economic growth
to a more sustainable pace. It seems that the same story that dogged markets in
1999 is so far continuing, with persistent upward pressure on interest rates.
We expect accelerating global economic growth to bring with it broader
earnings growth. With earnings growth spread more evenly across the U.S.
economy, a broader stock market should follow. If this happens, we believe value
investing will once again prove to be a market-beating investment strategy. We
continue to find attractive valuation opportunities, and we feel the portfolio
is well positioned going forward.
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
<TABLE>
<CAPTION>
========================================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Health Management Associates, Inc. 5.05% 1. Oil & Gas (Drilling & Equipment) 6.98%
2. Novellus Systems Inc. 3.13 2. Electric Companies 6.73
3. Koninklijke (Royal) Philips Electronics N.V. 3.11 3. Computers (Software & Services) 5.57
4. United HealthCare Corp. 2.85 4. Insurance (Property-Casualty) 5.56
5. Computer Associates International Inc. 2.82 5. Health Care (Hospital Management) 5.05
6. McKesson HBOC Inc. 2.73 6. Manufacturing (Specialized) 4.47
7. Bank of America Corp. 2.63 7. Financial (Diversified) 4.18
8. Beckman Coulter Inc. 2.58 8. Electrical Equipment 3.74
9. First Data Corp. 2.57 9. Paper & Forest Products 3.69
10. Transocean Sedco Forex Inc. 2.49 10. Retail (Food Chains) 3.40
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
========================================================================================================================
</TABLE>
See important fund and index disclosures inside front cover.
AIM BASIC VALUE FUND
3
<PAGE> 75
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM BASIC VALUE FUND VS. BENCHMARK INDEXES
10/18/95-12/31/99
In thousands
<TABLE>
<CAPTION>
======================================================================================================
Lipper
AIM Basic AIM Basic AIM Basic Multi-Cap Russell
Value Fund, Value Fund, Value Fund, Value Russell 1000
Class A Class B Advisor Class Fund 1000 Value
Shares Shares Shares Index Index Index
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/18/95 9446 10000 10000
10/31/95 10425 10446 10000
12/31/95 10545 11155 11172.4 10589.6 10605.2 10770.5
12/31/96 12140 12756 12913 12812.4 12985.8 13101.5
12/31/97 15446 16128 16500.1 16260.1 17251.7 17710.9
12/31/98 16530 17150 17725.5 17321.1 21913.6 20479.1
12/31/99 $21,826 $22,290 $23,478 $18,350 $26,496 $21,984
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
======================================================================================================
</TABLE>
ABOUT THIS CHART
The chart compares your fund's Class A, Class B and Advisor Class shares to
benchmark indexes. It is intended to give you an idea of how your fund performed
compared to these indexes over the period 10/18/95-12/31/99. (Data for these
indexes are for the period 10/31/95-12/31/99.) It is important to understand the
differences between your fund and an index. An index measures the performance of
a hypothetical portfolio. Your fund's total return is shown with the applicable
sales charge, and it includes fund expenses and management fees. A market index
such as the Russell 1000 Index is not managed, incurring no sales charges,
expenses or fees. If you could buy all the securities that make up a market
index, you would incur expenses that would affect your investment's return. An
index of funds such as the Lipper Multi-Cap Value Fund Index includes a number
of mutual funds grouped by investment objective. Each of those funds interprets
that objective differently, and each employs a different management style and
investment strategy.
Since our last report, AIM Basic Value Fund has elected to use the Russell
1000 Index as its primary benchmark. The fund will no longer measure its
performance against the Russell 1000 Value Index because this index does not
meet SEC guidelines as a broad market index. Because this is the first reporting
period since we have adopted the new index, SEC guidelines require that we
include the old index in the performance comparison above.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/99, including sales charges
================================================================================
ADVISOR CLASS SHARES*
Inception (10/18/95) 22.52%
1 year 32.45
*Sales charges do not apply.
CLASS B SHARES
Inception (10/18/95) 21.01%
1 year 26.13*
*31.13%, excluding CDSC
CLASS A SHARES
Inception (10/18/95) 20.41%
1 year 24.75*
*32.04%, excluding sales charges
CLASS C SHARES
Inception (5/3/99) 9.72%*
*10.72%, excluding CDSC. Total return provided is cumulative total return that
has not yet been annualized.
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class A, Class B, Class C and Advisor Class shares
will differ due to differing fees and expenses. For fund performance
calculations and descriptions of the indexes cited on this page, please see the
inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM BASIC VALUE FUND
4
<PAGE> 76
------------
FIRST CLASS
U.S. POSTAGE
PAID
[AIM LOGO APPEARS HERE] PROXY
TABULATOR
------------
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY!
**** Control number: 999999999999 ****
-- Please fold and detach card at perforation before mailing --
PROXY CARD PROXY CARD
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
AIM ADVISOR LARGE CAP VALUE FUND
(A PORTFOLIO OF AIM ADVISOR FUNDS, INC.)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 31, 2000
The undersigned hereby appoints Robert H. Graham, Gary T. Crum and Lewis F.
Pennock, 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 Special Meeting of Shareholders on May 31, 2000, at 3:00 p.m., Central
time, and at any adjournment thereof, all of the shares of the fund which the
undersigned would be entitled to vote if personally present. IF THIS PROXY IS
SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
THE APPROVAL OF THE PROPOSAL.
Dated _________________________________
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(s)
<PAGE> 77
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY!
-- Please fold and detach card at perforation before mailing --
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE DIRECTORS RECOMMEND VOTING "FOR" THE PROPOSAL.
TO VOTE, FILL IN THE BOX COMPLETELY. EXAMPLE: [X]
1. To approve an Agreement and Plan of FOR AGAINST ABSTAIN
Reorganization that provides for the
combination of AIM Advisor Large Cap [ ] [ ] [ ]
Value Fund and AIM Basic Value Fund, an
investment portfolio of AIM Growth
Series.
2. IN THE DISCRETION OF SUCH PROXIES, UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
