<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TAX-FREE INVESTMENTS CO.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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 to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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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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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
TAX-FREE INVESTMENTS CO.
CASH RESERVE PORTFOLIO
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 2000
TO THE SHAREHOLDERS:
Tax-Free Investments Co.(the company) is holding a special meeting of
shareholders on Wednesday, May 3, 2000 at 3:00 p.m., Central time. The place of
the meeting is the company's offices at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
The company, a Maryland corporation, consists of the Cash Reserve Portfolio
(the fund).
The purposes of the meeting are as follows:
(1) To elect ten directors, each of whom will serve until his or her successor
is elected and qualified.
(2) To approve a new Master Investment Advisory Agreement with A I M Advisors,
Inc.
(3) To approve changing the fundamental investment restrictions for the fund.
(4) To approve changing the investment objective of the fund and making it
non-fundamental.
(5) To ratify the selection of KPMG LLP as independent accountants for the fund
for the fiscal year ending in 2000.
(6) To transact such other business as may properly come before the meeting.
You may vote at the meeting if you are the record owner of shares of the
fund as of the close of business on February 18, 2000. If you attend the
meeting, you may vote your shares in person. If you expect to attend the meeting
in person, 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.
<PAGE> 3
It is important that you return your signed proxy card promptly so that a
quorum may be assured. If we do not hear from you after a reasonable amount of
time, you may receive a telephone call reminding you to vote your shares.
Thank you for your cooperation and continued support.
By order of the Board,
/s/ CAROL F. RELIHAN
Carol F. Relihan
Secretary
March 9, 2000
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TAX-FREE INVESTMENTS CO.
CASH RESERVE PORTFOLIO
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
Toll Free: (800) 454-0327
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PROXY STATEMENT
DATED MARCH 9, 2000
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SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 2000
WHO IS ASKING FOR MY VOTE?
The Board of Directors (the Board) of Tax-Free Investments Co. (the
company) is sending you this proxy statement and the enclosed proxy card on
behalf of the company's Cash Reserve Portfolio (the fund). The Board is
soliciting your proxy to vote at the 2000 special meeting of shareholders of the
company (the meeting).
WHEN AND WHERE WILL THE MEETING BE HELD?
The meeting will be held at the company's offices, 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173, at 3:00 p.m., Central time, on Wednesday, May 3,
2000. If you expect to attend the meeting in person, please notify the company
by calling 1-800-952-3502.
WHO IS ELIGIBLE TO VOTE?
The Board is sending this proxy statement, the attached notice of meeting
and the enclosed proxy card on or about March 13, 2000 to all shareholders
entitled to vote. Shareholders who owned shares of common stock of any class of
the fund at the close of business on February 18, 2000 (the record date) are
entitled to vote. The number of shares outstanding on the record date for each
class of the fund is in Appendix A. Each share of common stock of the fund that
you own entitles you to one vote on each proposal set forth in this proxy
statement (a fractional share has a fractional vote).
WHAT ARE THE DIFFERENT WAYS I CAN VOTE?
Voting by Proxy
Whether you plan to attend the meeting or not, the Board urges you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the meeting and vote.
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The Board has named Robert H. Graham, Gary T. Crum and Lewis F. Pennock as
proxies. If you properly fill in your proxy card and send it to the company in
time to vote, your proxy will vote your shares as you have directed. If you sign
the proxy card but do not make specific choices, your proxy will vote your
shares with respect to Proposals 1 through 5 as recommended by the Board.
If any other matter is presented, your proxy will vote in accordance with
his or her best judgment. At the time this proxy statement was printed, the
Board knew of no matters that needed to be acted on at the meeting other than
those discussed in this proxy statement.
If you appoint a proxy, you may revoke it at any time before it is
exercised. You can do this by sending in another proxy with a later date or by
notifying the company's secretary in writing before the meeting that you have
revoked your proxy.
Voting in Person
If you do attend the meeting and wish to vote in person, you will be given
a ballot when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring a letter from the nominee
indicating that you are the beneficial owner of the shares on the record date
and authorizing you to vote.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
The Board recommends that shareholders vote as follows:
- FOR electing all ten nominees for director.
- FOR approving a new advisory agreement for the fund.
- FOR changing the fund's fundamental investment restrictions.
- FOR changing the investment objective of the fund and making it non-
fundamental.
- FOR ratifying the Board's selection of independent accountants for the
fund for 2000.
WHAT IS THE QUORUM REQUIREMENT?
A quorum of shareholders is necessary to hold a valid meeting. The presence
in person or by proxy of shareholders entitled to cast thirty percent (30%) of
all votes entitled to be cast at the meeting shall constitute a quorum at all
meetings of the shareholders, except with respect to any matter which by law or
the Charter of the company requires the separate approval of one or more classes
or series of the capital stock of the company, in which case the holders of
one-third of the shares of each such class or series (or of such classes or
series voting
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<PAGE> 6
together as a single class) entitled to vote on the matter shall constitute a
quorum.
Under rules applicable to broker-dealers, if your broker holds your shares
in its name, the broker will be entitled to vote your shares on Proposals 1 and
5 (election of directors and ratification of selection of accountants) even if
it has not received instructions from you. Your broker will not be entitled to
vote on Proposals 2, 3, 4 or 6 (approving a new advisory agreement for your
fund, changing your fund's investment restrictions, making your fund's
investment objective non-fundamental, changing your fund's investment objective,
and considering other matters) unless it has received instructions from you. If
your broker does not vote your shares on Proposals 2, 3, 4 and 6 because it has
not received instructions from you, these shares will be considered broker
non-votes.
Broker non-votes and abstentions with respect to any proposal will count as
present for establishing a quorum.
WHAT IS THE VOTE NECESSARY TO APPROVE EACH PROPOSAL?
The affirmative vote of a plurality of votes cast is necessary to elect the
directors, meaning that the nominees receiving the most votes will be elected
(Proposal 1). In an uncontested election for directors, the plurality
requirement is not a factor.
The affirmative vote of a majority of the outstanding voting securities of
the fund, as defined in the Investment Company Act of 1940, as amended (the 1940
Act), is required to:
- approve the fund's new advisory agreement (proposal 2).
- change the fund's fundamental investment restrictions (Proposal 3).
- change the fund's investment objective and make it non-fundamental
(Proposal 4).
The 1940 Act defines a majority of the outstanding voting securities of a
fund (a 1940 Act majority) as the lesser of (a) the vote of holders of 67% or
more of the voting securities of the fund present in person or by proxy, if the
holders of more than 50% of the outstanding voting securities of the fund are
present in person or by proxy, or (b) the vote of the holders of more than 50%
of the outstanding voting securities of the fund. Broker non-votes and
abstentions will not count as votes cast and will have the effect of votes
against Proposals 2 through 5.
The affirmative vote of a majority of votes cast is necessary to ratify the
selection of KPMG LLP as your fund's independent accountants (Proposal 6). For
Proposal 6, abstentions will not count as votes cast and will have no effect on
the outcome of the vote.
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CAN THE MEETING BE ADJOURNED?
The proxies may propose to adjourn the meeting to permit further
solicitation of proxies or for other purposes. Any such adjournment will require
the affirmative vote of a majority of the votes cast.
HOW CAN I OBTAIN MORE INFORMATION ABOUT THE FUND?
UPON YOUR REQUEST, THE FUND WILL FURNISH YOU A FREE COPY OF ITS MOST RECENT
ANNUAL REPORT AND THE MOST RECENT SEMI-ANNUAL REPORT SUCCEEDING THE ANNUAL
REPORT, IF ANY. YOU SHOULD DIRECT YOUR REQUEST TO FUND MANAGEMENT COMPANY AT
P.O. BOX 4497, HOUSTON, TX 77210-4497 OR BY CALLING 1-800-659-1005.
PROPOSAL 1:
ELECTION OF DIRECTORS
WHO ARE THE NOMINEES FOR DIRECTOR?
For election of directors at the meeting, the Board has approved the
nomination of Charles T. Bauer, Bruce L. Crockett, Owen Daly II, Edward K. Dunn,
Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Prema Mathai-Davis,
Lewis F. Pennock and Louis S. Sklar, each to serve as director until his or her
successor is elected and qualified.
The proxies will vote for the election of these nominees unless you
withhold authority to vote for any or all of them in the proxy. Each of the
nominees has indicated that he or she is willing to serve as a director. If any
or all of the nominees should become unavailable for election due to events not
now known or anticipated, the persons named as proxies will vote for such other
nominee or nominees as the directors who are not interested persons of the
company, as defined in the 1940 Act (the independent directors), may recommend.
All of the nominees presently are directors of the company. The nominees
serve as directors, trustees or officers of the following open-end management
investment companies advised or managed by A I M Advisors, Inc. (AIM): AIM
Advisor Funds, Inc., AIM Equity Funds, Inc. AIM Funds Group, AIM International
Funds, Inc., AIM Investment Securities Funds, AIM Special Opportunities Funds,
AIM Summit Fund, Inc., AIM Tax-Exempt Funds, Inc., AIM Variable Insurance Funds,
Inc., Short-Term Investments Co., Short-Term Investments Trust and Tax-Free
Investments Co. (these investment companies and their series portfolios, if any,
are referred to collectively as the AIM funds). Robert H. Graham also serves as
a director or trustee, and officer of other open-end and closed-end management
investment companies managed or advised by AIM. No director or nominee is a
party adverse to the company or any of its affiliates in any material pending
legal proceedings, nor does any director or nominee have an interest materially
adverse to the company.
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The following table sets forth information concerning the nominees:
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------- -------------- ----------------------------------------
<S> <C> <C>
+*Charles T. Bauer (81) March 4, 1992 Director and Chairman, A I M Management
11 Greenway Plaza Group Inc.; A I M Advisors, Inc., A I M
Suite 100 Capital Management, Inc.; A I M
Houston, TX 77046-1173 Distributors, Inc.; A I M Fund Services,
Inc. and Fund Management Company; and
Executive Vice Chairman and Director,
AMVESCAP PLC.
Bruce L. Crockett (55) December 8, 1992 Director, ACE Limited (insurance
906 Frome Lane company). Formerly, Director, President
McLean, VA 22102 and Chief Executive Officer, COMSAT
Corporation; and Chairman, Board of
Governors of INTELSAT (international
communications company).
Owen Daly II (75) March 5, 1992 Formerly, Director, Cortland Trust Inc.
Six Blythewood Road (investment company), CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company
and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
Edward K. Dunn, Jr. March 10, 1998 Chairman of the Board of Directors,
(64) Mercantile Mortgage Corporation.
2 Hopkins Plaza Formerly, Vice Chairman of the Board of
8th Floor, Suite 805 Directors, President and Chief Operating
Baltimore, MD 21201 Officer, Mercantile-Safe Deposit & Trust
Co.; and President, Mercantile
Bankshares.
Jack M. Fields (48) March 11, 1997 Chief Executive Officer, Texana Global,
Jetero Plaza, Suite E Inc. (foreign trading company) and
8810 Will Clayton Twenty First Century Group, Inc. (a
Parkway governmental affairs company); and
Humble, TX 77338 Director, Telscape International and
Administaff. Formerly, Member of the
U.S. House of Representatives.
</TABLE>
+ Does not include years of service as a director or trustee of any predecessor
funds.
* Mr. Bauer is an interested person of AIM and the company, as defined in the
1940 Act, primarily because of his positions with AIM and its affiliated
companies, as set forth above, and through his ownership of stock of AMVESCAP
PLC, which, through A I M Management Group Inc., owns all of the outstanding
stock of AIM.
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<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DURING PAST 5
NAME, ADDRESS AND AGE DIRECTOR SINCE YEARS
- --------------------- -------------- ----------------------------------
<S> <C> <C>
**Carl Frischling (63) March 5, 1992 Partner, Kramer Levin Naftalis &
919 Third Avenue Frankel LLP (law firm). Formerly
New York, NY 10022 Partner, Reid & Priest (law firm).
***Robert H. Graham (53) May 10, 1994 Director, President and Chief
11 Greenway Plaza Executive Officer, A I M
Suite 100 Management Group Inc.; Director
Houston, TX 77046-1173 and President, A I M Advisors,
Inc.; Director and Senior Vice
President, A I M Capital
Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund Management
Company; and Director and Chief
Executive Officer, Managed
Products, AMVESCAP PLC.
Prema Mathai-Davis (49) September 10, 1998 Chief Executive Officer, YWCA of
350 Fifth Avenue, Suite the U.S.A.
301
New York, NY 10118
Lewis F. Pennock (57) March 4, 1992 Partner, Pennock & Cooper (law
6363 Woodway, Suite 825 firm).
Houston, TX 77057
Louis S. Sklar (60) March 4, 1992 Executive Vice President,
The Williams Tower Development and Operations, Hines
50th Floor Interests Limited Partnership
2800 Post Oak Boulevard (real estate development).
Houston, TX 77056
</TABLE>
** Mr. Frischling is an interested person of the company, as defined in the
1940 Act, primarily because of payments received by his law firm from the
company for services to the independent directors of the company.
*** Mr. Graham is an interested person of AIM and the company, as defined in the
1940 Act, primarily because of his positions with AIM and its affiliated
companies, as set forth above, and through his ownership of stock of
AMVESCAP PLC, which, through A I M Management Group Inc., owns all of the
outstanding stock of AIM.
WHAT ARE THE RESPONSIBILITIES OF THE BOARD?
The Board is responsible for the general oversight of the fund's business
and for assuring that the fund is managed in the best interests of the fund's
shareholders. The Board periodically reviews the fund's investment performance
as well as the quality of other services provided to the fund and its
shareholders by each of the fund's service providers, including AIM and its
affiliates. At least annually, the Board reviews the fees paid by the company
for these services and the overall level of the fund's operating expenses.
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WHY ARE DIRECTORS BEING ELECTED AT THE PRESENT TIME?
Under the 1940 Act, the Board may fill vacancies on the Board or appoint
new directors only if, immediately thereafter, at least two-thirds of the
directors will have been elected by shareholders. Currently, seven of the
company's ten directors have been elected by shareholders. As directors retire,
resign or otherwise cease their services as directors in the future, the company
may be unable to fill the vacancies created by such action because three of the
company's ten directors have not been elected by shareholders. To provide the
Board with the flexibility to fill vacancies created when directors cease their
service as directors, and in light of the fact that only seven of the company's
directors have been elected by shareholders, the Board believes it is
appropriate for shareholders to elect directors at the present time.
HOW LONG CAN DIRECTORS SERVE ON THE BOARD?
Directors generally hold office until their successors are elected and
qualified. Pursuant to a policy adopted by the Board, each duly elected or
appointed independent director may continue to serve as a director until
December 31 of the year in which the director turns 72. Independent directors
who were age 65 or older and serving on the board of one or more of the AIM
funds when the policy was initially adopted in 1992 may continue to serve until
December 31 of the year in which the director turns 75. A director of the
company may resign or be removed for cause by a vote of the holders of a
majority of the outstanding shares of the company at any time. A majority of the
Board may extend from time to time the retirement date of a director. The Board
has agreed to extend the retirement date of Mr. Daly, who otherwise would have
retired December 31, 2000, to December 31, 2001. In making this decision, the
Board took into account Mr. Daly's experience and active participation as a
director.
WHAT ARE SOME OF THE WAYS IN WHICH THE BOARD REPRESENTS MY INTERESTS?
The Board seeks to represent shareholder interests by:
- reviewing the fund's investment performance with the fund's managers;
- reviewing the quality of the various other services provided to the fund
and its shareholders by each of the fund's service providers, including
AIM and its affiliates;
- discussing with senior management of AIM steps being taken to address any
performance deficiencies;
- reviewing the fees paid to AIM and its affiliates to ensure that such
fees remain reasonable and competitive with those of other mutual funds,
while at the same time providing sufficient resources to continue to
provide high-quality services in the future;
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- monitoring potential conflicts between the fund and AIM and its
affiliates to ensure that the fund continues to be managed in the best
interests of its shareholders; and
- monitoring potential conflicts among the AIM funds to ensure that
shareholders continue to realize the benefits of participation in a large
and diverse family of funds.
WHAT ARE THE COMMITTEES OF THE BOARD?
The standing Committees of the Board are the Audit Committee, the
Capitalization Committee, the Investments Committee and the Nominating and
Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for:
- considering management's recommendations of independent accountants for
the fund and evaluating such accountants' performance, costs and
financial stability;
- with AIM reviewing and coordinating audit plans prepared by the fund's
independent accountants and management's internal audit staff; and
- reviewing financial statements contained in periodic reports to
shareholders with the fund's independent accountants and management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for:
- increasing or decreasing the aggregate number of shares of any class of
the company's common stock by classifying and reclassifying the company's
authorized but unissued shares of common stock, up to the company's
authorized capital;
- fixing the terms of such classified or reclassified shares of common
stock; and
- issuing such classified or reclassified shares of common stock upon the
terms set forth in the fund's prospectus, up to the company's authorized
capital.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly,
Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr. Mathai-Davis. The
Investments Committee is responsible for:
- overseeing AIM's investment-related compliance, systems and procedures to
ensure their continued adequacy; and
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- considering and acting on an interim basis between meetings of the full
Board, on investment-related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing
matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for:
- considering and nominating individuals to stand for election as
independent directors as long as the company maintains a distribution
plan pursuant to Rule 12b-1 under the 1940 Act;
- reviewing from time to time the compensation payable to the independent
directors; and
- making recommendations to the Board regarding matters related to
compensation, including deferred compensation plans and retirement plans
for the independent directors.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as directors, provided (i) that such
person is a shareholder of record at the time he or she submits such names and
is entitled to vote at the meeting of shareholders at which directors will be
elected, and (ii) that the Nominating and Compensation Committee or the Board,
as applicable, shall make the final determination of persons to be nominated.
HOW OFTEN DOES THE BOARD MEET?
The Board typically conducts regular meetings nine times a year to review
the operations of the fund and of the other AIM funds. Typically, five of these
nine meetings are held in person, each over a two-day period. One or more
Committees of the Board generally meet in conjunction with each in-person
meeting of the Board. In addition, the Board or any Committee may hold special
meetings by telephone or in person to discuss specific matters that may require
action prior to the next regular meeting.
During the fiscal year ended March 31, 1999, the Board held 9 meetings, the
Audit Committee held 4 meetings, the Investments Committee held 4 meetings and
the Nominating and Compensation Committee held 5 meetings. The Capitalization
Committee did not meet. All of the current directors and committee members then
serving, except Mr. Graham, attended at least 75% of the meetings of the Board
and applicable Committees, if any, held during the fiscal year ended March 31,
1999. Mr. Graham attended six Board Meetings held during the fiscal year ended
March 31, 1999, but was not able to attend at least
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<PAGE> 13
75% of the meetings of the Board during this time due to various corporate and
personal conflicts.
WHAT ARE THE DIRECTORS PAID FOR THEIR SERVICES?
Each director is reimbursed for expenses incurred in connection with each
meeting of the Board or any Committee attended. Each director who is not also an
officer of the company is compensated for his or her services according to a fee
schedule which recognizes the fact that such director also serves as a director
or trustee of all of the other AIM funds. Each such director receives a fee,
allocated among the AIM funds for which he or she serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued for
each director:
<TABLE>
<CAPTION>
TOTAL
RETIREMENT BENEFITS COMPENSATION
AGGREGATE COMPENSATION ACCRUED BY ALL FROM ALL
DIRECTOR FROM COMPANY(1) AIM FUNDS(2) AIM FUNDS(3)
- -------- ---------------------- ------------------- ------------
<S> <C> <C> <C>
Charles T. Bauer..... $ 0 $ 0 $ 0
Bruce L. Crockett.... 1,521 37,485 103,500
Owen Daly II......... 1,521 122,898 103,500
Edward K. Dunn Jr. .. 1,496 0 103,500
Jack M. Fields....... 1,513 15,826 101,500
Carl Frischling(4)... 1,513 97,791 103,500
Robert H. Graham..... 0 0 0
John F. Kroeger(5)... 715 107,896 0
Prema Mathai-Davis... 877 0 101,500
Lewis F. Pennock..... 1,513 45,766 103,500
Ian W. Robinson(6)... 1,496 94,442 25,000
Louis S. Sklar....... 1,506 90,232 101,500
</TABLE>
(1) The total amount of compensation deferred by all directors of the company
during the fiscal year ended March 31, 1999, including earnings thereon, was
$8,899.
(2) During the fiscal year ended March 31, 1999, the total amount of expenses
allocated to the company in respect of such retirement benefits was $6,883.
Data reflects compensation for the calendar year ended December 31, 1999.
Accruals for 1999 are based on actuarial projections from 1998.
(3) Each director serves as director or trustee of at least 12 registered
investment companies advised by AIM. Data reflects compensation for the
calendar year ended December 31, 1999.
(4) During the fiscal year ended March 31, 1999, the company paid $5,333 in
legal fees to Mr. Frischling's law firm, Kramer Levin Naftalis & Frankel
LLP, for services rendered to the independent directors of the company.
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<PAGE> 14
(5) Mr. Kroeger was a director until June 11, 1998, when he resigned. On that
date, he became a consultant to the company. Of the amount listed above,
$256 was for compensation for services as a director and the remainder as a
consultant. Mr. Kroeger passed away on November 26, 1998. Mr. Kroeger's
widow will receive his pension as described below under "AIM Funds
Retirement Plan for Eligible Directors/Trustees."
(6) Mr. Robinson was a director until March 12, 1999, when he retired.
A I M Management Group Inc. (AIM Management) has requested proposals from
real estate development firms in the greater Houston area in connection with
exploring possible options upon the expiration of the lease of AIM Management's
current office space on December 31, 2003. Mr. Sklar is employed by Hines
Interests Limited Partnership (Hines). Two of Hines' affiliates, Hines Corporate
Properties, LLC and Sugarland Properties Incorporated (collectively, Hines
Affiliates), have each submitted office space proposals to AIM Management for
evaluation. Mr. Sklar would have an indirect financial interest, and may have a
direct equity interest, in these proposals. Since the Hines Affiliates'
proposals are among many being evaluated by AIM Management, it is not currently
possible to determine the extent of any such interest, or to determine whether
AIM Management will proceed with negotiations with Hines Affiliates on any
specific proposal.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible Directors/
Trustees, each director (who is not an employee of any of the AIM funds, AIM
Management or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board. Pursuant to such retirement plan, a director becomes
eligible to retire and receive full benefits under the plan when he or she has
attained age 65 and has completed at least five years of continuous service with
one or more of the regulated investment companies managed, administered or
distributed by AIM or its affiliates (the applicable AIM funds). Each eligible
director is entitled to receive an annual benefit from the applicable AIM funds
commencing on the first day of the calendar quarter coincident with or following
his or her date of retirement equal to a maximum of 75% of the annual retainer
paid or accrued by the applicable AIM funds for such director during the twelve-
month period immediately preceding the director's retirement (including amounts
deferred under a separate agreement between the applicable AIM funds and the
director) and based on the number of such director's years of service (not in
excess of 10 years of service) completed with respect to any of the applicable
AIM funds. Such benefit is payable to each eligible director in quarterly
installments. If an eligible director dies after attaining the normal retirement
date but before receipt of all benefits under the plan, the director's surviving
spouse (if any) shall receive a quarterly survivor's benefit equal to 50% of the
amount payable to the deceased director for no more than ten years
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<PAGE> 15
beginning the first day of the calendar quarter following the date of the
director's death. Payments under the plan are not secured or funded by any
applicable AIM fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming the retainer amount reflected
below and various years of service. The estimated credited years of service for
Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock, Robinson and
Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 20, 18, 11, 10 and 1 years,
respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
ANNUAL
RETIREMENT
COMPENSATION
PAID BY ALL
NUMBER OF YEARS OF SERVICE APPLICABLE
WITH THE APPLICABLE AIM FUNDS AIM FUNDS
- ----------------------------- ------------
<S> <C>
10.............................. $67,500
9.............................. $60,750
8.............................. $54,000
7.............................. $47,250
6.............................. $40,500
5.............................. $33,750
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling, and Sklar and Dr. Mathai-Davis (the
deferring directors) have each executed a deferred compensation agreement.
Pursuant to the agreements, the deferring directors may elect to defer receipt
of up to 100% of their compensation payable by the company, and such amounts are
placed into a deferral account. Currently, the deferring directors may select
various AIM funds in which all or part of their deferral accounts shall be
deemed to be invested. Distributions from the deferring directors' accounts will
be paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the agreement) beginning on the date the
deferring director's retirement benefits commence under the plan. The Board, in
its sole discretion, may accelerate or extend the distribution of such deferral
accounts after the deferring director's termination of service as a director of
the company. If a deferring director dies prior to the distribution of amounts
in his or her deferral account, the balance of the deferral account will be
distributed to his or her designated beneficiary in a single lump sum payment as
soon as practicable after such deferring director's death. The agreements are
not funded and, with respect to the payments of amounts held in the deferral
accounts, the deferring directors have the status of unsecured creditors of the
company and of each other AIM fund from which they are deferring compensation.
12
<PAGE> 16
WHAT ARE OFFICERS PAID FOR THEIR SERVICES?
The company does not pay its officers for the services they provide to the
company. Instead, the officers, who are also officers or employees of AIM or its
affiliates, are compensated by AIM Management or its affiliates.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 1?
------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
------------------------------------------------------------
PROPOSAL 2:
APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve a new advisory agreement between AIM
and the company for your fund. The Board is asking you to vote on this new
agreement because the company may amend its advisory agreement only with
shareholder approval. A form of the company's proposed Master Investment
Advisory Agreement is in Appendix B. The proposed advisory agreement amends the
current advisory agreement primarily by:
- omitting references to the provision of administrative services to the
fund;
- omitting certain expense limitations that are no longer applicable;
- clarifying existing non-exclusivity provisions;
- clarifying existing delegation provisions;
- adding provisions regarding affiliated brokerage;
- adding certain provisions relating to certain functions to be performed
by AIM in connection with the fund's securities lending program; and
- clarifying existing liability provisions.
At a meeting held on February 3, 2000, the Board voted to recommend that
you approve a proposal to adopt the new advisory agreement.
WHO IS THE FUND'S INVESTMENT ADVISOR?
AIM became the investment advisor for the fund on January 5, 1983 and
currently serves pursuant to a Master Investment Advisory Agreement, as amended,
executed on February 28, 1997. The Master Investment Advisory Agreement was last
submitted to a vote of public shareholders on February 7, 1997 as a result of a
merger between AIM Management and a subsidiary of
13
<PAGE> 17
INVESCO PLC. The Board, including a majority of the independent directors, last
approved the current advisory agreement on May 11, 1999.
AIM is a wholly owned subsidiary of AIM Management, a holding company that
has been engaged in the financial services business since 1976. The address of
AIM and AIM Management is 11 Greenway Plaza, Suite 100, Houston, Texas 77046.
AIM was organized in 1976, and, together with its subsidiaries, advises or
manages approximately 120 investment portfolios encompassing a broad range of
investment objectives. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, United Kingdom. AMVESCAP
PLC and its subsidiaries are an independent investment management group engaged
in institutional investment management and retail mutual fund businesses in the
United States, Europe and the Pacific region. A list of the principal executive
officer and the directors of AIM is in Appendix C.
DO ANY OF THE COMPANY'S DIRECTORS OR EXECUTIVE OFFICERS HOLD POSITIONS WITH AIM?
Charles T. Bauer, Robert H. Graham, Gary T. Crum, Carol F. Relihan,
Melville B. Cox, Dana R. Sutton, Stuart W. Coco, Karen Dunn Kelley and J. Abbot
Sprague, all of whom are directors and/or executive officers of the company,
also are directors and/or officers of AIM. Each of them also beneficially owns
shares of AMVESCAP PLC and/or options to purchase shares of AMVESCAP PLC.
WHAT ARE THE TERMS OF THE CURRENT ADVISORY AGREEMENT?
Under the terms of the current advisory agreement, AIM supervises all
aspects of the fund's operations and provides investment advisory services to
the fund. AIM obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the fund. AIM
will not be liable to the fund or their shareholders except in the case of AIM's
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
The current advisory agreement provides that the fund will pay or cause to
be paid all of its expenses not assumed by AIM, including without limitation:
- brokerage commissions;
- taxes;
- legal, accounting, auditing or governmental fees;
- the cost of preparing share certificates;
- custodian, transfer and shareholder service agent costs;
- expenses of issue, sale, redemption, and repurchase of shares;
14
<PAGE> 18
- expenses of registering and qualifying shares for sale;
- expenses relating to director and shareholder meetings;
- the cost of preparing and distributing reports and notices to
shareholders;
- the fees and other expenses incurred by the fund in connection with
membership in investment company organizations;
- the cost of printing copies of prospectuses and statements of additional
information distributed to the fund's shareholders; and
- all other charges and costs of the fund's operations unless otherwise
explicitly provided.
The current advisory agreement will continue in effect from year to year
only if such continuance is specifically approved at least annually by (i) the
Board or the vote of a majority of the outstanding voting securities of the fund
(as defined in the 1940 Act), and (ii) the affirmative vote of a majority of
independent directors by votes cast in person at a meeting called for such
purpose. The current advisory agreement provides that the Board, a majority of
the outstanding voting securities of the fund or AIM may terminate the agreement
for the fund on 60 days' written notice without penalty. The agreement
terminates automatically in the event of its assignment.
As compensation for its services, AIM receives an annual fee, calculated
daily and paid monthly, at the annual rate of 0.25% of the first $500 million of
the fund's average daily net assets, and 0.20% of the fund's average daily net
assets in excess of $500 million. For the fiscal year ended March 31, 1999, AIM
received a fee of $1,646,048 (after waiving receipt of $809,773) for advisory
services. As of March 31, 1999 the total net assets of the fund were
$1,170,341,884.
AIM may from time to time waive or reduce its fee. AIM may rescind
voluntary fee waivers or reductions at any time without further notice to
investors. If, during any fiscal year, AIM has waived or reduced fees, AIM will
retain its ability to be reimbursed for such fee waiver or reduction prior to
the end of such fiscal year. If AIM has agreed to contractual fee waivers or
reductions AIM may not alter those arrangements to the fund's detriment during
the period stated in the agreement between AIM and the company. AIM may not
terminate fee waivers or reductions set forth in the current advisory agreement
without shareholder approval. AIM may not change provisions in the current
advisory agreement imposing expense limitations without shareholder approval.
WHAT ADDITIONAL SERVICES ARE PROVIDED BY AIM AND ITS AFFILIATES?
AIM and its affiliates also provide additional services to the fund. AIM
provides or arranges for others to provide administrative services to the fund.
Fund Management Company serves as the principal underwriter for the fund and
A I M Fund Services, Inc. serves as the transfer agent for the fund and provides
15
<PAGE> 19
services to fund shareholders and other services to the fund. Each of those
entities are wholly owned subsidiaries of AIM. Information concerning fees paid
to AIM and its affiliates for these services is in Appendix D.
WHAT ADVISORY FEES DOES AIM CHARGE FOR SIMILAR FUNDS IT MANAGES?
The advisory fee schedules for other funds advised by AIM with similar
investment objectives as the fund are in Appendix E.
WHAT ARE THE TERMS OF THE PROPOSED ADVISORY AGREEMENT?
The primary differences between the current advisory agreement and the
proposed advisory agreement that the Board approved are:
- To omit references to the provision of administrative services to the
fund by AIM, because such services are covered by a separate
administrative services agreement between AIM and the company;
- To omit certain expense limitations that are no longer applicable;
- To clarify non-exclusivity provisions that are set forth in the current
advisory agreement;
- To clarify delegation provisions that are set forth in the current
advisory agreement;
- To add provisions regarding affiliated brokerage;
- To add certain provisions relating to certain functions to be performed
by AIM in connection with the fund's securities lending program; and
- To the extent the Board creates additional funds in the future, to
clarify that one fund is not liable for another fund's obligations, and
that AIM's liability to one fund does not automatically extend to another
fund.
Each of these changes is discussed more fully below. Except for these
changes, the effective dates and the renewal dates, the terms of the current
advisory agreement and the proposed advisory agreement are substantially
similar.
Administrative Services
The company and AIM are parties to a Master Administrative Services
Agreement dated February 28, 1997. The current advisory agreement states that
AIM may provide certain administrative services to the fund at the Board's
request. The Board has traditionally asked AIM to provide such services to the
fund. AIM then provides such services pursuant to the Master Administrative
Services Agreement.
The Board proposes to separate the advisory services and the administrative
services that AIM provides to the company, so that the provision of administra-
16
<PAGE> 20
tive services is dealt with solely in a Master Administrative Services
Agreement. As a result, the proposed advisory agreement omits all references to
the Master Administrative Services Agreement. Since this omission will not
change the administrative services that AIM provides to the company or the
compensation AIM receives for providing administrative services, the Board
believes that this change is a matter of form rather than a substantive change
in the relationship between AIM and the company.
Expense Limitations
The current advisory agreement provides that advisory fees will be reduced
in accordance with certain expense limitations set forth in securities
regulations of the states in which the fund's shares are qualified for sale.
States can no longer impose expense limitations because federal law has
pre-empted these state regulations. Accordingly, the Board believes that this
expense limitation provision should be omitted from the proposed advisory
agreement.
Non-Exclusivity Provisions
The current advisory agreement provides that neither AIM nor the directors
or officers of the company owe an exclusive duty to the company. The current
advisory agreement expressly permits AIM to render investment advisory,
administrative and other services to other entities (including investment
companies). The current advisory agreement also expressly permits the directors
and officers of the company to serve as partners, officers, directors or
trustees of other entities (including other investment advisory companies). The
Board believes that the non-exclusivity provision in the current advisory
agreement should be divided into two separate provisions: one dealing with AIM
and the other dealing with officers and directors of the company.
The non-exclusivity provisions of the proposed advisory agreement are
substantially similar to the provision in the current advisory agreement.
However, the proposed advisory agreement explicitly states that the company
recognizes that AIM's obligations to other clients may adversely affect the
company's ability to participate in certain investment opportunities. The
proposed advisory agreement also explicitly states that AIM, in its sole
discretion, shall be entitled to determine the allocation of investment
opportunities among the AIM funds and other clients in accordance with a policy
that AIM believes to be equitable.
Delegation
The proposed advisory agreement expands the extent to which AIM can
delegate its rights, duties and obligations by expressly providing that AIM may
delegate any or all of its rights, duties or obligations under the agreement to
one or more sub-advisors rather than solely certain specified advisory services.
It also provides that AIM may replace sub-advisors from time to time in
accordance with applicable federal securities laws and rules and regulations in
effect or
17
<PAGE> 21
interpreted from time to time by the Securities and Exchange Commission (SEC) or
with exemptive orders or other similar relief. If, in accordance with the laws,
rules, interpretations and exemptions, AIM is not required to seek shareholder
approval of the appointment of a sub-advisor, it may do so solely upon approval
of the Board. Under the current agreement, any appointment of a sub-advisor
would require shareholder approval.
Affiliated Brokerage
Although AIM does not currently execute trades through brokers or dealers
that are affiliated with AIM, the proposed advisory agreement includes a new
provision that would permit such trades, subject to compliance with applicable
federal securities laws, rules, interpretations and exemptions.
Securities Lending
If the fund engages in securities lending, AIM will provide the fund
investment advisory services and related administrative services. The proposed
advisory agreement includes a new provision that specifies the administrative
services to be rendered by AIM if the fund engages in securities lending
activities, as well as the compensation AIM may receive for such administrative
services. Services to be provided include: (a) overseeing participation in the
securities lending program to ensure compliance with all applicable regulatory
and investment guidelines; (b) assisting the securities lending agent or
principal (the agent) in determining which specific securities are available for
loan; (c) monitoring the agent to ensure that securities loans are effected in
accordance with AIM's instructions and with procedures adopted by the Board; (d)
preparing appropriate periodic reports for, and seeking appropriate approvals
from, the Board with respect to securities lending activities; (e) responding to
agent inquiries; and (f) performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the current advisory fee schedule. As
compensation for the related administrative services AIM will provide, the fund
shall pay AIM a fee equal to 25% of the net monthly interest or fee income
retained or paid to the fund from such lending activities. AIM currently intends
to waive such fees, and has agreed to seek Board approval prior to its receipt
of all or a portion of such fees.
Liability
The proposed advisory agreement clarifies that no fund shall be liable for
the obligations of another fund, and the liability of AIM to one fund shall not
automatically render AIM liable to any other fund. This provision would affect
the fund only if the Board creates additional funds in the future.
18
<PAGE> 22
WHAT FACTORS DID THE DIRECTORS CONSIDER IN APPROVING THE ADVISORY AGREEMENT?
At the request of AIM, the Board discussed the approval of the proposed
advisory agreement at a meeting held in person on February 3, 2000. The
independent directors also discussed approval of the proposed advisory agreement
with independent counsel at that meeting. In evaluating the proposed advisory
agreement, the Board requested and received information from AIM to assist it in
its deliberations.
The board considered the following factors in determining the
reasonableness and fairness of the proposed changes to the current advisory
agreement with respect to the fund.
- The qualifications of AIM to provide investment advisory services. The
Board reviewed the credentials and experience of the officers and
employees of AIM who provide investment advisory services to the fund,
and noted that the persons providing services to the fund would not
change if the new advisory agreement is approved by shareholders.
- The range of investment advisory services provided by AIM. The Board
reviewed the services to be provided by AIM under the new advisory
agreement, and noted that no changes in the level or type of services
provided by AIM would occur if the new advisory agreement is approved by
shareholders, other than the provision by AIM of certain administrative
services if the fund engages in securities lending.
- The qualifications of AIM to provide a range of management and
administrative services. The Board reviewed the general nature of the
non-investment advisory services performed by AIM and its affiliates,
such as administrative, transfer agency and distribution services, and
the fees received by AIM and its affiliates for performing such services.
In addition to reviewing such services, the Board also considered the
organizational structure employed by AIM and its affiliates to provide
those services. The Board reviewed the proposed elimination from the new
advisory agreement of references to the provision by AIM of
administrative services. The Board also reviewed the proposed form of
administrative services agreement, noted that the services to be provided
under the existing and proposed administrative services agreements are
the same, and concluded that the administrative services to be provided
by AIM would not change if all references to administrative services were
deleted from the new advisory agreement.
- The performance record of the fund. The Board determined that AIM has
provided high quality services with respect to the fund, after
considering performance information that it received during the past year
from AIM regarding the fund. The Board also determined that the fund's
performance would not have been affected if the proposed advisory
agreement had been in effect during the past fiscal year, since no
changes
19
<PAGE> 23
to advisory fees are being proposed, other than to permit AIM's receipt
of fees for providing administrative services in connection with
securities lending. Such fees would be paid only to the extent that the
fund engages in securities lending, and therefore are not paid if the
fund does not engage in securities lending. The Board noted that the fund
does not currently engage in securities lending, but that such
arrangements provide the opportunity for both the fund and AIM to obtain
additional income. The Board noted that AIM currently intends to waive
its right to receive any fees under the proposed investment advisory
agreement for the administrative services it may provide in connection
with securities lending activities. The Board also noted that AIM has
agreed to seek Board approval prior to its receipt of all or a portion of
such fees.
- The profitability of AIM. The Board reviewed information concerning the
profitability of AIM's (and its affiliates') investment advisory and
other activities and its financial condition. The Board noted that no
changes to the advisory fees were being proposed, other than to permit
AIM's receipt of fees for providing administrative services in connection
with securities lending, and further noted that AIM currently intends to
waive its right to receive any such fees and has agreed to seek Board
approval prior to its receipt of all or a portion of such fees. The Board
also noted that, in accordance with an exemptive order issued by the SEC,
before the fund may participate in a securities lending program, the
Board must approve such participation. In addition, the Board must
evaluate the securities lending arrangements annually and determine that
it is in the best interests of the shareholders of the fund to invest in
AIM-advised money market funds any cash collateral the fund receives as
security for the borrower's obligation to return the loaned securities.
If the fund invests the cash collateral in AIM-advised money market
funds, AIM will receive additional advisory fees from these money market
funds, because the invested cash collateral will increase the assets of
these funds and AIM receives advisory fees based upon the assets of these
funds. The Board noted that the cash collateral relates to assets of the
fund that have already been invested, and the investment of the cash
collateral is intended to benefit the fund by providing it with
additional income. The Board also noted that an investment of the cash
collateral in an AIM-advised money market fund would have a positive
effect on the profitability of AIM.
- The terms of the proposed agreement. The Board reviewed the terms of the
proposed agreement, including changes being made to clarify non-
exclusivity, delegation and liability provisions, to separate
administrative services from advisory services, to have AIM assist the
fund if it engages in securities lending and to permit AIM to engage in
brokerage transactions with affiliates. The Board determined that these
changes reflect the
20
<PAGE> 24
current environment in which the fund operates, and that AIM should have
the flexibility to take advantage of that environment.
After considering the foregoing factors, the Board concluded that it is in
the best interests of the fund and its shareholders to approve the new advisory
agreement.
The Board reached its conclusion after careful discussion and analysis. The
Board believes that it has carefully and thoroughly examined the pertinent
issues and alternatives. In recommending that you approve the proposed advisory
agreement, the independent directors have considered what they believe to be in
your best interests. In so doing, they were advised by independent counsel,
retained by the independent directors and paid for by the company, as to the
nature of the matters to be considered and the standards to be used in reaching
their decision.
In accordance with an exemptive order issued by the SEC, before the fund
may participate in a securities lending program, the Board must approve such
participation. In addition, the Board must evaluate the securities lending
arrangements annually, and must determine that it is in the best interests of
the shareholders of the fund to invest in AIM-advised money market funds any
cash collateral the fund receives as security for the borrower's obligation to
return the loaned securities. If the fund invests the cash collateral in
AIM-advised money market funds, AIM will receive additional advisory fees from
these money market funds, because the invested cash collateral will increase the
assets of these funds and AIM receives advisory fees based upon the assets of
these funds.
WHEN WILL PROPOSAL 2 BE IMPLEMENTED?
If approved, the new advisory agreement will become effective on May 24,
2000 and will expire, unless renewed, on or before June 30, 2001. If
shareholders do not approve the proposed advisory agreement, the current
advisory agreement will continue in effect.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 2?
------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
------------------------------------------------------------
21
<PAGE> 25
PROPOSALS 3(a) THROUGH 3(k):
CHANGES TO THE FUNDAMENTAL INVESTMENT
RESTRICTIONS OF THE FUND
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve changing your fund's investment
restrictions. The Board is asking you to vote on these changes because the
investment restrictions described below are fundamental and shareholders must
approve any change.
Pursuant to the 1940 Act, the fund has adopted certain fundamental
restrictions covering certain types of investment practices, which may be
changed only with shareholder approval. Restrictions that the fund has not
specifically designated as being fundamental are considered to be
"non-fundamental" and may be changed by the Board without shareholder approval.
In addition to investment restrictions, the fund operates pursuant to investment
objectives and policies. These objectives and policies govern the investment
activities of the fund and further limit its ability to invest in certain types
of securities or engage in certain types of transactions.
The Board is proposing that you approve changes to your fund's fundamental
investment restrictions. The changes will conform these restrictions to a set of
uniform model restrictions under which most AIM funds will operate. The Board
approved the changes to your fund's fundamental investment restrictions at a
meeting held on February 3, 2000. The current fundamental investment
restrictions for the fund are in Appendix F.
WHAT ARE THE REASONS FOR THE PROPOSED CHANGES TO THE FUNDAMENTAL RESTRICTIONS?
Several of the fund's current fundamental restrictions that the fund has
adopted reflect regulatory, business or industry conditions, practices or
requirements that are no longer applicable. For example, the National Securities
Markets Improvement Act of 1996 (NSMIA) preempted state laws, under which the
fund previously was regulated and which required the adoption of certain
restrictions. In addition, other fundamental restrictions reflect federal
regulatory requirements that remain in effect but are not required to be stated
as fundamental, or in some cases even as non-fundamental, restrictions.
Accordingly, the Board has approved changes to certain of the fund's
fundamental restrictions in order to simplify, modernize and make more uniform
those restrictions that are required to be fundamental.
The Board expects that you will benefit from these amendments in a number
of ways. The proposed uniform restrictions will provide the fund with as much
investment flexibility as is possible under the 1940 Act. In addition, by
reducing to a minimum those restrictions that can be changed only by shareholder
vote,
22
<PAGE> 26
the fund will be able to avoid the costs and delays associated with a
shareholder meeting if the Board decides to make future changes to its
investment policies.
WHAT ARE THE PROPOSED CHANGES TO THE FUNDAMENTAL RESTRICTIONS?
Each proposed change to the fund's fundamental restrictions is discussed
below. The proposed fundamental investment restrictions will provide the fund
with the ability to operate under new interpretations of the 1940 Act or
pursuant to exemptive relief from the SEC without receiving prior shareholder
approval of operating under such interpretations or exemptions. Even though the
fund will have this flexibility, if the proposed fundamental restrictions are
approved, several new non-fundamental investment restrictions (which function as
internal operating guidelines) will become effective. AIM must follow these non-
fundamental investment restrictions in managing the fund. Of course, if
circumstances change, the Board may change or eliminate any non-fundamental
investment restriction in the future without shareholder approval.
With respect to the fund and each existing or proposed fundamental or non-
fundamental restriction, if a percentage restriction is adhered to at the time
of an investment or transaction, a later increase or decrease in percentage
resulting from a change in the values of the fund's portfolio securities or the
amount of its total assets will not be considered a violation of the
restriction.
PROPOSAL 3(a):
CHANGE TO THE FUNDAMENTAL
RESTRICTION ON ISSUER DIVERSIFICATION
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(a), the existing fundamental restriction on
issuer diversification would be changed to read as follows:
"The fund is a 'diversified company' as defined in the 1940 Act. The
fund will not purchase the securities of any issuer if, as a result,
the fund would fail to be a diversified company within the meaning of
the 1940 Act, and the rules and regulations promulgated thereunder, as
such statute, rules and regulations are amended from time to time or
are interpreted from time to time by the SEC staff (collectively, the
1940 Act laws and interpretations) or except to the extent that the
fund may be permitted to do so by exemptive order or similar relief
(collectively, with the 1940 Act laws and interpretations, the 1940
Act laws, interpretations and exemptions). In complying with this
restriction, however, the fund may purchase securities of other
investment companies to the extent permitted by the 1940 Act laws,
interpretations and exemptions."
23
<PAGE> 27
Discussion:
The fund is a "diversified" fund under the 1940 Act. The proposed change to
the fund's fundamental restriction on issuer diversification would make the
fund's diversification restriction no more limiting than required by the 1940
Act laws, interpretations and exemptions. The Board does not expect this change
to have any material impact on the fund's current operations.
If you approve the proposed change, the following non-fundamental
restriction will become effective:
"In complying with the fundamental restriction regarding issuer
diversification, the fund will not, with respect to 100% of its total
assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the fund's
total assets would be invested in the securities of that issuer except
as permitted by Rule 2a-7 under the 1940 Act or (ii) the fund would
hold more than 10% of the outstanding voting securities of that
issuer. The fund may (i) purchase securities of other investment
companies as permitted by Section 12(d)(1) of the 1940 Act and (ii)
invest its assets in securities of other money market funds and lend
money to other investment companies or their series portfolios that
have AIM or an affiliate of AIM as an investment advisor (an AIM
fund), subject to the terms and conditions of any exemptive orders
issued by the SEC."
PROPOSAL 3(b):
CHANGE TO FUNDAMENTAL RESTRICTION ON
BORROWING MONEY AND ISSUING SENIOR SECURITIES
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(b), the existing fundamental restriction on
issuing senior securities and borrowing money for the fund would be changed to
read as follows:
"The fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act laws, interpretations and exemptions."
Discussion:
The 1940 Act establishes limits on the ability of the fund to borrow money
or issue "senior securities," a term that is defined, generally, to refer to
obligations that have a priority over the company's shares of common stock with
respect to the distribution of its assets or the payment of dividends.
Currently, the fundamental restriction of the fund is more limiting than
required by the 1940
24
<PAGE> 28
Act. In addition, the fund currently does not have a fundamental investment
restriction on issuing senior securities.
The proposed change would make the fund's restriction on borrowing money or
issuing senior securities no more limiting than required by the 1940 Act and the
Board believes that changing the fund's fundamental restrictions in this manner
will provide flexibility for future contingencies. However, the Board does not
expect this change to have any material impact on the fund's current operations.
The fundamental limitation that requires the fund to repay all borrowings (other
than when issued securities) before making additional investments will be
revised so that the fund may not purchase additional securities when any
borrowing from banks exceeds 5% of the fund's total assets and continue as a
non-fundamental policy.
If you approve the proposed change, the following non-fundamental
restriction will become effective for the fund:
"In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the fund may borrow money in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The fund may
borrow from banks, broker-dealers or an AIM fund. The fund may not
borrow for leveraging, but may borrow for temporary or emergency
purposes, in anticipation of or in response to adverse market
conditions, or for cash management purposes. The fund may not purchase
additional securities when any borrowings from banks exceed 5% of the
fund's total assets."
PROPOSAL 3(c):
CHANGE TO FUNDAMENTAL RESTRICTION ON
UNDERWRITING SECURITIES
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(c), the existing fundamental restriction on
underwriting securities for the fund would be changed to read as follows:
"The fund may not underwrite the securities of other issuers. This
restriction does not prevent the fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the fund may be considered to be an
underwriter under the Securities Act of 1933."
Discussion:
The proposed changes to this fundamental restriction would expand the types
of transactions in which the fund may engage, even if it may be considered
25
<PAGE> 29
to be an underwriter. Otherwise the proposed restriction is substantially
similar to the fund's current investment restriction.
PROPOSAL 3(d):
CHANGE TO FUNDAMENTAL RESTRICTION
ON INDUSTRY CONCENTRATION
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(d), the existing fundamental restriction on
concentration for the fund would be changed to read as follows:
"The fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940
Act laws, interpretations and exemptions) of its investments in the
securities of issuers primarily engaged in the same industry. This
restriction does not limit the fund's investments in (i) obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, (ii) tax-exempt obligations issued by governments
or political subdivisions of governments, or (iii) bank instruments.
In complying with this restriction, the fund will not consider a
bank-issued guaranty or financial guaranty insurance as a separate
security."
Discussion:
The proposed fundamental restriction is substantially similar to the fund's
current investment restriction but it would make the fund's restriction on
concentration no more limiting than required by the 1940 Act laws,
interpretations and exemptions. If you approve the proposed change, the
following non-fundamental restriction will become effective for the fund:
"In complying with the fundamental restriction regarding industry
concentration, the fund may invest up to 25% of its total assets in
the securities of issuers whose principal business activities are in
the same industry."
The fund will also maintain three non-fundamental policies regarding
concentration of investments: (1) it will not invest 25% or more of its assets
in securities whose issuers are located in the same state; (2) it will not
invest 25% or more of its assets in securities the interest upon which is paid
from revenues of similar type projects; and (3) it will not invest 25% or more
of its assets in industrial development bonds. The policy described in (2) does
not apply, however, if the securities are subject to a guarantee. For securities
subject to a guarantee, the fund does not intend to purchase any such security
if, after giving effect to the purchase, 25% or more of the fund's assets would
be invested in securities issued or guaranteed by entities in a particular
industry. Securities
26
<PAGE> 30
issued or guaranteed by a bank or subject to financial guaranty insurance are
not subject to the limitations set forth in the preceding sentence.
PROPOSAL 3(e):
CHANGE TO FUNDAMENTAL RESTRICTION
ON PURCHASING OR SELLING REAL ESTATE
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(e), the existing fundamental restriction on
real estate investments for the fund would be changed to read as follows:
"The fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments.
This restriction does not prevent the fund from investing in issuers
that invest, deal, or otherwise engage in transactions in real estate
or interests therein, or investing in securities that are secured by
real estate or interests therein."
Discussion:
The proposed changes to this fundamental restriction would clarify the
types of real estate related securities that are permissible investments for the
fund. In addition, the proposed restriction includes an exemption that permits
the fund to hold real estate acquired as a result of ownership of securities or
other instruments. The Board does not expect this change to have any material
impact on the fund's current operations.
PROPOSAL 3(f):
CHANGE TO FUNDAMENTAL RESTRICTION
ON PURCHASING OR SELLING COMMODITIES
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(f), the existing fundamental restriction on
investing in commodities for the fund would be changed to read as follows:
"The fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or
other instruments. This restriction does not prevent the fund from
engaging in transactions involving futures contracts and options
thereon or investing in securities that are secured by physical
commodities."
Discussion:
Although the proposed changes to this fundamental restriction are intended
to ensure that the fund will have the maximum flexibility to enter into hedging
27
<PAGE> 31
and other transactions utilizing financial contracts and derivative products
when doing so is permitted by the fund's other investment policies, the fund
does not intend to engage in transactions involving futures contracts and
options thereon or securities that are secured by physical commodities. The
Board does not expect this change to have any material impact on the fund's
current operations.
PROPOSAL 3(g):
CHANGE TO FUNDAMENTAL RESTRICTION
ON MAKING LOANS
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(g), the existing fundamental restriction on
making loans for the fund would be changed to read as follows:
"The fund may not make personal loans or loans of its assets to
persons who control or are under common control with the fund, except
to the extent permitted by 1940 Act laws, interpretations and
exemptions. This restriction does not prevent the fund from, among
other things, purchasing debt obligations, entering into repurchase
agreements, loaning its assets to broker-dealers or institutional
investors, or investing in loans, including assignments and
participation interests."
Discussion:
The proposed changes to this fundamental restriction would broaden the
situations in which the fund could lend its assets. In addition, the proposed
restriction more completely describes various types of debt instruments
available in the financial markets that the fund may purchase that do not
constitute the making of a loan, and broadens the potential circumstances under
which the fund could make loans.
If you approve the proposed change, the following non-fundamental
restriction will become effective:
"In complying with the fundamental restriction with regard to making
loans, the fund may lend up to 33 1/3% of its total assets and may
lend money to another AIM fund, on such terms and conditions as the
SEC may require in an exemptive order."
28
<PAGE> 32
PROPOSAL 3(h):
APPROVAL OF A NEW FUNDAMENTAL
INVESTMENT RESTRICTION ON INVESTING
ALL OF THE FUND'S ASSETS IN AN OPEN-END FUND
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(h), the following fundamental investment
restriction on investing in an open-end fund would be added for the fund:
"The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies and restrictions as the
fund."
Discussion:
The Board has approved, subject to shareholder approval, the adoption of a
new fundamental investment restriction that would permit the fund to invest all
of its assets in another open-end fund. At present the Board has not considered
any specific proposal to authorize the fund to invest all of its assets in this
fashion. The Board will authorize investing the fund's assets in another
open-end fund only if the Board first determines that is in the best interests
of the fund and its shareholders.
The purpose of this proposal is to enhance the flexibility of the fund and
permit it to take advantage of potential efficiencies in the future available
through investment in another open-end fund. This structure allows several funds
with different distribution pricing structures, but the same investment
objective, policies and limitations, to combine their assets in a pooled fund
instead of managing them separately. This could lower the costs of obtaining
portfolio execution, custodial, investment advisory and other services for the
fund and could assist in portfolio management to the extent the cash flows of
each investment vehicle offset each other or provide for less volatile asset
changes. Of course, such benefits may not occur.
At present, certain of the fundamental investment restrictions of the fund
may prevent it from investing all of its assets in another registered investment
company and would require a vote of fund shareholders before such a structure
could be adopted. To avoid the costs associated with a subsequent shareholder
meeting, the Board recommends that you vote to permit all of the assets of your
fund to be invested in an open-end fund, without a further vote of shareholders,
but only if the Board subsequently determines that such action is in the best
interests of your fund and its shareholders. If you approve this proposal, the
fundamental restrictions of your fund would be changed to permit such
investment.
29
<PAGE> 33
The fund's methods of operation and shareholder services would not be
materially affected by its investment in an open-end fund, except that the
assets of the fund might be managed as part of a larger pool. If the fund
invested all of its assets in an open-end fund, it would hold only investment
securities issued by the open-end fund, and the open-end fund would invest
directly in individual securities of other issuers. The fund otherwise would
continue its normal operations. The Board would retain the right to withdraw the
fund's investments from the open-end fund, and the fund then would resume
investing directly in individual securities of other issuers as it does
currently.
AIM may benefit from the use of this structure if, as a result, overall
assets under management are increased (since management fees are based on
assets). Also, AIM's expense of providing investment and other services to the
fund may be reduced.
If you approve the proposed restriction, the fund will have the ability to
invest all of its assets in another open-end investment company. Because the
fund does not currently intend to do so, the following non-fundamental
restriction will become effective for the fund:
"Notwithstanding the fundamental restriction with regard to investing
all assets in an open-end fund, the fund may not invest all of its
assets in the securities of a single open-end management investment
company with the same fundamental investment objectives, policies and
restrictions as the fund."
PROPOSAL 3(i):
ELIMINATION OF FUNDAMENTAL RESTRICTION ON MARGIN
TRANSACTIONS AND SHORT SALES OF SECURITIES
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(i), the existing fundamental restrictions
on engaging in margin transactions and short sales of securities for the fund
would be eliminated.
Discussion:
The fund is not required to have a fundamental restriction with regard to
margin transactions or short sales of securities. In order to conform the
fundamental restrictions for all AIM funds, the Board believes that the fund's
fundamental restriction with regard to margin transactions and short sales of
securities should be deleted. The fund does not intend to engage in margin
transactions or short sales of securities. The fund will not sell securities
short or purchase any securities on margin, except that it may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of portfolio securities. The Board does not expect the elimination of the
fundamental
30
<PAGE> 34
restriction regarding margin transactions and short sales of securities to have
any material impact on the fund's current operations.
PROPOSAL 3(j):
ELIMINATION OF FUNDAMENTAL RESTRICTION ON
INVESTING FOR THE PURPOSE OF CONTROL
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(j), the existing fundamental restriction on
investing for the purpose of control for the fund would be eliminated.
Discussion:
The Board proposes to eliminate this fundamental restriction, which
prohibits the fund from investing in companies for the purpose of exercising
control or management. Elimination of this restriction would clarify the fund's
ability to exercise freely its rights as a shareholder of the companies in which
it invests. The fund, however, currently has no intention to become involved in
directing or administering the day-to-day operations of any company.
AIM believes that it should be able to communicate freely the fund's views
as a shareholder on important matters of policy to a company's management, its
board of directors and its shareholders, when AIM or the Board believes that
such action or policy may affect significantly the value of its investment. The
activities that the fund might engage in, either individually or with others,
include seeking changes in a company's direction, seeking the sale of a company
or a portion of its assets, or participating in a takeover effort or in
opposition to a takeover effort. AIM believes that the fund currently may engage
in such activities without necessarily violating this fundamental restriction.
Nevertheless, the existence of the investment restriction might give rise to a
claim that such activities did in fact constitute investing for control or
management.
PROPOSAL 3(k):
ELIMINATION OF FUNDAMENTAL RESTRICTION ON PUTS,
CALLS, STRADDLES, SPREADS OR COMBINATIONS THEREOF
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 3(k), the fund's existing fundamental
restriction on writing, purchasing or selling puts, calls, straddles, spreads or
combinations thereof (other than covered put and call options) would be
eliminated.
31
<PAGE> 35
Discussion:
The fund is not required to have a fundamental restriction with regard to
writing, purchasing or selling puts, calls, straddles, spreads or combinations
thereof. In order to conform the fundamental restrictions for all AIM funds, the
Board believes that the fund's fundamental restriction with regard to writing,
purchasing or selling puts, calls, straddles, spreads or combinations thereof
should be deleted. The fund does not, however, intend to engage in these types
of transactions. The Board does not expect this change to have any material
impact on the fund's current operations.
WHEN WILL PROPOSALS 3(a) THROUGH 3(k) BE IMPLEMENTED?
If you approve each of the above proposals, the new fundamental
restrictions will replace the fundamental investment restrictions for the fund.
Accordingly, the proposed fundamental restrictions will become the only
fundamental investment restrictions under which the fund will operate. If
approved, the above restrictions may not be changed with respect to the fund
without the approval of the holders of a majority of the fund's outstanding
voting securities (as defined in the 1940 Act). The Board anticipates that these
proposals, if approved, will be implemented on May 24, 2000.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSALS 3(a) THROUGH 3(k)?
------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 3(a) THROUGH 3(k).
------------------------------------------------------------
PROPOSAL 4:
CHANGING THE INVESTMENT OBJECTIVE OF
THE FUND AND MAKING IT NON-FUNDAMENTAL
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve changing your fund's investment
objective by making it non-fundamental and by eliminating from the investment
objective the types of securities your fund proposes to purchase in seeking to
achieve its objective. The Board is asking you to vote on this change because
the investment objective of the fund presently is fundamental and shareholders
must approve any change.
The current investment objective of your fund is to generate as high a
level of tax-exempt income as is consistent with the preservation of capital and
maintenance of liquidity by investing in high-quality, short-term municipal
securities.
32
<PAGE> 36
Your fund's current investment objective includes the types of securities
that your fund proposes to purchase to achieve its objective. The Board believes
that the basic investment objective of your fund should be separate from the
types of securities your fund may purchase to achieve its objective. This change
will permit the Board to change the types of securities your fund may purchase
without also changing the fund's investment objective.
The Board recommends that you approve making your fund's investment
objective non-fundamental. By making this objective non-fundamental, the Board
may change it as it deems appropriate, without seeking a shareholder vote. The
Board does not anticipate making additional changes to the investment objective
of your fund at the present time.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4, your fund's investment objective will read
as follows:
"The fund's investment objective is to provide as high a level of tax-
exempt income as is consistent with the preservation of capital and
maintenance of liquidity."
Your fund will also retain the investment policy of investing in high
quality, short-term municipal securities.
The Board expects that you will benefit from these proposed changes because
it will have the ability to respond more quickly to new developments and
changing trends in the marketplace without incurring the time and the costs of a
shareholder vote. This should make your fund more competitive among its peers.
WHEN WILL PROPOSAL 4 BE IMPLEMENTED?
The Board anticipates that Proposal 4, if approved, will be implemented on
May 24, 2000.
33
<PAGE> 37
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 4?
------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
------------------------------------------------------------
PROPOSAL 5:
RATIFICATION OF SELECTION OF KPMG LLP
AS INDEPENDENT ACCOUNTANTS
WHAT AM I BEING ASKED TO APPROVE?
The Board has selected KPMG LLP as independent accountants for the fund for
its fiscal year ending March 31, 2000. As the fund's independent accountants,
KPMG LLP will examine and verify the accounts and securities of the fund and
report on them to the Board and to the fund's shareholders. The Board's
selection will be submitted for your ratification at the meeting.
WHY HAS THE BOARD SELECTED KPMG LLP AS THE INDEPENDENT ACCOUNTANTS?
KPMG was selected primarily on the basis of its expertise as auditors of
investment companies, its independence from AIM and its affiliates, the quality
of its audit services, and the competitiveness of the fees charged for these
services. KPMG LLP also serves as independent accountants of some of the other
AIM funds.
WILL A REPRESENTATIVE FROM KPMG LLP BE AVAILABLE FOR QUESTIONS?
The Board expects that a representative of KPMG LLP will be present at the
meeting. The representative will have an opportunity to make a statement should
he or she desire to do so and will be available to respond to shareholders'
questions.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 5?
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
34
<PAGE> 38
GENERAL INFORMATION
WHO ARE THE EXECUTIVE OFFICERS OF THE COMPANY?
Information about the executive officers of the company is in Appendix G.
WHAT IS THE SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN HOLDERS?
Information about the ownership of each class of the fund's shares by the
directors and the executive officers of the company and by 5% holders of the
fund is in Appendix H.
WHO ARE THE INVESTMENT ADVISOR, ADMINISTRATOR AND PRINCIPAL UNDERWRITER OF THE
FUND?
A I M Advisors, Inc., whose principal address is 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173, serves as the investment advisor and
administrator for the funds.
Fund Management Company, whose principal address is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173, serves as the principal underwriter for
the fund.
HOW WILL THE COMPANY SOLICIT PROXIES?
The company will bear the cost of soliciting proxies. The company expects
to solicit proxies principally by mail, but the company may also solicit proxies
by facsimile or personal interview. The company may also reimburse firms and
others for their expenses in forwarding solicitation materials to the beneficial
owners of shares of the fund.
HOW CAN I SUBMIT A PROPOSAL?
As a general matter, the fund does not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of a fund, you should send such proposal to the company at the
address set forth on the first page of this proxy statement. To be considered
for presentation at a shareholders' meeting, the company must receive proposals
a reasonable time before proxy materials are prepared relating to that meeting.
Your proposal also must comply with applicable law.
OTHER MATTERS
The Board does not know of any matters to be presented at the meeting other
than those set forth in this proxy statement. If any other business should come
before the meeting, the persons named in the accompanying proxy will vote
thereon in accordance with their best judgment.
35
<PAGE> 39
APPENDIX A
SHARES OF TAX-FREE INVESTMENT CO.
OUTSTANDING ON FEBRUARY 18, 2000
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING ON
NAME OF FUND (CLASS) FEBRUARY 18, 2000
- -------------------- -----------------
<S> <C>
Cash Reserve Portfolio
Cash Management Class..................................... 2,950,445.240
Institutional Class....................................... 990,843,791.930
Personal Investment Class................................. 0
Private Investment Class.................................. 86,083,383.440
Reserve Class............................................. 21,817,744.330
Resource Class............................................ 3,587,600.390
</TABLE>
A-1
<PAGE> 40
APPENDIX B
TAX-FREE INVESTMENTS CO.
FORM OF MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this day of , , by and
between Tax-Free Investments Co., a Maryland corporation (the "Company") with
respect to its series of shares shown on the Schedule A attached hereto, as the
same may be amended from time to time, and A I M Advisors, Inc., a Delaware
corporation (the "Advisor").
RECITALS
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "l940 Act"), as an open-end, diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Company's charter authorizes the Board of Directors of the
Company (the "Board of Directors") to classify or reclassify authorized but
unissued shares of the Company, and as of the date of this Agreement, the Board
of Directors has created one separate series portfolio (such portfolio and any
other portfolios hereafter added to the Company being referred to collectively
herein as the "Funds"); and
WHEREAS, the Company and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for the
Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Board of Directors. The Advisor shall give the
Company and the Funds the benefit of its best judgment, efforts and facilities
in rendering its services as investment advisor.
B-1
<PAGE> 41
2. Investment Analysis and Implementation. In carrying out its obligations
under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Funds,
and whether concerning the individual issuers whose securities are included
in the assets of the Funds or the activities in which such issuers engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Funds' assets;
(c) determine which issuers and securities shall be represented in the
Funds' investment portfolios and regularly report thereon to the Board of
Directors;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Board of Directors; and
(e) take, on behalf of the Company and the Funds, all actions which
appear to the Company and the Funds necessary to carry into effect such
purchase and sale programs and supervisory functions as aforesaid,
including but not limited to the placing of orders for the purchase and
sale of securities for the Funds.
3. Securities Lending Duties and Fees. The Advisor agrees to provide the
following services in connection with the securities lending activities of each
Fund: (a) oversee participation in the securities lending program to ensure
compliance with all applicable regulatory and investment guidelines; (b) assist
the securities lending agent or principal (the "Agent") in determining which
specific securities are available for loan; (c) monitor the Agent to ensure that
securities loans are effected in accordance with the Advisor's instructions and
with procedures adopted by the Board of Directors; (d) prepare appropriate
periodic reports for, and seek appropriate approvals from, the Board of
Directors with respect to securities lending activities; (e) respond to Agent
inquiries; and (f) perform such other duties as necessary.
As compensation for such services provided by the Advisor in connection
with securities lending activities of each Fund, a lending Fund shall pay the
Advisor a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities.
4. Delegation of Responsibilities. The Advisor is authorized to delegate
any or all of its rights, duties and obligations under this Agreement to one or
more sub-advisors, and may enter into agreements with sub-advisors, and may
replace any such sub-advisors from time to time in its discretion, in accordance
B-2
<PAGE> 42
with the 1940 Act, the Advisers Act, and rules and regulations thereunder, as
such statutes, rules and regulations are amended from time to time or are
interpreted from time to time by the staff of the Securities and Exchange
Commission ("SEC"), and if applicable, exemptive orders or similar relief
granted by the SEC and upon receipt of approval of such sub-advisors by the
Board of Directors and by shareholders (unless any such approval is not required
by such statutes, rules, regulations, interpretations, orders or similar
relief).
5. Independent Contractors. The Advisor and any sub-advisors shall for all
purposes herein be deemed to be independent contractors and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Company in any way or otherwise be deemed to be an agent of the
Company.
6. Control by Board of Directors. Any investment program undertaken by the
Advisor pursuant to this Agreement, as well as any other activities undertaken
by the Advisor on behalf of the Funds, shall at all times be subject to any
directives of the Board of Directors.
7. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act and
any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Company, as
the same may be amended from time to time under the Securities Act of 1933
and the 1940 Act;
(c) the provisions of the corporate charter of the Company, as the
same may be amended from time to time;
(d) the provisions of the by-laws of the Company, as the same may be
amended from time to time; and
(e) any other applicable provisions of state, federal or foreign law.
8. Broker-Dealer Relationships. The Advisor is responsible for decisions to
buy and sell securities for the Funds, broker-dealer selection, and negotiation
of brokerage commission rates.
(a) The Advisor's primary consideration in effecting a security
transaction will be to obtain the best execution.
(b) In selecting a broker-dealer to execute each particular
transaction, the Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial
condition of the broker-dealer; the size of and the difficulty in executing
the order; and the value of the expected contribution of the broker-dealer
to the investment performance of the Funds on a continuing basis.
Accordingly, the price to the Funds
B-3
<PAGE> 43
in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other aspects of
the fund execution services offered.
(c) Subject to such policies as the Board of Directors may from time
to time determine, the Advisor shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely
by reason of its having caused the Funds to pay a broker or dealer that
provides brokerage and research services to the Advisor an amount of
commission for effecting a fund investment transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Advisor's overall
responsibilities with respect to a particular Fund, other Funds of the
Company, and to other clients of the Advisor as to which the Advisor
exercises investment discretion. The Advisor is further authorized to
allocate the orders placed by it on behalf of the Funds to such brokers and
dealers who also provide research or statistical material, or other
services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocations regularly to the
Board of Directors indicating the brokers to whom such allocations have
been made and the basis therefor.
(d) With respect to one or more Funds, to the extent the Advisor does
not delegate trading responsibility to one or more sub-advisors, in making
decisions regarding broker-dealer relationships, the Advisor may take into
consideration the recommendations of any sub-advisor appointed to provide
investment research or advisory services in connection with the Funds, and
may take into consideration any research services provided to such sub-
advisor by broker-dealers.
(e) Subject to the other provisions of this Section 8, the 1940 Act,
the Securities Exchange Act of 1934, and rules and regulations thereunder,
as such statutes, rules and regulations are amended from time to time or
are interpreted from time to time by the staff of the SEC, any exemptive
orders issued by the SEC, and any other applicable provisions of law, the
Advisor may select brokers or dealers with which it or the Funds are
affiliated.
9. Compensation. The compensation that each Fund shall pay the Advisor is
set forth in Schedule B attached hereto.
10. Expenses of the Funds. All of the ordinary business expenses incurred
in the operations of the Funds and the offering of their shares shall be borne
by the Funds unless specifically provided otherwise in this Agreement. These
expenses borne by the Funds include but are not limited to brokerage commis-
B-4
<PAGE> 44
sions, taxes, legal, accounting, auditing, or governmental fees, the cost of
preparing share certificates, custodian, transfer and shareholder service agent
costs, expenses of issue, sale, redemption and repurchase of shares, expenses of
registering and qualifying shares for sale, expenses relating to directors and
shareholder meetings, the cost of preparing and distributing reports and notices
to shareholders, the fees and other expenses incurred by the Company on behalf
of the Funds in connection with membership in investment company organizations
and the cost of printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders.
11. Services to Other Companies or Accounts. The Company understands that
the Advisor now acts, will continue to act and may act in the future as
investment manager or advisor to fiduciary and other managed accounts, and as
investment manager or advisor to other investment companies, including any
offshore entities, or accounts, and the Company has no objection to the Advisor
so acting, provided that whenever the Company and one or more other investment
companies or accounts managed or advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each company and account.
The Company recognizes that in some cases this procedure may adversely affect
the size of the positions obtainable and the prices realized for the Funds.
12. Non-Exclusivity. The Company understands that the persons employed by
the Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of the Advisor
or any affiliate of the Advisor to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature. The Company
further understands and agrees that officers or directors of the Advisor may
serve as officers or directors of the Company, and that officers or directors of
the Company may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
13. Effective Date, Term and Approval. This Agreement shall become
effective with respect to a Fund, if approved by the shareholders of such Fund,
on the Effective Date for such Fund, as set forth in Schedule A attached hereto.
If so approved, this Agreement shall thereafter continue in force and effect
until June 30, 2001, and may be continued from year to year thereafter, provided
that the continuation of the Agreement is specifically approved at least
annually:
(a) (i) by the Board of Directors or (ii) by the vote of "a majority
of the outstanding voting securities" of such Fund (as defined in Section
2(a)(42) of the 1940 Act); and
B-5
<PAGE> 45
(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of a party to this Agreement (other than as Company directors), by
votes cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated as to the Company or as
to any one or more of the Funds at any time, without the payment of any penalty,
by vote of the Board of Directors or by vote of a majority of the outstanding
voting securities of the applicable Fund, or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by the party entitled to receipt thereof. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for purposes of
this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
15. Amendment. No amendment of this Agreement shall be effective unless it
is in writing and signed by the party against which enforcement of the amendment
is sought.
16. Liability of Advisor and Fund. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Company or to
the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security. Any
liability of the Advisor to one Fund shall not automatically impart liability on
the part of the Advisor to any other Fund. No Fund shall be liable for the
obligations of any other Fund.
17. Liability of Shareholders. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any of the shareholders of the Company individually but are binding
only upon the assets and property of the Company and that the shareholders shall
be entitled, to the fullest extent permitted by applicable law, to the same
limitation on personal liability as shareholders of private corporations for
profit.
18. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company and that of the Advisor shall be 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
19. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act or the Advisers Act shall be resolved by
reference to such term or provision of the 1940 Act or the Advisers Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of
B-6
<PAGE> 46
any controlling decision of any such court, by rules, regulations or orders of
the SEC issued pursuant to said Acts. In addition, where the effect of a
requirement of the 1940 Act or the Advisers Act reflected in any provision of
the Agreement is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
Subject to the foregoing, this Agreement shall be governed by and construed in
accordance with the laws (without reference to conflicts of law provisions) of
the State of Texas.
20. License Agreement. The Company shall have the non-exclusive right to
use the name "AIM" to designate any current or future series of shares only so
long as A I M Advisors, Inc. serves as investment manager or advisor to the
Company with respect to such series of shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
<TABLE>
<S> <C>
TAX-FREE INVESTMENTS CO.
(a Maryland corporation)
Attest:
By:
- ---------------------------------------
Assistant Secretary --------------------------------------
President
(SEAL)
Attest: A I M ADVISORS, INC.
- --------------------------------------- By:
Assistant Secretary
--------------------------------------
(SEAL) President
</TABLE>
B-7
<PAGE> 47
SCHEDULE A
FUNDS AND EFFECTIVE DATES
<TABLE>
<CAPTION>
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
- ------------ ------------------
<S> <C>
Cash Reserve Portfolio May 24, 2000
</TABLE>
B-8
<PAGE> 48
SCHEDULE B
COMPENSATION TO THE ADVISOR
The Company shall pay the Advisor, out of the assets of a Fund, as full
compensation for all services rendered, an advisory fee for such Fund set forth
below. Such fee shall be calculated by applying the following annual rates to
the average daily net assets of such Fund for the calendar year computed in the
manner used for the determination of the net asset value of shares of such Fund.
CASH RESERVE PORTFOLIO
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $500 million............. 0.25 %
Over $500 million.............. 0.20 %
</TABLE>
B-9
<PAGE> 49
APPENDIX C
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS
OF A I M ADVISORS, INC.
The following table provides information with respect to the principal
executive officer and the directors of A I M Advisors, Inc., all of whose
business address is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH AIM PRINCIPAL OCCUPATION
---------------- ----------------- --------------------
<S> <C> <C>
Charles T. Bauer Director and Chairman See director table under Proposal 1
Gary T. Crum Director and Senior See Appendix G
Vice President
Robert H. Graham Director and See director table under Proposal 1
President
Dawn M. Hawley Director, Senior Vice Senior Vice President, Chief
President and Financial Officer and Treasurer,
Treasurer A I M Management Group Inc; and
Vice President and Treasurer for
A I M Capital Management, Inc,
A I M Distributors, Inc, A I M Fund
Services, Inc. and Fund Management
Company.
Carol F. Relihan Director, Senior Vice See Appendix G
President, General
Counsel and Secretary
</TABLE>
C-1
<PAGE> 50
APPENDIX D
FEES PAID TO AIM AND AFFILIATES
IN MOST RECENT FISCAL YEAR
The following chart sets forth the fees paid during the fiscal year ended
March 31, 1999 by the company to A I M Advisors, Inc. ("AIM") for administrative
services and to affiliates of AIM. The administrative and other services
currently provided by AIM and its affiliates will continue to be provided after
the investment advisory contract with AIM is approved.
<TABLE>
<CAPTION>
AIM FUND
(ADMINISTRATIVE MANAGEMENT A I M FUND
SERVICES) COMPANY* SERVICES, INC.
--------------- ---------- --------------
<S> <C> <C> <C>
TAX-FREE INVESTMENTS CO.
Cash Reserve
Portfolio............................ $ 86,020 $0 $ 97,188
</TABLE>
* Net amount received from Rule 12b-1 fees. Excludes amounts reallowed to
brokers, dealers, agents and other service providers.
D-1
<PAGE> 51
APPENDIX E
ADVISORY FEE SCHEDULES FOR OTHER AIM FUNDS
The following table provides information with respect to the annual
advisory fee rates paid to AIM by certain AIM funds that have a similar
investment objective as Cash Reserve Portfolio.
<TABLE>
<CAPTION>
FEE WAIVERS,
EXPENSE LIMITATIONS
TOTAL NET ASSETS FOR AND/OR EXPENSE
ANNUAL RATE THE MOST RECENTLY REIMBURSEMENTS FOR
(BASED ON AVERAGE COMPLETED FISCAL THE MOST RECENTLY
NAME OF FUND DAILY NET ASSETS) YEAR COMPLETED FISCAL YEAR
- ------------ ----------------- -------------------- ---------------------
<S> <C> <C> <C>
AIM Tax-Exempt Cash
Fund............... 0.35% $ 61,158,998 N/A
AIM Tax-Free
Intermediate
Fund............... 0.30% of the first $500 million; $ 244,499,469 N/A
0.25% over $500 million up to $1
billion; 0.20% of the excess over
$1 billion
</TABLE>
E-1
<PAGE> 52
APPENDIX F
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
CASH RESERVE PORTFOLIO
Cash Reserve Portfolio may not:
(a) purchase the securities of any issuer if, as a result, the
Portfolio would fail to be a diversified company within the meaning of the
1940 Act, the rules and regulations promulgated thereunder, as such
statute, rules and regulations are amended from time to time; provided,
however, that the Portfolio may purchase securities of other investment
companies to the extent permitted by the 1940 Act and the rules and
regulations promulgated thereunder (as such statute, rules and regulations
are amended from time to time) or to the extent permitted by exemptive
order or other similar relief;
(b) concentrate 25% or more of its total assets in the securities of
issuers in a particular industry; provided, however, that securities issued
or guaranteed by banks or subject to financial guaranty insurance are not
subject to this limitation; and provided further, that securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities and
tax-exempt securities issued by state and local governments and their
political subdivisions, are not included within this restriction;
(c) borrow money or pledge, mortgage or hypothecate the assets of the
Portfolio except for temporary or emergency purposes and then only in an
amount not exceeding 10% of the value of the Portfolio's total assets,
except that the Portfolio may purchase when-issued securities consistent
with the Portfolio's investment objectives and policies; provided that the
Portfolio will repay all borrowings (other than when-issued purchases)
before making additional investments;
(d) lend money or securities except to the extent that the Portfolio's
investments may be considered loans;
(e) purchase or sell puts, calls, straddles, spreads or combinations
thereof;
(f) invest in companies for the purpose of exercising control, except
that the Portfolio may purchase securities of other investment companies to
the extent permitted by applicable law or exemptive order;
(g) underwrite any issue of securities, except to the extent that the
purchase of securities, either directly from the issuer or from an
underwriter for an issuer, and the later disposition of such securities in
accordance with the Portfolio's investment program, may be deemed an
underwriting;
(h) purchase or sell real estate, but this shall not prevent
investments in securities secured by real estate or interests therein;
F-1
<PAGE> 53
(i) sell, securities short or purchase any securities on margin,
except for such short-term credits as are necessary for the clearance of
transactions; or
(j) purchase or sell commodities or commodity futures contracts.
F-2
<PAGE> 54
APPENDIX G
EXECUTIVE OFFICERS OF TAX-FREE INVESTMENTS CO.
The following table provides information with respect to the executive
officers of the company. Each executive officer is elected by the Board and
serves until his or her successor is chosen and qualified or until his or her
resignation or removal by the Board. The business address of all officers of the
company is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION PRINCIPAL OCCUPATION(S)
WITH THE COMPANY OFFICER SINCE DURING PAST 5 YEARS
- ---------------------- ------------- -----------------------
<S> <C> <C>
Charles T. Bauer (81), March 5, 1992 See director table under
Chairman Proposal 1
Robert H. Graham (53), January 1, 1994 See director table under
President Proposal 1
Gary T. Crum (52), September 11, 1993 Director and President, A I M
Senior Vice President Capital Management, Inc.;
Director and Executive Vice
President, A I M Management
Group Inc.; Director and Senior
Vice President, A I M Advisors,
Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP
PLC.
Carol F. Relihan (45), August 4, 1994 Director, Senior Vice President,
Senior Vice President and General Counsel and Secretary,
Secretary A I M Advisors, Inc.; Senior
Vice President, General Counsel
and Secretary, A I M Management
Group Inc.; Director, Vice
President and General Counsel,
Fund Management Company; Vice
President and General Counsel,
A I M Fund Services, Inc; and
Vice President, A I M Capital
Management, Inc. and A I M
Distributors, Inc.
Melville B. Cox (56), March 5, 1992 Vice President and Chief
Vice President Compliance Officer, A I M
Advisors, Inc., A I M Capital
Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund
Management Company
Dana R. Sutton (41), September 11, 1993 Vice President and Fund
Vice President and Treasurer Controller, A I M Advisors,
Inc.; and Assistant Vice
President and Assistant
Treasurer, Fund Management
Company.
</TABLE>
G-1
<PAGE> 55
<TABLE>
<CAPTION>
NAME, AGE AND POSITION PRINCIPAL OCCUPATION(S)
WITH THE COMPANY OFFICER SINCE DURING PAST 5 YEARS
- ---------------------- ------------- -----------------------
<S> <C> <C>
Stuart W. Coco (44), March 5, 1992 Senior Vice President, A I M
Vice President Capital Management, Inc.; and
Vice President, A I M Advisors,
Inc.
Karen Dunn Kelley (39) March 5, 1992 Senior Vice President, A I M
Vice President Capital Management, Inc.; and
Vice President, A I M Advisors,
Inc.
J. Abbott Sprague (45) March 5, 1992 Director and President, Fund
Vice President Management Company; Director,
A I M Fund Services, Inc.; and
Senior Vice President, A I M
Advisors, Inc. and A I M
Management Group Inc.
</TABLE>
G-2
<PAGE> 56
APPENDIX H
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
As of February 18, 2000, none of the directors or executive officers of the
company owned shares of the fund. The directors and executive officers, as a
group, held less than 1% of the shares of the fund as of February 18, 2000.
H-1
<PAGE> 57
SECURITY OWNERSHIP OF CERTAIN RECORD OWNERS
To the best knowledge the company, the names and addresses of the holders
of 5% or more of the outstanding shares of the fund as of February 18, 2000, and
the amount of the outstanding shares owned of record or beneficially by such
holders, are set forth below.
<TABLE>
<CAPTION>
PERCENT PERCENT OF
OF CLASS SHARES CLASS
NAME AND ADDRESS OF RECORD SHARES OWNED OWNED OF OWNED OWNED
FUND (CLASS) OWNER OF RECORD RECORD BENEFICIALLY* BENEFICIALLY*
- ------------ -------------------------- ------------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CASH RESERVE
PORTFOLIO
Cash Management
Class........... Heritage Asset 2,451,271 83.08% 0 0
Management Inc
P.O. Box 33022
St. Petersburg, FL
33733-8022
EVEREN Clearing Corp 474,499 16.08% 0 0
111 East Kilbourn Ave.
Milwaukee, WI 53202
Institutional
Class........... Bank of America N.A. 175,578,534 17.72% 0 0
1401 Elm Street 11th Floor
P.O. Box 831000
Dallas, TX 75202-2911
Frost National Bank Tx 125,191,367 12.63% 0 0
Muir & Co
PO Box 2479
San Antonio, TX 78298-2479
Chase Bank of Texas fbo 105,468,249 10.64% 0 0
OBIE & CO.
PO BOX 2558
Houston, TX 77252-2558
Trust Company Bank 90,953,993 9.18% 0 0
Center 3139
PO Box 105504
Atlanta, GA 30348
Trustmark National Bank 58,461,892 5.90% 0 0
248 East Capitol
Jackson, MS 39205
</TABLE>
H-2
<PAGE> 58
<TABLE>
<CAPTION>
PERCENT PERCENT OF
OF CLASS SHARES CLASS
NAME AND ADDRESS OF RECORD SHARES OWNED OWNED OF OWNED OWNED
FUND (CLASS) OWNER OF RECORD RECORD BENEFICIALLY* BENEFICIALLY*
- ------------ -------------------------- ------------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Private Investment
Class........... Cullen/Frost Discount 33,621,459 39.06% 0 0
Brokers
P.O. Box 2358
San Antonio, TX 78299
Bank of New York 11,411,839 13.26% 0 0
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
New Haven Savings Bank 7,260,955 8.43% 0 0
P.O. Box 302
Attn: Carl W. Lindskog
Trust Department
New Haven, CT 06502
Bank One Trust Company 6,618,347 7.69% 0 0
1111 Polaris Parkway
Columbus, OH 43240
Anderson Tax Free Accounts 6,195,590 7.20% 0 0
330 Spring Creek Rd.
Rockford, IL 61107-1035
Union Bank of California 5,660,797 6.58% 0 0
530 B Street, Suite 204
San Diego, CA 92101
Hambrecht & Quist LLC 5,553,335 6.45% 0 0
1100 Newport Center Drive
Second Floor
Newport Beach, CA 92660
CIBC World Markets 4,344,188 5.05% 0 0
200 Liberty Street
World Financial Center
New York, NY 10281
Reserve Class..... Bank of New York 21,817,744 100.00% 0 0
440 Mamoroneck, 5th Fl.
Harrison, NY 10286
Resource Class.... EVEREN Clearing Corp 2,503,676 69.79% 0 0
111 East Kilbourn Ave.
Milwaukee, WI 53202
McDonald & Company 900,969 25.11% 0 0
800 Superior Avenue
Suite 2100
Cleveland, OH 44114-2603
Hambrecht & Quist LLC 182,955 5.10% 0 0
1100 Newport Center Drive
Second Floor
Newport Beach, CA 92660
</TABLE>
* The company has no knowledge as to whether all or any portion of the
shares owned of record are also owned beneficially.
H-3
<PAGE> 59
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
PROXY CARD PROXY CARD
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
CASH RESERVE PORTFOLIO
(A PORTFOLIO OF TAX-FREE INVESTMENTS CO.)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 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 3, 2000, at 3:00 p.m., Central
time, and at any adjournment thereof, all of the shares of the portfolio which
the undersigned would be entitled to vote if personally present. IF THIS PROXY
IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
EACH DIRECTOR AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
NOTE: PLEASE SIGN EXACTLY AS YOUR
NAME APPEARS ON THIS PROXY CARD.
All joint owners should sign. When
signing as executor, administrator,
attorney, trustee or guardian or as
custodian for a minor, please give
full title as such. If a
corporation, please sign in full
corporate name and indicate the
signer's office. If a partner, sign
in the partnership name.
-----------------------------------
Signature
-----------------------------------
Signature (if held jointly)
-----------------------------------
Dated 10527_TFIC
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" EACH PROPOSAL. TO VOTE, FILL IN THE BOX COMPLETELY.
EXAMPLE: [X]
<TABLE>
<S> <C> <C> <C>
1. To elect ten individuals to the Board of Directors of Tax-Free Investments FOR WITHHOLD FOR ALL
Co., each of whom will serve until his or her successor is elected ALL AUTHORITY FOR EXCEPT
and qualified: ALL NOMINEES
01 Charles T. Bauer 04 Edward K. Dunn, Jr. 07 Robert H. Graham 10 Louis S. Sklar [ ] [ ] [ ]
02 Bruce L. Crockett 05 Jack M. Fields 08 Prema Mathai-Davis
03 Owen Daly II 06 Carl Frischling 09 Lewis F. Pennock
TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "FOR ALL EXCEPT" BOX
AND WRITE THE NOMINEE NUMBER(S) ON THE LINE PROVIDED.
-----------------------------------
FOR AGAINST ABSTAIN
2. To approve a new Master Investment Advisory Agreement with A I M Advisors, Inc. [ ] [ ] [ ]
3. To approve changing the fundamental investment restrictions of the fund. [ ] [ ] [ ]
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
(a) Change to Fundamental Restriction [ ] [ ] [ ] (g) Change to Fundamental Restriction on [ ] [ ] [ ]
on Issuer Diversification. Making Loans.
(b) Change to Fundamental Restriction [ ] [ ] [ ] (h) Approval of a New Fundamental [ ] [ ] [ ]
on Borrowing Money and Issuing Investment Restriction on Investing
Senior Securities. All of the Fund's Assets in an
Open-End Fund.
(c) Change to Fundamental Restriction [ ] [ ] [ ]
on Underwriting Securities. (i) Elimination of Fundamental [ ] [ ] [ ]
Restriction on Margin Transactions
and Short Sales of Securities.
(d) Change to Fundamental Restriction [ ] [ ] [ ] (j) Elimination of Fundamental [ ] [ ] [ ]
on Industry Concentration. Restriction on Investing for
the Purpose of Control.
(e) Change to Fundamental Restriction [ ] [ ] [ ] (k) Elimination of Fundamental [ ] [ ] [ ]
on Purchasing or Selling Real Restriction on Puts, Calls,
Estate. Straddles, Spreads or Combinations
Thereof.
(f) Change to Fundamental Restriction [ ] [ ] [ ]
on Purchasing or Selling
Commodities.
FOR AGAINST ABSTAIN
4. To approve changing the investment objective of the fund and making it [ ] [ ] [ ]
non-fundamental.
5. To ratify the selection of KPMG LLP as independent accountants for the [ ] [ ] [ ]
fiscal year ending in 2000.
6. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
