<PAGE> 1
AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
May 6, 1999
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your approval of a
proposed combination of AIM Advisor MultiFlex Fund ("MultiFlex Fund"), an
investment portfolio of AIM Advisor Funds, Inc. ("AAF"), with AIM Advisor Flex
Fund ("Flex Fund"), which is also an investment portfolio of AAF.
MultiFlex Fund and Flex Fund have the same investment objective -- to achieve a
high total return on investment through growth of capital and current income,
without regard to federal income tax considerations. Flex Fund seeks to meet
this objective by investing in a combination of equity securities issued
primarily by companies that have large market capitalizations and fixed-and
variable-income securities, while MultiFlex Fund invests in a broader range of
securities, including stocks of large cap companies, stocks of small cap
companies, fixed income securities, real estate securities and foreign
securities. A I M Advisors, Inc. serves as the investment adviser to both funds.
The net assets of MultiFlex Fund decreased from approximately $386 million at
December 31, 1997 to approximately $233 million in March of this year. The total
operating expenses of the Class A shares of Flex Fund were 0.29% lower than the
total operating expenses of the Class A shares of MultiFlex Fund during 1998,
and the expenses of the Flex Fund Class B and Class C shares were 0.27% lower
than the expenses of the MultiFlex Fund Class B and Class C shares during 1998.
Additionally, Flex Fund has out-performed MultiFlex Fund during recent years.
For these reasons, the Board of Directors of your fund concluded that it was
desirable to combine MultiFlex Fund with Flex Fund. The accompanying document
describes the proposed transaction and compares the investment policies,
operating expenses and performance of the funds for your evaluation.
You are being asked to approve a Plan of Reorganization for MultiFlex Fund which
provides for the reclassification and change of each outstanding share of
MultiFlex Fund into a fractional share of the corresponding class of shares of
Flex Fund based upon their respective net asset values. After careful
consideration, the Board of Directors recommends that you vote FOR the proposal
after carefully reviewing the enclosed materials.
Your vote is important. Please take a moment now to sign and return your proxy
card in the enclosed postage paid return envelope. If we do not hear from you
after a reasonable amount of time, you may receive a telephone call from our
proxy solicitor, Shareholder Communications Corporation, reminding you to vote
your shares. You may also vote your shares on the web at http://www.aimfunds.com
by following the instructions that appear on the enclosed proxy insert.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 2
AIM ADVISOR MULTIFLEX FUND REORGANIZATION
Q: WHY AM I RECEIVING THIS PROXY?
A: AIM proposes to reorganize the Advisor MultiFlex Fund into the AIM Advisor
Flex Fund. This transaction requires shareholder approval.
Q: HOW WILL THE REORGANIZATION BENEFIT SHAREHOLDERS IN THE FUND?
A: The reorganization will move AIM Advisor MultiFlex shareholders into a fund
with the same investment objective and an investment strategy that has
produced superior historic returns. Shareholders should consider the
following:
- The two Funds have the same investment objective, to achieve a high total
return on investment through growth of capital and current income, without
regard to federal income tax considerations.
- The total expenses of the Flex Fund are lower than those of the MultiFlex
Fund.
- The Flex Fund has outperformed the MultiFlex Fund in every year but one
since the inception of the two Funds.
- MultiFlex Fund's assets have declined since December 31, 1997.
Q: WILL THE REORGANIZATION AFFECT THE VALUE OF MY INVESTMENT?
A: The value of your account will not change. Your account in the MultiFlex
Fund will be calculated at NAV on June 18, 1999. The total amount will be
invested in the Flex Fund according to a ratio based on the closing prices
of the two Funds on June 18, 1999. The effective day for the merger is
before the opening of business on June 21, 1999.
Q: WILL THE REORGANIZATION CHANGE MY PRIVILEGES AS A SHAREHOLDER?
A: The privileges established for your MultiFlex Fund account will remain in
effect. If a shareholder has identical accounts with both the MultiFlex and
Flex Funds, the MultiFlex account will be merged into the Flex account. AIM
is reviewing those accounts with significant differences to analyze
additional changes. In some cases, AIM will contact shareholders to confirm
the privileges for the account.
Q: WHO WILL MANAGE THE FUND?
A: The Advisor Flex Fund portfolio managers -- Ed Mitchell, David Griffin and
Margaret (Peg) Durkes -- will manage the reorganized Fund. Mr. Mitchell,
senior portfolio manager, has managed the Fund since its inception in
February 1988. Mr. Griffin has been an assistant portfolio manager for the
Fund since 1993, and Ms. Durkes has been an assistant portfolio manager for
the Fund since 1997.
Q: WHAT DOES THE BOARD RECOMMEND?
A: The Board of Directors believes the reorganization is in the best interests
of shareholders and the Funds. It encourages shareholders to vote FOR the
reorganization.
Q: WHAT ARE THE TAX IMPLICATIONS FOR SHAREHOLDERS?
A: The reorganization is structured as a tax-free transaction, and
shareholders will incur no charges.
Q: WILL THERE BE A SHAREHOLDER MEETING?
A: Yes, a shareholder meeting will be held on June 16, 1999, at 11 Greenway
Plaza, Suite 100, in Houston, Texas, at 3 p.m. Central Time.
Q: HOW CAN I VOTE?
A: You can vote by signing and returning your proxy card in the enclosed
postage paid envelope. Or you can vote your shares on the Web at
HTTP://WWW.AIMFUNDS.COM. Please follow the instructions provided on the Web
site. You will be asked to input a personal identification number (PIN)
that you received in this proxy mailing.
Q: HAS THE FUND RETAINED A PROXY SOLICITATION FIRM?
A: Yes, the Fund has hired Shareholder Communications Corporation to assist in
the solicitation of proxies for the Special Meeting. While AIM expects to
receive most proxies by mail, it may also solicit proxies by telephone,
fax, telegraph or personal interview.
Q: WHY IS MY VOTE IMPORTANT?
A: For the Special Meeting to have a quorum, one-third of the outstanding
shares of each class of shares of the MultiFlex Fund must be represented
either in person or by proxy. Approval of the reorganization requires a
majority of all affirmative votes cast by shareholders. The Board of
Directors urges every shareholder to vote. Please read all proxy materials
thoroughly before casting your vote.
1
<PAGE> 3
AIM ADVISOR MULTIFLEX FUND
A PORTFOLIO OF
AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 16, 1999
TO THE SHAREHOLDERS OF AIM Advisor MultiFlex Fund ("MultiFlex Fund"):
YOU ARE HEREBY NOTIFIED that a Special Meeting of Shareholders of MultiFlex
Fund, an investment portfolio of AIM Advisor Funds, Inc. ("AAF"), will be held
at 11 Greenway Plaza, Suite 100, Houston, TX 77046 on June 16, 1999, at 3:00
p.m., local time, for the following purposes:
1. To approve a Plan of Reorganization (the "Plan of Reorganization") for
MultiFlex Fund and the consummation of the transactions contemplated therein.
The Plan of Reorganization provides for the reclassification and change of
outstanding MultiFlex Fund shares into shares of AIM Advisor Flex Fund ("Flex
Fund") of the same class (the "Reorganization"). The value of each MultiFlex
Fund shareholder's account with Flex Fund immediately after the Reorganization
will be the same as the value of such shareholder's account with MultiFlex Fund
immediately prior to the Reorganization. The Reorganization has been structured
as a tax-free transaction.
2. To transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies or
their substitutes.
Shareholders of record as of the close of business on April 26, 1999, are
entitled to notice of, and to vote at, the Special Meeting or any adjournment
thereof.
YOU ARE REQUESTED TO PROMPTLY EXECUTE AND RETURN IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF
AAF. THIS IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL
MEETING. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE
SUBSEQUENT EXECUTION AND SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE
OF REVOCATION TO AAF AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING IN
PERSON AT THE SPECIAL MEETING.
Carol F. Relihan
Senior Vice President and Secretary
May 6, 1999
<PAGE> 4
AIM ADVISOR MULTIFLEX FUND
AIM ADVISOR FLEX FUND
PORTFOLIOS OF
AIM ADVISOR FUNDS, INC.
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 454-0327
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: MAY 6, 1999
This document is being furnished to you in connection with the Special
Meeting of Shareholders of AIM Advisor MultiFlex Fund ("MultiFlex Fund"), an
investment portfolio of AIM Advisor Funds, Inc. ("AAF"), to be held on June 16,
1999 (the "Special Meeting"). At the Special Meeting you will be asked to
consider and approve a Plan of Reorganization (the "Plan of Reorganization") for
MultiFlex Fund and the consummation of the transactions described therein, as
further described in this Combined Proxy Statement and Prospectus (the
"Reorganization"). THE BOARD OF DIRECTORS OF AAF HAS UNANIMOUSLY APPROVED THE
PLAN OF REORGANIZATION AS BEING IN THE BEST INTEREST OF MULTIFLEX FUND
SHAREHOLDERS.
The Plan of Reorganization provides for the reclassification of the shares
of MultiFlex Fund and the change of the outstanding shares of MultiFlex Fund
into shares of AIM Advisor Flex Fund ("Flex Fund") of the same class based upon
the net asset value of the shares of the two Funds. All of the assets and
liabilities of MultiFlex Fund will become assets and liabilities of Flex Fund.
The value of your account with Flex Fund immediately after the Reorganization
will be the same as the value of your account with MultiFlex Fund immediately
before the Reorganization.
Flex Fund is an investment portfolio of AAF, an open-end, series management
investment company. The investment objective of both MultiFlex Fund and Flex
Fund is to achieve a high total return on investment through growth of capital
and current income, without regard to federal income tax consequences. Flex Fund
seeks to obtain that objective by investing in a combination of equity
securities issued primarily by companies that have large market capitalizations
and fixed-and variable-income securities, while MultiFlex Fund invests in a
broader range of securities including large cap equity securities, small cap
equity securities, fixed income securities, real estate securities and foreign
securities. A I M Advisors, Inc. ("AIM Advisors") serves as the investment
adviser to both Funds. See "Comparison of Investment Objectives, Policies and
Restrictions."
This Combined Proxy Statement and prospectus ("Proxy Statement/Prospectus")
sets forth the information that you should know before voting on the Plan of
Reorganization. It should be read and retained for future reference.
The current prospectuses for both MultiFlex Fund and Flex Fund, dated May
3, 1999, together with the related Statement of Additional Information also
dated May 3, 1999, are on file with the Securities and Exchange Commission (the
"SEC") and are incorporated into this Proxy Statement/Prospectus by this
reference. A copy of the current prospectus of Flex Fund is attached as Appendix
II to this Proxy Statement/Prospectus. These documents are available without
charge by writing to A I M Distributors, Inc., P.O. Box 4739, Houston, Texas
77210-4739 or by calling (800) 347-4246. The SEC maintains a Web site at
http://www.sec.gov that contains the prospectus and statement of additional
information described above, material incorporated by reference, and other
information about AAF. You can obtain additional information about MultiFlex
Fund and Flex Fund on the Web at http://www.aimfunds.com.
AS WITH ALL OTHER MUTUAL FUND SECURITIES, THE SEC HAS NOT APPROVED OR
DISAPPROVED THESE SECURITIES OR DETERMINED WHETHER THE INFORMATION IN THIS PROXY
STATEMENT/PROSPECTUS IN ADEQUATE OR ACCURATE. ANYONE WHO TELLS YOU OTHERWISE IS
COMMITTING A CRIME.
<PAGE> 5
[AIM LOGO APPEARS HERE]
THE AIM FAMILY OF FUNDS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION................................................ 1
SUMMARY..................................................... 2
Reorganization............................................ 2
Background and Reasons for the Reorganization............. 2
Comparison of Flex Fund and MultiFlex Fund................ 3
RISK FACTORS................................................ 4
Comparative Risks......................................... 4
Risks Associated with Flex Fund........................... 4
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS.............................................. 5
Investment Objectives..................................... 5
Investment Policies....................................... 5
Investment Restrictions................................... 6
FINANCIAL HIGHLIGHTS........................................ 7
ADDITIONAL INFORMATION ABOUT THE PLAN OF REORGANIZATION..... 10
The Reorganization........................................ 10
Board Considerations...................................... 10
Operation of Flex Fund Following the Reorganization....... 11
Other Terms............................................... 12
Federal Tax Consequences.................................. 12
RIGHTS OF SHAREHOLDERS...................................... 14
OWNERSHIP OF FLEX FUND AND MULTIFLEX FUND SHARES............ 15
Significant Holders....................................... 15
Ownership of Officers and Directors....................... 16
CAPITALIZATION.............................................. 17
LEGAL MATTERS............................................... 17
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 17
ADDITIONAL INFORMATION ABOUT FLEX FUND...................... 18
APPENDIX I.................................Plan of Reorganization
APPENDIX II...........................Prospectus of AIM Flex Fund
APPENDIX III.......................Annual Report of AIM Flex Fund
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Link, AIM Institutional Funds, aimfunds.com,
Invest With Discipline, La Familia AIM de Fondos and La Familia AIM de Fondos
and Design are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
i
<PAGE> 6
INTRODUCTION
This Proxy Statement/Prospectus is furnished to you in connection with the
solicitation of proxies by AAF's Board of Directors for use at the Special
Meeting of Shareholders of MultiFlex Fund to be held at 11 Greenway Plaza, Suite
100, Houston, TX 77046 on June 16, 1999, at 3:00 p.m., local time. That meeting
and any adjournments thereof are referred to as the "Special Meeting."
We have engaged Shareholder Communications Corporation ("SCC") to assist in
the solicitation of proxies for the Special Meeting. We expect to solicit
proxies principally by mail, but we may also solicit proxies by telephone,
facsimile, telegraph or personal interview. Our officers will not receive any
additional or special compensation for solicitation activities. MultiFlex Fund
and Flex Fund will each bear their own costs and expenses incurred in connection
with the Reorganization. For MultiFlex Fund, this will include expenses incurred
in preparing, printing and mailing proxy materials for the Special Meeting of
shareholders and proxy solicitation costs. Because AIM Advisors has agreed to
pay some of the administrative expenses of MultiFlex Fund, in return for a fixed
fee, the costs incurred by MultiFlex Fund in connection with the Reorganization
will be borne by AIM Advisors.
All properly executed and unrevoked proxies received in time for the
Special Meeting will be voted in accordance with the instructions they contain.
If no instructions are given, shares represented by proxies will be voted FOR
the proposal to approve the Plan of Reorganization and in accordance with Board
of Directors' recommendation on other matters. The presence in person or by
proxy of one-third of the outstanding shares of each class of shares of
MultiFlex Fund entitled to vote at the Special Meeting will constitute a quorum
("Quorum") with respect to that class. Approval of the Plan of Reorganization
requires the affirmative vote of a majority of all votes cast by the
shareholders at the Special Meeting of each class of shares of MultiFlex Fund.
Abstentions and broker non-votes will be counted as shares present at the
Special Meeting for quorum purposes but will not be considered votes cast at the
Special Meeting. Broker non-votes arise from a proxy returned by a broker
holding shares for a customer which indicates that the broker has not been
authorized by the customer to vote on a proposal. If you return a proxy, you may
revoke it at any time prior to its exercise by executing a superseding proxy or
by submitting a notice of revocation to the Secretary of AAF. In addition,
although mere attendance at the Special Meeting will not revoke a proxy, if you
attend the Special Meeting, you may withdraw your proxy and vote in person.
Shareholders may also transact any other business not currently contemplated
that may properly come before the Special Meeting in the discretion of the
proxies or their substitutes.
Shareholders of record as of the close of business on April 26, 1999 (the
"Record Date"), are entitled to vote at the Special Meeting. On the Record Date,
there were outstanding 1,067,526.007 Class A shares, 437,816.146 Class B shares
and 14,654,940.459 Class C shares of MultiFlex Fund. Each share is entitled to
one vote for each full share held, and a fractional vote for a fractional share
held.
We intend to mail this Proxy Statement/Prospectus and the accompanying
proxy on or about May 6, 1999.
1
<PAGE> 7
SUMMARY
REORGANIZATION
The Plan of Reorganization provides for the reclassification and change of
outstanding MultiFlex Fund shares into Flex Fund shares of the same class (the
"Reorganization"). If shareholders of MultiFlex Fund approve the Plan of
Reorganization and other closing conditions are satisfied, all of the assets and
liabilities of MultiFlex Fund will become assets and liabilities of Flex Fund,
and each issued and outstanding share of MultiFlex Fund will be changed into a
fractional share of Flex Fund of the same class that has a net asset value equal
to the net asset value of the MultiFlex Fund share immediately prior to the
Reorganization. The value of each MultiFlex Fund shareholder's account with Flex
Fund immediately after the Reorganization will be the same as the value of such
shareholder's account with MultiFlex Fund immediately prior to the
Reorganization.
We will receive an opinion of Ballard Spahr Andrews & Ingersoll, LLP, to
the effect that the Reorganization will constitute a tax-free reorganization for
Federal income tax purposes. Thus, shareholders will not have to pay Federal
income taxes as a result of the Reorganization. See "Additional Information
About the Plan of Reorganization -- Federal Tax Consequences" below.
No initial sales charge will be imposed in connection with the
Reorganization. A copy of the Plan of Reorganization is attached as Appendix I
to this Proxy Statement/Prospectus. See "Additional Information About the Plan
of Reorganization" below.
Flex Fund is a diversified investment portfolio of AAF, an open-end series
management investment company registered under the 1940 Act. The principal
offices of AAF are located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046
(telephone: (800) 347-4246).
BACKGROUND AND REASONS FOR THE REORGANIZATION
The Board of Directors of AAF, including the independent directors, has
determined that the reorganization of MultiFlex Fund into Flex Fund is in the
best interests of both Funds and their shareholders and that the interests of
the shareholders of each Fund will not be diluted as a result of the
Reorganization.
In making that determination, the Board of Directors considered the fact
that the operating expenses of Flex Fund are lower than the operating expenses
of MultiFlex Fund, as shown below.
COMPARATIVE FEES FOR YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FLEX FUND MULTIFLEX FUND
--------------------------- ---------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES SHARES SHARES SHARES SHARES
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Management Fees........................... 0.75% 0.75% 0.75% 1.00% 1.00% 1.00%
12b-1 Fees................................ 0.35% 1.00% 1.00% 0.35% 1.00% 1.00%
Other..................................... 0.42% 0.44% 0.44% 0.44% 0.44% 0.44%
Total Fund Operating Expenses(1).......... 1.52% 2.19% 2.19% 1.79% 2.44% 2.44%
Total Expense Ratio -- (Net of
Waivers)(2)............................. 1.23% 2.00% 2.00% 1.52% 2.27% 2.27%
</TABLE>
- ---------------
(1) A transfer of MultiFlex Fund's assets into Flex Fund is not expected to
materially affect the total fund operating expenses of Flex Fund.
(2) With voluntary expense limitations in effect through 1998.
2
<PAGE> 8
The Board of Directors also considered the return to shareholders provided
by Flex Fund over the past two years, as shown below.
PERFORMANCE INFORMATION
<TABLE>
<CAPTION>
FLEX FUND MULTIFLEX FUND
----------------------------- -----------------------------
CLASS A CLASS B CLASS C CLASS A CLASS B CLASS C
SHARES SHARES(1) SHARES SHARES SHARES(1) SHARES
------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Year 1997.............................. 24.60% N/A 23.64% 19.40% N/A 18.55%
Year 1998.............................. 13.26% 7.25% 12.41% 0.51% (3.96)% (0.26)%
</TABLE>
- ---------------
(1) Class B shares did not exist until March 3, 1998.
Flex Fund has outperformed MultiFlex Fund in every year but one since
inception of the two Funds. Additional information about the performance of Flex
Fund can be found in its Annual Report to Shareholders which is attached as
Appendix III.
In addition, the Board of Directors considered the decrease in the size of
MultiFlex Fund's assets since December 31, 1998. The Board of Directors noted
that the two Funds have the same investment objective, but employ different
investment strategies to achieve that objective. The investment strategies of
the two Funds are compatible in that Flex Fund does not invest in any securities
that fall outside of the investment strategies of MultiFlex Fund.
For additional information concerning the deliberations of the Board of
Directors on the Plan of Reorganization see "Additional Information About the
Plan of Reorganization."
COMPARISON OF FLEX FUND AND MULTIFLEX FUND
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of Flex Fund and MultiFlex Fund is the same -- to
achieve a high total return on investment through growth of capital and current
income, without regard to federal income tax consequences. Flex Fund and
MultiFlex Fund follow different investment strategies to achieve that objective.
Flex Fund invests in a combination of equity securities and fixed-and
variable-income securities. The Flex Fund normally invests at least 20% of its
total assets in equity securities issued by companies having large market
capitalizations and at least 20% of its total assets in fixed-and
variable-income securities. The remaining 60% of Flex Fund's assets will be
allocated to those types of securities according to the portfolio manager's
assessment of current business, economic and market conditions.
MultiFlex Fund invests in a combination of equity securities and
fixed-income securities through allocation in the following five asset
categories: stocks of large capitalization companies, stocks of small
capitalization companies, fixed income securities, real estate securities, and
foreign securities. MultiFlex Fund will normally invest 20% of its assets in
each of these five asset classes but may invest up to 40% of its assets in any
one category.
INVESTMENT ADVISORY SERVICES
AIM Advisors serves as investment adviser to MultiFlex Fund and Flex Fund.
INVESCO Capital Management, Inc., a Delaware corporation, is the sub-adviser to
Flex Fund and INVESCO Management & Research, Inc., a Massachusetts corporation,
is the sub-adviser to MultiFlex Fund.
SALES CHARGES
No sales charges are applicable to the Reorganization.
The Class A shares of Flex Fund and MultiFlex Fund are both sold with an
initial sales charge ranging from 5.50% to 2.00% depending upon the dollar
amount of the purchase. Class B shares of Flex
3
<PAGE> 9
Fund and MultiFlex Fund are sold without an initial sales charge, but are
subject to a contingent deferred sales charge of up to 5% if the shares are
redeemed by the holder within six years after purchase. Class C shares of the
two Funds are sold without an initial sales charge but are subject to a
contingent deferred sales charge upon certain redemptions.
DISTRIBUTION, PURCHASE, EXCHANGE AND REDEMPTION
Shares of Flex Fund and MultiFlex Fund are both distributed by A I M
Distributors, Inc. Purchase and redemption procedures are the same for Flex Fund
and MultiFlex Fund. Shares of Flex Fund and MultiFlex Fund may be exchanged for
shares of other funds of The AIM Family of Funds-- -Registered Trademark-- of
the same class.
FURTHER INFORMATION
Additional information concerning Flex Fund is contained in this Proxy
Statement/Prospectus and in the current prospectus for Flex Fund that is
attached hereto as Appendix II. Further information concerning MultiFlex Fund
can be found in its prospectus which has been made part of this Proxy
Statement/Prospectus by reference. See the cover page for information on how to
receive further information.
RISK FACTORS
COMPARATIVE RISKS
MultiFlex Fund and Flex Fund have the same investment objective. Flex Fund
seeks to meet this objective by investing in a combination of large cap equity
securities and fixed-and-variable income securities, while MultiFlex Fund
invests in a broader range of securities, including large cap equity, small cap
equity, fixed income securities, real estate securities and foreign securities.
The greater asset diversification of MultiFlex Fund could provide some
protection against the risk of loss in times of declining markets. For example,
a general decline in the prices of securities of large cap companies could
result in a greater decline in the value of Flex Fund shares than of MultiFlex
Fund shares.
However, investments in the market sectors available to MultiFlex Fund
carry risks to which Flex Fund shareholders have lesser or no exposure. For
instance, MultiFlex Fund may invest up to 40% of its assets in foreign
securities which have risks in addition to those of domestic securities,
including exchange rate changes, political and economic upheaval, the relative
lack of information about these companies, relatively low market liquidity and
the potential lack of strict financial and accounting controls and standards.
Similarly, equity securities of smaller companies, as opposed to the large cap
companies which Flex Fund invests in, may not be traded as often and it may be
difficult or impossible for the Fund to sell securities at a desired price.
MultiFlex Fund's greater holdings of real estate securities carries with it
additional risks, including difficulties in valuing and trading real estate,
declines in value of the property and risks related to general and local
economic conditions, changes in the climate for real estate, environmental
liability risks, increase in taxes, expenses and costs, change in laws, casualty
and condemnation losses, rent control limitations and increases in interest
rates.
RISKS ASSOCIATED WITH FLEX FUND
The risk associated with Flex Fund is that you could lose all or a portion
of your investment and that income you may receive from the Fund may vary. The
value of your investment in Flex Fund will go up and down with the prices of the
securities in which the Fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity.
4
<PAGE> 10
Interest rate increases can cause the price of a debt security to decrease;
the longer a debt security's duration, the more sensitive it is to this risk.
The issuer of a security may default or otherwise be unable to honor a financial
obligation. A faster than expected principal prepayment rate on U.S. government
agency mortgage-backed securities will reduce both the market value of, and
income from, such securities.
Flex Fund may also invest up to 10% of its total assets in non-Canadian
foreign securities and unsponsored American Depositary Receipts, which have
additional risks, including exchange rate changes, political and economic
upheaval, the relative lack of information about these companies, relatively low
market liquidity and the potential lack of strict financial and accounting
controls and standards.
The value of your shares could be adversely affected if the computer
systems used by Flex Fund's investment adviser and the Fund's other service
providers are unable to distinguish the year 2000 from the year 1900. Flex
Fund's investment adviser and independent technology consultants are working to
avoid year 2000-related problems in its systems and to obtain assurances that
other service providers are taking similar steps. Year 2000 problems may also
affect issuers in whose securities the Fund invests.
An investment in Flex Fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objective of both Flex Fund and MultiFlex Fund is to achieve
a high total return on investment through growth of capital and current income,
without regard to federal income tax considerations.
INVESTMENT POLICIES
A description of the investment policies of each of Flex Fund and MultiFlex
Fund is provided below.
Flex Fund
Flex Fund seeks to meet its investment objective by investing in a
combination of equity securities and fixed- and variable-income securities. The
Fund normally invests at least 20% of its total assets in equity securities and
at least 20% of its total assets in fixed- and variable-income securities. Flex
Fund's equity investments will consist primarily of common stocks, and to a
lesser extent convertible securities, of selected companies from a list of
companies with market capitalizations among the largest 800 publicly traded U.S.
corporations.
Flex Fund's fixed-income investments will consist primarily of U.S.
government obligations and corporate obligations that have been rated
investment-grade, or securities deemed by the Fund's portfolio manager to be of
comparable quality.
Flex Fund may invest in mortgage-backed securities, including mortgage
pass-through securities and collateralized mortgage obligations, that are
guaranteed as to timely payment of principal and interest by an agency of the
U.S. government or a private issuer. The Fund may invest up to 10% of its total
assets in non-Canadian foreign securities and unsponsored American Depositary
Receipts (ADRs). The Fund may also invest up to 25% of its total assets in
securities of Canadian issuers and sponsored ADRs.
The portion of Flex Fund's assets that can be invested in either equity
securities or income securities is allocated according to the portfolio
managers' assessments of current business, economic and market conditions. The
Fund seeks reasonably consistent returns over a variety of market cycles. In
order to identify the equity securities having the best relative values, the
portfolio managers start with a list of the 800 largest publicly traded U.S.
corporations, which they reduce to a list of 100 eligible stocks by utilizing a
proprietary database system and fundamental analysis. The portfolio managers
will purchase fixed- and variable-income obligations that they believe are
undervalued and may offer superior yields. A particular
5
<PAGE> 11
income security is usually sold when any of those factors materially change or
when it no longer qualifies for the list of eligible securities.
MultiFlex Fund
MultiFlex Fund seeks to meet its investment objective by investing in a
combination of equity securities and fixed-income securities. The Fund attempts
to allocate the mix of equity securities and fixed-income securities among the
following five asset classes: (1) equity securities of large capitalization
companies, i.e., companies with market capitalizations among the largest 800
publicly traded U.S. corporations; (2) equity securities of small capitalization
companies, i.e., companies with market capitalizations smaller than the largest
1,000 publicly traded U.S. corporations; (3) fixed-income securities; (4) real
estate securities; and (5) foreign securities. The Fund may invest up to 40% of
its assets in each asset class and will normally invest 20% of its assets in
each asset class.
MultiFlex Fund's fixed-income securities investments will consist primarily
of U.S. government securities and corporate obligations. U.S. government
securities include securities issued or guaranteed by the U.S. government and
obligations of U.S. government agencies or instrumentalities. The Fund may
invest in mortgage- and asset-backed securities, municipal obligations, and
foreign currency denominated securities. The Fund may also invest up to 5% of
its assets in lower quality debt securities, i.e., "junk bonds."
MultiFlex Fund's real estate securities investments will consist primarily
of the common stocks of real estate companies, shares of real estate investments
trusts (REITs) and other real estate related securities. The Fund may invest in
non-Canadian foreign securities and American Depositary Receipts (ADRs).
Securities of Canadian issuers and sponsored ADRs are not considered within the
40% limitation on foreign securities.
The portion of MultiFlex Fund's assets that can be invested in each asset
class will be allocated according to the portfolio managers' assessment of
current business, economic and market conditions. The portfolio managers focus
on securities that they believe have the best relative values. A particular
security is usually sold when any of those factors materially changes.
INVESTMENT RESTRICTIONS
Since MultiFlex Fund and Flex Fund are each investment portfolios of AAF,
each Fund is subject to the same investment restrictions with the following
exceptions. Flex Fund may not invest more than 10% of its total assets in
non-Canadian foreign securities, including unsponsored ADRs, or more than 25% of
its total assets in securities of Canadian issuers and sponsored ADRs. In
comparison, MultiFlex Fund may invest up to 40% of its total assets in foreign
securities, including unsponsored ADRs, and is not limited in the percentage of
net assets it may invest in securities of Canadian issuers or sponsored ADRs.
Additionally, with respect to 75% of MultiFlex Fund's net assets, MultiFlex Fund
is restricted from investing in the securities of any one issuer, other than the
obligations of the U.S. government, its agencies, authorities and
instrumentalities if immediately after such investment more than 5% of the value
of the Fund's total assets, taken at market value, would be invested in such
issuer or more than 10% of such issuer's outstanding voting securities would be
owned by the Fund. This same restriction is imposed upon 100% of Flex Fund's net
assets.
6
<PAGE> 12
FINANCIAL HIGHLIGHTS
Flex Fund
Shown below are the financial highlights for Flex Fund Class A shares for
the years ended December 31, 1998 and 1997; for the Flex Fund Class B shares for
the period March 3, 1998 through December 31, 1998; and for the Flex Fund Class
C shares for the five years ended December 31, 1998. This information has been
audited by AAF's independent accountants. The "Report of Independent
Accountants" and financial statements included in Flex Fund's annual report to
shareholders for the fiscal year ended December 31, 1998, are hereby
incorporated by reference into this Proxy Statement/ Prospectus. Flex Fund's
annual report to shareholders, which contains additional unaudited performance
information, is available without charge upon request made to AAF at the address
or telephone number appearing on the cover page of this Proxy
Statement/Prospectus.
FLEX FUND CLASS A SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31(a)
--------------------------
1998 1997
-------- --------
<S> <C> <C>
Net asset value beginning of period......................... $ 19.74 $ 16.63
Income from operations:
Net investment income..................................... 0.39 0.41(b)
Net Gains on Securities (both realized and unrealized).... 2.16 3.63
------- -------
Total from net investment income............................ 2.55 4.04
------- -------
Less distributions:
Dividends from net investment income...................... (0.39) (0.43)
Distributions from net realized gains..................... (1.84) (0.50)
------- -------
Total Distributions......................................... (2.23) (0.93)
------- -------
Net asset value, end of period.............................. $ 20.06 $ 19.74
======= =======
Total return(c)............................................. 13.26% 24.60%
======= =======
Ratios/Supplemental Data:
Net assets, end of year (000s omitted).................... $46,286 $25,151
======= =======
Ratio of expenses to average net assets................... 1.23%(d)(e) 1.45%(e)
======= =======
Ratio of net investment income to average net assets...... 1.99%(d)(e) 2.34%(e)
======= =======
Portfolio turnover rate..................................... 34% 17%
======= =======
</TABLE>
- ---------------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges.
(d) Ratios are based on average net assets of $36,085,767.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 1.52% and 1.70%, respectively, for 1998 and
1.55% and 2.24%, respectively, for 1997.
7
<PAGE> 13
FLEX FUND CLASS B SHARES
<TABLE>
<CAPTION>
MARCH 3,
1998 THROUGH
DECEMBER 31,
1998
---------------
<S> <C>
Net asset value beginning of period......................... $20.69
Income from operations:
Net investment income..................................... 0.22
Net gains on securities................................... 1.22
------
Total from investment operations............................ 1.44
------
Less distributions: (both realized and unrealized)
Dividends from net investment income...................... (0.23)
Distributions from net realized gains..................... (1.84)
------
Total distributions......................................... (2.07)
------
Net asset value, end of period.............................. $20.06
======
Total return(a)............................................. 7.25%
======
Ratios/Supplemental Data:
Net assets, end of year (000s omitted).................... $3,592
======
Ratio of expenses to average net assets................... 2.00%(b)(c)
======
Ratio of net investment income to average net assets...... 1.22%(b)(c)
======
Portfolios turnover rate.................................... 34%
======
</TABLE>
- ---------------
(a) Does not deduct sales charges where applicable and are not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of $1,313,596.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 2.19% (annualized) and 1.03% (annualized),
respectively, for 1998.
8
<PAGE> 14
FLEX FUND CLASS C SHARES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31(a)
------------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of period....... $ 19.74 $ 16.63 $ 15.66 $ 12.63 $ 13.54
Income from operations:
Net investment income................... 0.25 0.30(b) 0.30 0.32 0.32
Net gains (losses) or securities (both
realized and unrealized).............. 2.14 3.60 1.81 3.09 (0.23)
-------- -------- -------- -------- --------
Total from investment operations.......... 2.39 3.90 2.11 3.41 0.09
-------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income.... (0.23) (0.29) (0.29) (0.32) (0.31)
Distributions from net realized gains... (1.84) (0.50) (0.85) (0.06) (0.69)
-------- -------- -------- -------- --------
Total distributions..................... (2.07) (0.79) (1.14) (0.38) (1.00)
-------- -------- -------- -------- --------
Net asset value, end of period............ $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
======== ======== ======== ======== ========
Total return(c)........................... 12.41% 23.64% 13.61% 27.30% 0.64%
======== ======== ======== ======== ========
Ratios/Supplemental Data:
Net assets, end of year (000's
omitted).............................. $670,256 $603,179 $489,918 $399,162 $243,848
======== ======== ======== ======== ========
Ratio of expenses to average net
assets.............................. 2.00%(d)(e) 2.20% 2.26% 2.28% 2.25%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets.................. 1.22%(d)(e) 1.59% 1.81% 2.28% 2.32%
======== ======== ======== ======== ========
Portfolio turnover rate................... 34% 17% 26% 5% 36%
======== ======== ======== ======== ========
</TABLE>
- ---------------
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend on November 7,
1997.
(b) Calculated using average shares outstanding.
(c) Does not deduct sales charges.
(d) Ratios are based on average net assets of $636,501,142.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average daily net assets prior to fee waivers and/or
expense reimbursements were 2.19% and 1.03%, respectively, for 1998.
9
<PAGE> 15
ADDITIONAL INFORMATION ABOUT THE PLAN OF REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Plan of Reorganization. The deliberations of the Board of
Directors concerning the Reorganization and significant provisions of the Plan
of Reorganization are summarized below. A copy of the Plan of Reorganization is
attached as Appendix I to this Proxy Statement/Prospectus.
THE REORGANIZATION
Pursuant to the Plan of Reorganization each issued and outstanding share of
MultiFlex Fund will be changed into a fractional share of Flex Fund of the same
class having an aggregate net asset value equal to the net asset value of the
MultiFlex Fund share immediately prior to the Reorganization. The value of each
MultiFlex Fund shareholder's account with Flex Fund immediately after the
Reorganization will be the same as the value of such shareholder's account with
MultiFlex Fund immediately prior to the Reorganization. Shareholders will not
pay any initial sales charge in connection with the Reorganization.
All of the assets and liabilities of MultiFlex Fund will become assets and
liabilities of Flex Fund. The authorized but unissued shares of MultiFlex Fund
will become authorized shares of AAF without any further designation or
classification.
Each share of Flex Fund is entitled to one vote, to participate equally in
dividends and distributions declared by the Board of Directors with respect to a
class of shares of Flex Fund and, upon liquidation of Flex Fund, to participate
proportionately in its net assets allocable to a class after satisfaction of the
outstanding liabilities allocable to that class. Fractional shares of Flex Fund
have proportionately the same rights, including voting rights, as are provided
for full shares.
Consummation of the Reorganization is expected to occur on June 21, 1999,
at 8:00 a.m. Central Time on the basis of values calculated as of the close of
regular trading on the New York Stock Exchange on the preceding business day.
BOARD CONSIDERATIONS
The Board of Directors of AAF determined that the proposed reorganization
of MultiFlex Fund is in the best interests of the shareholders of MultiFlex
Fund, and recommended approval of the Plan of Reorganization by the shareholders
at the Special Meeting. A summary of the information that was presented to, and
considered by, the Board of Directors in making their determination is provided
below.
At a meeting of the Board of Directors held on March 11, 1999, AIM Advisors
proposed that the Board of Directors approve the proposed reorganization of
MultiFlex Fund. The Directors received from AIM Advisors written materials that
described the structure and tax consequences of the proposed reorganization and
contained information concerning MultiFlex Fund and Flex Fund, including
comparative historical total return and fee and expense information and a
comparison of the investment policies of the two Funds.
In considering the proposed reorganization, the Board of Directors noted
that MultiFlex Fund and Flex Fund have the same investment objective, which is
to achieve a high total return on investment through growth of capital and
current income, without regard to federal income tax consequences. Flex Fund
seeks to meet that objective by investing in a combination of large cap equity
securities and fixed-income securities, while MultiFlex Fund invests in a
broader range of securities including large cap equity, small cap equity,
fixed-income securities, real estate securities and foreign securities. The
Reorganization was proposed by AIM Advisors because investors have not viewed
MultiFlex Fund as an attractive investment alternative. The net assets of
MultiFlex Fund have decreased significantly since December 31, 1997. The
combined assets of the two Funds should provide a more stable base for
management because daily purchases and redemptions of shares should have a less
significant impact on the size of the combined Fund.
10
<PAGE> 16
MultiFlex Fund shareholders will benefit from Flex Fund's lower operating
expenses. The total operating expenses of each class of Flex Fund shares are
lower than the total operating expenses of the comparable class of MultiFlex
Fund shares, both before and after fee waivers. The total operating expenses
paid by the Class A shares of Flex Fund were 0.29% lower than the total
operating expenses of the MultiFlex Fund Class A shares, and the expenses of the
Flex Fund Class B and Class C shares were 0.27% lower than the total operating
expenses paid by the MultiFlex Fund Class B and Class C shares, during 1998. In
addition, once MultiFlex Fund is combined with Flex Fund, Flex Fund will have a
larger asset base, which may enable Flex Fund to achieve economies of scale,
thereby reducing the expenses of Flex Fund as a percentage of net assets.
The information provided by AIM Advisors to the Board of Directors
demonstrated that Flex Fund has provided a better return to its shareholders.
Although past performance is not a guarantee of future results, MultiFlex Fund
shareholders could benefit from the better performance of Flex Fund after the
Reorganization is completed.
AIM Advisors indicated to the Board of Directors that AIM Advisors does not
expect any immediate benefit from the Reorganization. In fact, the investment
advisory fee paid by Flex Fund is 0.25% lower than the fee paid by MultiFlex
Fund, and as a result, the advisory fee paid to AIM Advisors on the assets of
MultiFlex Fund will decrease as a result of the Reorganization.
The Board of Directors further noted that the value of each shareholder's
account with Flex Fund immediately after the Reorganization will be the same as
the value of that shareholder's account with MultiFlex Fund immediately prior to
the Reorganization, meaning that there will be no dilution of the value of the
shares of either Fund. No initial sales or other charges will be imposed on any
of the shares of Flex Fund acquired by the shareholders of MultiFlex Fund in
connection with the Reorganization.
Finally, the Board of Directors reviewed the principal terms of the Plan of
Reorganization. The Board of Directors noted that MultiFlex Fund would be
provided with an opinion of counsel that the Reorganization would be tax-free as
to MultiFlex Fund and its shareholders.
At the meeting of the Board of Directors, based upon their evaluation of
the information presented to them, the Board of Directors determined that the
proposed Reorganization will not dilute the interests of MultiFlex Fund's
shareholders and is in the best interest of MultiFlex Fund's shareholders in
view of the above-mentioned factors. Therefore, the Board of Directors
recommends the approval of the Plan of Reorganization by the shareholders at a
Special Meeting.
OPERATION OF FLEX FUND FOLLOWING THE REORGANIZATION
There are differences in some of the investment policies of the Funds. Flex
Fund will not revise its investment objectives to reflect those of MultiFlex
Fund. Rather, AIM Advisors and INVESCO Capital Management, Inc. believe that a
substantial portion of the assets of MultiFlex Fund are consistent with the
investment policies of Flex Fund and can be transferred to and held by Flex
Fund. If the Reorganization is approved, MultiFlex Fund will sell any assets
that are inconsistent with Flex Fund's investment policies prior to the
effective time of the Reorganization, and the proceeds of such sales will be
held in temporary investments or reinvested in assets that are consistent with
Flex Fund's investment policies. The need for MultiFlex Fund to dispose of
assets prior to the Reorganization may result in sales at disadvantageous times
and could result in MultiFlex Fund realizing losses that would not otherwise
have been realized.
After the Reorganization, AIM Advisors and INVESCO Capital Management, Inc.
will continue to serve as investment adviser and sub-adviser to Flex Fund. The
individuals who are primarily responsible for the day-to-day management of Flex
Fund are:
- Edward C. Mitchell, Jr., C.F.A., Senior Portfolio Manager, who has been
responsible for the Fund since 1988 and has been associated with the
sub-adviser and/or its affiliates since 1979.
11
<PAGE> 17
- Margaret (Peg) W. Durkes, C.F.A., Assistant Portfolio Manager, who has
been responsible for the Fund since 1997 and has been associated with the
sub-adviser and/or its affiliates since 1993.
- David S. Griffin, C.F.A., Assistant Portfolio Manager, who has been
responsible for the Fund since 1993 and has been associated with the
sub-adviser and/or its affiliates since 1991.
OTHER TERMS
Completion of the Reorganization is subject to various conditions,
including the following:
- An amendment to the Charter of AAF shall have been filed with the
Maryland Department of Assessments and Taxation,
- All consents, approvals, permits and authorizations required to be
obtained from governmental authorities, including the SEC and state
securities commissions, to permit the parties to carry out the
transactions contemplated by the Plan of Reorganization shall have been
received,
- The Plan of Reorganization, the amendment to the Charter and related
corporate matters shall have been approved by the shareholders of
MultiFlex Fund at the Special Meeting by the affirmative vote of a
majority of the total number of votes entitled to be cast for each class
of MultiFlex Fund shares,
- The assets of MultiFlex Fund to be acquired by Flex Fund shall constitute
at least 90% of the fair market value of the net assets and at least 70%
of the fair market value of the gross assets held by MultiFlex Fund
immediately prior to the reclassification,
- The dividend or dividends as described in the Plan of Reorganization
shall have been declared,
- AAF shall have received an opinion of Ballard Spahr Andrews & Ingersoll,
LLP ("BSA&I") to the effect that consummation of the transactions
contemplated by the Plan of Reorganization will constitute a
"reorganization" within the meanings of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the shareholders
of MultiFlex Fund will recognize no gain or loss to the extent that they
receive shares of Flex Fund in exchange for their shares of MultiFlex
Fund in accordance with the Plan of Reorganization,
- AAF shall have received an opinion of BSA&I addressed to and in form and
substance satisfactory to AAF, to the effect that the Plan of
Reorganization has been duly authorized and approved by all requisite
action of AAF and the holders of the shares of MultiFlex Fund.
Flex Fund and MultiFlex Fund have each agreed to bear their own expenses in
connection with the Reorganization. For MultiFlex Fund, this will include
expenses incurred in preparing, printing and mailing proxy materials for the
Special Meeting of shareholders and proxy solicitation costs. Because AIM
Advisors has agreed to pay some of the administrative expenses of MultiFlex Fund
in return for a fixed fee, the costs incurred by MultiFlex Fund in connection
with the Reorganization will be borne by AIM Advisors.
FEDERAL TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Code, the existing Treasury regulations thereunder, current administrative
rulings of the Internal Revenue Service ("IRS") and judicial decisions, all of
which are subject to change. The principal Federal income tax consequences that
are expected to result from the Reorganization, under currently applicable law,
are as follows:
- The Reorganization will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code;
- No gain or loss will be recognized by MultiFlex Fund upon
reclassification of its assets to Flex Fund;
12
<PAGE> 18
- No gain or loss will be recognized by any shareholder of MultiFlex Fund
upon the exchange of shares of MultiFlex Fund solely for shares of Flex
Fund;
- The tax basis of the shares of Flex Fund to be received by a shareholder
of MultiFlex Fund will be the same as the tax basis of the shares of
MultiFlex Fund surrendered in exchange therefor;
- The holding period of the shares of Flex Fund to be received by a
shareholder of MultiFlex Fund will include the holding period for which
such shareholder held the shares of MultiFlex Fund exchanged therefor,
provided that such shares of MultiFlex Fund are capital assets in the
hands of such shareholder as of the date the Reorganization is
consummated;
- No gain or loss will be recognized by Flex Fund on the receipt of assets
of MultiFlex Fund in exchange for shares of Flex Fund and Flex Fund's
assumption of MultiFlex Fund's liabilities;
- The tax basis of the assets of MultiFlex Fund in the hands of Flex Fund
will be the same as the tax basis of such assets in the hands of
MultiFlex Fund immediately prior to the Reorganization; and
- The holding period of the assets of MultiFlex Fund to be received by Flex
Fund will include the holding period of such assets in the hands of
MultiFlex Fund immediately prior to the Reorganization.
As a condition to closing, BSA&I will render a favorable opinion to AAF as
to the foregoing Federal income tax consequences of the Reorganization, which
opinion will be conditioned upon the accuracy, as of the date of closing, of
certain representations made by AAF upon which BSA&I will rely in rendering its
opinion, which representations include, but are not limited to, the following
(taking into account for purposes thereof any events that are part of the Plan
of Reorganization, regardless of their date of occurrence):
- There is no plan or intention by the shareholders of MultiFlex Fund to
redeem a number of shares of Flex Fund received in the Reorganization
that would reduce the MultiFlex Fund shareholders' ownership of Flex Fund
shares to a number of shares having a value, as of the date the
Reorganization is consummated, of less than 50% of the value of all of
the formerly outstanding shares of MultiFlex Fund as of the date the
Reorganization is consummated;
- Following the Reorganization, Flex Fund will continue the historic
business of MultiFlex Fund (for this purpose "historic business" shall
mean the business most recently conducted by MultiFlex Fund which was not
entered into in connection with the Reorganization) or use a significant
portion of MultiFlex Fund's historic business assets in its business;
- At the direction of MultiFlex Fund, Flex Fund will issue directly to each
MultiFlex Fund shareholder in the Reorganization shares of Flex Fund
having a net asset value equal to the net asset value of the MultiFlex
Fund shares exchanged therefor; MultiFlex Fund will transfer all of its
assets and liabilities to Flex Fund in the Reorganization; and MultiFlex
Fund will terminate its existence as an investment portfolio of AAF on,
or as soon as practicable after, the date the Reorganization is
consummated;
- Flex Fund has no plan or intention to reacquire any of its shares issued
in the Reorganization, except to the extent that Flex Fund is required by
the 1940 Act to redeem any of its shares presented for redemption;
- Flex Fund does not plan or intend to sell or otherwise dispose of any of
the assets of MultiFlex Fund acquired in the Reorganization, except for
dispositions made in the ordinary course of its business in a manner
consistent with its investment objectives and policies and dispositions
necessary to maintain its status as a "regulated investment company"
("RIC") under the Code;
13
<PAGE> 19
- Flex Fund, MultiFlex Fund and the shareholders of MultiFlex Fund will pay
their respective expenses, if any, incurred in connection with the
Reorganization in accordance with current IRS guidelines;
- Flex Fund will acquire at least 90 percent of the fair market value of
the net assets, and at least 70 percent of the fair market value of the
gross assets, held by MultiFlex Fund immediately before the
Reorganization, including for this purpose any amounts used by MultiFlex
Fund to pay its reorganization expenses and all redemptions and
distributions made by MultiFlex Fund immediately before the MultiFlex
Fund Reorganization (other than redemptions pursuant to a demand of a
shareholder in the ordinary course of MultiFlex Fund's business as an
open-end diversified management investment company under the 1940 Act and
regular, normal dividends not in excess of the requirements of Section
852 of the Code); and
- Flex Fund and MultiFlex Fund have each elected to be taxed as a RIC under
Section 851 of the Code and will each have qualified for the special
Federal tax treatment afforded RICs under the Code for all taxable
periods (including the last short taxable period of MultiFlex Fund ending
on the date the Reorganization is consummated and the taxable year of
Flex Fund that includes the date the Reorganization is consummated).
THE DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION PROVIDED ABOVE IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND
CIRCUMSTANCES OF ANY SHAREHOLDER OF MULTIFLEX FUND. MULTIFLEX FUND SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO
THEM OF THE REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL, FOREIGN AND OTHER TAX LAWS.
RIGHTS OF SHAREHOLDERS
MultiFlex Fund and Flex Fund are each separate series of shares of the
capital stock of AAF, a Maryland corporation. Since both Funds are part of the
same corporate entity there are no differences in shareholder's rights.
14
<PAGE> 20
OWNERSHIP OF FLEX FUND AND MULTIFLEX FUND SHARES
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who
as of April 26, 1999, to the knowledge of AAF, owned beneficially 5% or more of
the outstanding shares of MultiFlex Fund:
MultiFlex Fund
<TABLE>
<CAPTION>
PERCENT OWNED
PERCENT OWNED OF RECORD
OF RECORD AND BENEFICIALLY
------------- ----------------
<S> <C> <C>
CLASS A SHARES
Merrill Lynch Pierce Fenner & Smith...................... 9.15% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
Gardonville Coop Tele Assn............................... 7.01% -0-
P.O. Box 187
Brandon, MN 56315
CLASS B SHARES
Merrill Lynch Pierce Fenner & Smith...................... 5.97% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
CLASS C SHARES
Merrill Lynch Pierce Fenner & Smith...................... 11.13% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
</TABLE>
15
<PAGE> 21
Listed below is the name, address and percent ownership of each person who
as of April 26, 1999, to the knowledge of AAF, owned beneficially 5% or more of
the outstanding shares of Flex Fund:
Flex Fund
<TABLE>
<CAPTION>
PERCENT OWNED
PERCENT OWNED OF RECORD
OF RECORD AND BENEFICIALLY
------------- ----------------
<S> <C> <C>
CLASS A SHARES
Merrill Lynch Pierce Fenner & Smith...................... 42.38% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
Donald Lufkin Jenrette................................... 6.72% -0-
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Cypress Enterprises...................................... 5.42% -0-
A Partnership
730 S. Tonti St.
New Orleans, LA 70119-7551
CLASS B SHARES
Merrill Lynch Pierce Fenner & Smith...................... 9.98% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
Donald Lufkin Jenrette................................... 5.53% -0-
Securities Corporation Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
CLASS C SHARES
Merrill Lynch Pierce Fenner & Smith...................... 10.88% -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr. East 2nd Floor
Jacksonville, FL 32246
</TABLE>
OWNERSHIP OF OFFICERS AND DIRECTORS
To the best of the knowledge of AAF, the beneficial ownership of shares of
MultiFlex Fund or of Flex Fund by officers of AAF as a group constituted less
than 1% of the outstanding shares of such Fund as of the date of this Proxy
Statement/Prospectus.
16
<PAGE> 22
CAPITALIZATION
The following tables set forth as of December 31, 1998, (i) the
capitalization of Flex Fund Class A shares, Flex Fund Class B shares, and Flex
Fund Class C shares, (ii) the capitalization of MultiFlex Fund Class A, Class B
and Class C shares and the pro forma capitalization of Flex Fund Class A, Class
B and Class C shares as adjusted to give effect to the transactions contemplated
by the Plan of Reorganization.
<TABLE>
<CAPTION>
FLEX FUND MULTIFLEX FUND FLEX FUND
CLASS A SHARES CLASS A SHARES PRO FORMA
-------------- -------------- ------------
<S> <C> <C> <C>
Net Assets......................................... $ 46,286,433 $ 16,485,231 $ 62,771,664
Shares Outstanding................................. 2,307,756 1,225,276 3,129,290
Net Asset Value Per Shares......................... $ 20.06 $ 13.45 $ 20.06
</TABLE>
<TABLE>
<CAPTION>
FLEX FUND MULTIFLEX FUND FLEX FUND
CLASS B SHARES CLASS B SHARES PRO FORMA
-------------- -------------- ------------
<S> <C> <C> <C>
Net Assets......................................... $ 3,591,573 $ 7,221,683 $ 10,813,256
Shares Outstanding................................. 179,008 535,931 539,145
Net Asset Value Per Shares......................... $ 20.06 $ 13.48 $ 20.06
</TABLE>
<TABLE>
<CAPTION>
FLEX FUND MULTIFLEX FUND FLEX FUND
CLASS C SHARES CLASS C SHARES PRO FORMA
-------------- -------------- ------------
<S> <C> <C> <C>
Net Assets......................................... $670,255,537 $312,182,627 $982,438,164
Shares Outstanding................................. 33,407,634 23,188,570 48,966,864
Net Asset Value Per Shares......................... $ 20.06 $ 13.46 $ 20.06
</TABLE>
LEGAL MATTERS
Certain legal matters concerning AAF and its participation in the
Reorganization, the issuance of shares of Flex Fund in connection with the
Reorganization and the tax consequences of the Reorganization will be passed
upon by Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, 51st Floor,
Philadelphia, PA 19103-7599.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports which AAF has
filed with the SEC pursuant to the requirements of the 1933 Act and the 1940
Act, to which reference is hereby made. The SEC file number for AAF's
registration statement containing the current prospectus and statement of
additional information relating to both MultiFlex Fund and Flex Fund is
Registration No. 2-87377.
AAF is subject to the informational requirements of the 1940 Act and in
accordance therewith files reports and other information with the SEC. Reports,
proxy statements, registration statements and other information filed by AAF
(including the Registration Statement of AAF relating to Flex Fund on Form N-14
of which this Proxy Statement/Prospectus is a part and which is hereby
incorporated by reference) may be inspected without charge and copied at the
public reference facilities maintained by the SEC at Room 1014, Judiciary Plaza,
450 Fifth Street, NW, Washington, DC 20549, and at the following regional
offices of the SEC: 7 World Trade Center, New York, New York 10048; and 500 West
Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the SEC at 450 Fifth
Street, NW, Washington, DC 20549 at the prescribed rates. The SEC maintains a
Web site at http://www.sec.gov that contains information regarding AAF and other
registrants that file electronically with the SEC.
17
<PAGE> 23
ADDITIONAL INFORMATION ABOUT FLEX FUND
For more information with respect to AAF and Flex Fund concerning the
following topics, please refer to the current prospectus of Flex Fund attached
as Appendix II as indicated: (i) see the discussion "Performance Information"
and "Fee Table and Expense Example" for further information regarding Flex Fund
performance and expenses; (ii) see the discussion "Fund Management" for further
information regarding management of Flex Fund; and (iii) see the discussion
"Other Information" and "Shareholder Information" for further information
regarding share pricing, purchase and redemption of shares, dividends and
distribution arrangements for the shares.
18
<PAGE> 24
APPENDIX I
PLAN OF REORGANIZATION
for the
AIM ADVISOR MULTIFLEX FUND
an Investment Portfolio of
AIM Advisor Funds, Inc.
This Plan of Reorganization provides for the reorganization of AIM
Advisors MultiFlex Fund ("MultiFlex Fund"), an investment portfolio of AIM
Advisor Funds, Inc. ("AAF"), into AIM Advisors Flex Fund ("Flex Fund"), another
investment portfolio of AAF.
WHEREAS, AAF is a Maryland corporation and a registered investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, MultiFlex Fund and Flex Fund are each investment portfolios of
AAF representing separate series of shares of the capital stock of AAF;
WHEREAS, the Board of Directors of AAF has determined that it would be
in the best interests of the MultiFlex Fund shareholders to reorganize MultiFlex
Fund by reclassifying the shares of MultiFlex Fund as Flex Fund shares pursuant
to an amendment to the Charter of AAF, all in the manner described below.
NOW, THEREFORE, MultiFlex Fund shall be reorganized into Flex Fund on
the following terms and conditions.
1. PLAN OF REORGANIZATION.
(a) RECLASSIFICATION OF SHARES. At the Effective Time
described in Section 3 below:
(i) all of the issued and outstanding Class A shares of MultiFlex Fund
shall be reclassified and changed into and become Class A shares of
Flex Fund based upon their respective net asset values, and thereafter
shall have the attributes of Class A shares of Flex Fund;
(ii) all of the issued and outstanding Class B shares of MultiFlex Fund
shall be reclassified and changed into and become Class B shares of
Flex Fund based upon their respective net asset values, and thereafter
shall have the attributes of Class B shares of Flex Fund; and
(iii) all of the issued and outstanding Class C shares of MultiFlex
Fund shall be reclassified and changed into and become Class C shares
of Flex Fund based upon their respective net assets values, and
thereafter shall have the attributes of Class C shares of Flex Fund.
<PAGE> 25
All authorized but unissued shares of MultiFlex Fund shall be reclassified
as authorized shares of the Corporation without further designation or
classification. The stock transfer books of MultiFlex Fund will be
permanently closed at the Effective Time and only requests for the
redemption of shares of MultiFlex Fund received in proper form prior to the
close of trading on the New York Stock Exchange on the date of the
Effective Time shall be accepted. Thereafter, redemption requests received
by MultiFlex Fund shall be deemed to be redemption requests for the Flex
Fund shares into which such MultiFlex Fund shares were reclassified under
this Plan of Reorganization.
(b) ATTRIBUTION OF ASSETS AND LIABILITIES. At the Effective Time described
in Section 3 below:
(i) the proportionate undivided interest in the net assets of MultiFlex
Fund attributable to its Class A shares shall become a part of the
proportionate undivided interest in the net assets of Flex Fund
attributable to its Class A shares and the expenses, costs, charges and
reserves allocated to the Class A shares of MultiFlex Fund immediately
prior to the Effective Time shall become expenses, costs, charges and
reserves of Class A shares of Flex Fund;
(ii) the proportionate undivided interest in the net assets of
MultiFlex Fund attributable to its Class B shares shall become a part
of the proportionate undivided interest in the net assets of Flex Fund
attributable to its Class B shares and the expenses, costs, charges and
reserves allocated to the Class B shares of MultiFlex Fund immediately
prior to the Effective Time shall become expenses, costs, charges and
reserves of Class B shares of Flex Fund; and
(iii) the proportionate undivided interest in the net assets of
MultiFlex Fund attributable to its Class C shares shall become a part
of the proportionate undivided interest in the net assets of Flex Fund
attributable its Class C shares and the expenses, costs, charges and
reserves allocated to the Class C shares of MultiFlex Fund immediately
prior to the Effective Time shall become expenses, costs, charges and
reserves of Class C shares of Flex Fund.
AAF shall instruct its custodian to reflect in the custodian's records for
Flex Fund the attribution of the assets of MultiFlex Fund in the manner
described above. Additionally, the books and records of MultiFlex Fund will
become the books and records of Flex Fund upon reclassification of
MultuFlex Fund shares.
(c) SHAREHOLDER ACCOUNTS. At the Effective Time described in Section 3
below:
(i) each shareholder of record of Class A shares of MultiFlex Fund will
receive that number of Class A shares of Flex Fund having an aggregate
net asset value equal to the aggregate net asset value of the Class A
shares of MultiFlex Fund held by such shareholder immediately prior to
the Effective Time;
2
<PAGE> 26
(ii) each shareholder of record of Class B shares of MultiFlex Fund
will receive that number of Class B shares of Flex Fund having an
aggregate net asset value equal to the aggregate net asset value of the
Class B shares of MultiFlex Fund held by such shareholder immediately
prior to the Effective Time; and
(iii) each shareholder of record of Class C shares of MultiFlex Fund
will receive a number of Class C shares of Flex Fund having an
aggregate net asset value equal to the aggregate net asset value of the
Class C shares of MultiFlex Fund held by such shareholder immediately
prior to the Effective Time.
AAF will establish an open account on the records of the Flex Fund in the
name of each shareholder of MultiFlex Fund to which will be credited the
respective number of shares of Flex Fund due such shareholder. Fractional
shares of Flex Fund will be carried to the third decimal place.
Certificates representing shares of Flex Fund will not be issued. The net
asset value of the shares of MultiFlex Fund and Flex Fund will be
determined at the Effective Time in accordance with the policies and
procedures of AAF.
2. AMENDMENT TO CHARTER. AAF shall effect the reorganization of MultiFlex
Fund by amending its Charter to provide for the reclassification of Class A,
Class B and Class C shares of MultiFlex Fund as Class A, Class B and Class C
shares of Flex Fund, respectively, based upon their respective net asset values,
to provide for the transfer of assets and liabilities from MultiFlex Fund to
Flex Fund, and to provide for the crediting of shares of Flex Fund to the
account of shareholders of MultiFlex Fund, all in the manner provided in
paragraph 1.
3. EFFECTIVE TIME OF THE REORGANIZATION. The reorganization of MultiFlex
Fund contemplated by this Plan of Reorganization shall occur on June 21, 1999 at
8:00 a.m. Eastern Time, or such later date and time as the officers of AAF shall
determine (the "Effective Time").
4. APPROVAL OF SHAREHOLDERS. A meeting of the holders of MultiFlex Fund
shares shall be duly called and constituted for the purpose of acting upon this
Plan of Reorganization and the transactions contemplated herein, including
approval of the amendment to the Charter of AAF described above. Approval by
such shareholders of this Plan of Reorganization shall authorize AAF to take the
actions required to effect the Plan of Reorganization.
5. CONDITIONS PRECEDENT. AAF will consummate the Plan of Reorganization
only after satisfaction of each of the following conditions:
(a) The amendment to the Charter of AAF described in paragraph 2 shall
have been filed with the Maryland Department of Assessments and Taxation
specifying the Effective Time as the effective date thereof.
(b) All consents, approvals, permits and authorizations required to be
obtained from governmental authorities, including the Securities and Exchange
Commission and state
3
<PAGE> 27
securities commissions, to permit the parties to carry out the transactions
contemplated by this Plan of Reorganization shall have been received.
(c) This Plan of Reorganization, the amendment to the Charter and
related corporate matters shall have been approved by the shareholders of
MultiFlex Fund at a special meeting by the affirmative vote of a majority of the
total number of votes entitled to be cast.
(d) The assets of MultiFlex Fund to be acquired by Flex Fund shall
constitute at least 90% of the fair market value of the net assets and at least
70% of the fair market value of the gross assets held by MultiFlex Fund
immediately prior to the reclassification. For purposes of this paragraph 5(d),
assets used by MultiFlex Fund to pay the expenses it incurs in connection with
this Plan of Reorganization and to effect all shareholder redemptions and
distributions (other than regular, normal dividends and regular, normal
redemptions pursuant to the 1940 Act, and not in excess of the requirements of
Section 852 of the Code, occurring in the ordinary course of MultiFlex Fund's
business as a series of an open-end management investment company) after the
date of this Plan of Reorganization shall be included as assets of MultiFlex
Fund held immediately prior to the reclassification.
(e) The dividend or dividends described in the last sentence of
paragraph 6(a) shall have been declared.
(f) AAF shall have received an opinion of Ballard Spahr Andrews &
Ingersoll, LLP ("BSA&I") to the effect that consummation of the transactions
contemplated by this Plan of Reorganization will constitute a "reorganization"
within the meanings of Section 368(a) of the Internal Revenue Code (the "Code"),
and that the shareholders of Multiflex Fund will recognize no gain or loss to
the extent that they receive shares of Flex Fund in exchange for their shares of
Multiflex Fund in accordance with this Plan of Reorganization. In rendering such
opinion, BSA&I may request and rely upon representations contained in
certificates of officers of AAF and others, and the officers of AAF shall use
their best efforts to make available such truthful certificates.
(g) AAF shall have received an opinion of BSA&I, dated as of the
Effective Time, addressed to and in form and substance satisfactory to AAF, to
the effect that this Plan of Reorganization has been duly authorized and
approved by all requisite action of AAF and the holders of the shares of
MultiFlex Fund.
At any time prior to the Effective Time, any of the foregoing
conditions may be waived by AAF if, in the judgment of its Board of Trustees,
such waiver will not have a material adverse effect on the benefits intended
under this Plan of Reorganization for the MultiFlex shareholders.
6. MULTIFLEX FUND TAX MATTERS.
(a) MultiFlex Fund has elected to be a regulated investment company
under Subchapter M of the Code. MultiFlex Fund has qualified as such for each
taxable year since inception and that has ended prior to the Effective Time and
will have satisfied the requirements
4
<PAGE> 28
of Part I of Subchapter M of the Code to maintain such qualification for the
period beginning on the first day of its current taxable year and ending at the
Effective Time. MultiFlex Fund has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M of the Code did not apply
to it. In order to (i) insure continued qualification of MultiFlex Fund as a
"regulated investment company" for tax purposes and (ii) eliminate any tax
liability of MultiFlex Fund arising by reason of undistributed investment
company taxable income or net capital gain, MultiFlex Fund will declare on or
prior to the Effective Time to the shareholders of MultiFlex Fund a dividend or
dividends that, together with all previous such dividends, shall have the effect
of distributing (A) all of MultiFlex Fund's investment company taxable income
(determined without regard to any deductions for dividends paid) for the taxable
year ended December 31, 1998 and for the short taxable year beginning on January
1, 1999 and ending at the Effective Time and (B) all of MultiFlex Fund's net
capital gain recognized in its taxable year ended December 31, 1998 and in such
short taxable year (after reduction for any capital loss carryover).
(b) MultiFlex Fund has timely filed all tax returns required to be
filed by it and all taxes with respect thereto have been paid. No deficiencies
for any taxes have been proposed, assessed or asserted in writing by any taxing
authority against MultiFlex Fund, and no deficiency has been proposed, assessed
or asserted, in writing, where such deficiency would reasonably be expected,
individually or in the aggregate, to have a material adverse effect on the
condition, financial or otherwise, property, assets or prospects of Multiflex
Fund.
(c) The fiscal year of MultiFlex Fund has not been changed for tax
purposes since the date on which it commenced operations.
7. FLEX FUND TAX MATTERS.
(a) Flex Fund has elected to be treated as a regulated investment
company under Subchapter M of the Code. Flex Fund has qualified as such for each
taxable year since inception that has ended prior to the Effective Time and will
satisfy the requirements of Part I of Subchapter M of the Code to maintain such
qualification for its current taxable year. MultiFlex Fund has no earnings or
profits accumulated in any taxable year in which the provisions of Subchapter M
of the Code did not apply to it.
(b) Flex Fund has timely filed all returns required to be filed by it
and all taxes with respect thereto have been paid. No deficiencies for any taxes
have been proposed, assessed or asserted in writing by any taxing authority
against Flex Fund, and no deficiency has been proposed, assessed or asserted, in
writing, where such deficiency would reasonably be expected, individually or in
the aggregate, to have a material adverse effect on the condition, financial or
otherwise, property, assets or prospects of Flex Fund.
(c) The fiscal year of Flex Fund has not been changed for tax purposes
since the date on which it commenced operations.
5
<PAGE> 29
8. TERMINATION. AAF may terminate this Plan of Reorganization with the
approval of its Board of Directors at any time prior to the Effective Time,
notwithstanding approval thereof by MultiFlex Fund shareholders if, in the
judgment of the Board, proceeding with the Plan of Reorganization would be
inadvisable.
9. FURTHER ASSURANCES. AAF shall take such further action as may be
necessary or desirable and proper to consummate the transactions contemplated
hereby.
10. EXPENSES. MultiFlex Fund and Flex Fund shall each bear any expenses
it incurs in connection with this Plan of Reorganization and the transactions
contemplated hereby.
This Plan of Reorganization was approved and adopted by the Board of
Directors of AAF on the 11th day of March, 1999.
6
<PAGE> 30
APPENDIX II
AIM ADVISOR FLEX FUND
------------------------------------------------------------------------
AIM Advisor Flex Fund seeks to achieve a high total return on investment
through growth of capital and current income, without regard to federal
income tax considerations.
PROSPECTUS
MAY 3, 1999
This prospectus contains important
information about the Class A, B and
C shares of the fund. Please read it
before investing and keep it for
future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE--Registered
Trademark--
<PAGE> 31
---------------------
AIM ADVISOR FLEX FUND
---------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
- - - - - - - - - - - - - - - - - - - - - - - - -
Fee Table 3
Expense Example 3
FUND MANAGEMENT 4
- - - - - - - - - - - - - - - - - - - - - - - - -
The Advisors 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 4
- - - - - - - - - - - - - - - - - - - - - - - - -
Sales Charges 4
Dividends and Distributions 4
FINANCIAL HIGHLIGHTS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
SHAREHOLDER INFORMATION A-1
- - - - - - - - - - - - - - - - - - - - - - - - -
Choosing a Share Class A-1
Purchasing Shares A-3
Redeeming Shares A-4
Exchanging Shares A-6
Pricing of Shares A-7
Taxes A-8
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection is a service
mark of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 32
---------------------
AIM ADVISOR FLEX FUND
---------------------
INVESTMENT OBJECTIVE AND STRATEGIES
- --------------------------------------------------------------------------------
The fund's investment objective is to achieve a high total return on investment
through growth of capital and current income, without regard to federal income
tax considerations.
The fund seeks to meet this objective by investing in a combination of equity
securities and fixed- and variable-income securities. The fund normally invests
at least 20% of its total assets in equity securities and at least 20% of its
total assets in fixed- and variable-income securities. The fund's equity
investments will consist primarily of common stocks, and to a lesser extent
convertible securities, of selected companies from a list of companies with
market capitalizations among the largest 800 publicly traded U.S. corporations.
The fund's fixed-income investments will consist primarily of U.S. government
obligations and corporate obligations that have been rated investment-grade, or
securities deemed by the portfolio managers to be of comparable quality.
The fund may invest in mortgage-backed securities, including mortgage
pass-through securities and collateralized mortgage obligations, that are
guaranteed as to timely payment of principal and interest by an agency of the
U.S. government or a private issuer. The fund may invest up to 10% of its total
assets in non-Canadian foreign securities and unsponsored American Depositary
Receipts (ADRs). The fund may also invest up to 25% of its total assets in
securities of Canadian issuers and sponsored ADRs.
The portion of the fund's assets that can be invested in either equity
securities or income securities will be allocated according to the portfolio
managers' assessment of current business, economic and market conditions. The
fund seeks reasonably consistent returns over a variety of market cycles. In
order to identify the equity securities having the best relative values, the
portfolio managers start with a list of the 800 largest publicly traded U.S.
corporations, which they reduce to a list of 100 eligible stocks by utilizing a
proprietary database system and fundamental analysis. The portfolio managers
usually sell a particular equity security when it no longer qualifies for the
list of eligible securities. The portfolio managers will purchase fixed- and
variable-income obligations that they believe are undervalued and may offer
superior yields. The portfolio managers consider whether to sell a particular
income security when any of those factors materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, bonds or other
debt securities. As a result, the fund may not achieve its investment objective.
PRINCIPAL RISKS OF INVESTING IN THE FUND
- --------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from the fund may vary. The value of
your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity.
Interest rate increases can cause the price of a debt security to decrease;
the longer a debt security's duration, the more sensitive it is to this risk.
The issuer of a security may default or otherwise be unable to honor a financial
obligation. A faster than expected principal prepayment rate on U.S. Government
agency mortgage-backed securities will reduce both the market value of, and
income from, such securities.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
The value of your shares could be adversely affected if the computer systems
used by the fund's investment advisor and the fund's other service providers are
unable to distinguish the year 2000 from the year 1900.
The fund's investment advisor and independent technology consultants are
working to avoid year 2000-related problems in its systems and to obtain
assurances that other service providers are taking similar steps. Year 2000
problems may also affect issuers in whose securities the fund invests.
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
1
<PAGE> 33
---------------------
AIM ADVISOR FLEX FUND
---------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's Class C
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- ------
<S> <C>
1989 ....................................... 17.26%
1990 ....................................... -1.68%
1991 ....................................... 24.80%
1992 ....................................... 7.72%
1993 ....................................... 10.48%
1994 ....................................... 0.64%
1995 ....................................... 27.30%
1996 ....................................... 13.61%
1997 ....................................... 23.64%
1998 ....................................... 12.41%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
12.12% (quarter ended March 31, 1991) and the lowest quarterly return was -8.25%
(quarter ended September 30, 1990).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index. The fund's performance reflects payment of
sales loads.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1998) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A 7.03% -- -- 15.48% 12/31/96
Class B -- -- -- -- 03/03/98
Class C 11.41% 15.13% 13.23% 12.49% 02/24/88
S&P 500(1) 28.60% 24.05% 19.19% 18.32%(2) 02/29/88(2)
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the class with the longest performance history.
2
<PAGE> 34
---------------------
AIM ADVISOR FLEX FUND
---------------------
FEE TABLE AND EXPENSE EXAMPLE
- --------------------------------------------------------------------------------
FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the fund:
<TABLE>
<CAPTION>
SHAREHOLDER FEES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(fees paid directly from
your investment) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales
Charge (Load)
Imposed on Purchases
(as a percentage of
offering price) 5.50% None None
Maximum Deferred
Sales Charge (Load)
(as a percentage of
original purchase
price or redemption
proceeds, whichever
is less) None(1) 5.00% 1.00%
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(expenses that are deducted
from fund assets) CLASS A CLASS B CLASS C
- -------------------------------------------------------
<S> <C> <C> <C>
Management Fees 0.75% 0.75% 0.75%
Distribution and/or
Service (12b-1) Fees 0.35 1.00 1.00
Other 0.45 0.45 0.45
Total Annual Fund
Operating Expenses 1.55 2.20 2.20
Fee Waiver(2) 0.44 0.32 0.32
Net Expenses 1.11% 1.88% 1.88%
- -------------------------------------------------------
</TABLE>
(1) If you buy $1,000,000 or more of Class A shares and redeem these shares
within 18 months from the date of purchase, you may pay a 1% contingent
deferred sales charge (CDSC) at the time of redemption.
(2) The distributor has contractually agreed to limit the Class A shares' Rule
12b-1 distribution plan payments to 0.25%. The investment advisor has
contractually agreed to waive a portion of its fees.
As a result of 12b-1 fees, long-term shareholders in the fund may pay more than
the maximum permitted initial sales charge.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
fund's gross operating expenses remain the same. To the extent fees are waived,
the expenses will be lower. Although your actual returns and costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $699 $1,013 $1,348 $2,294
Class B 723 988 1,380 2,370
Class C 323 688 1,180 2,534
- ----------------------------------------------
</TABLE>
You would pay the following expenses if you did not redeem your shares:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------
<S> <C> <C> <C> <C>
Class A $699 $1,013 $1,384 $2,294
Class B 223 688 1,180 2,370
Class C 223 688 1,180 2,534
- ----------------------------------------------
</TABLE>
3
<PAGE> 35
---------------------
AIM ADVISOR FLEX FUND
---------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor and
manages the investment operations of the fund and has agreed to perform or
arrange for the performance of the fund's day-to-day management. The advisor is
located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. INVESCO
Capital Management, Inc. (the subadvisor), the fund's subadvisor, is located at
1315 Peachtree Street, N.E., Atlanta, GA 30309. The subadvisor is responsible
for the fund's day-to-day management, including the fund's investment decisions
and the execution of securities transactions with respect to the fund.
The advisor has acted as an investment advisor since its organization in 1976,
and the subadvisor has acted as an investment advisor since 1979. Today, the
advisor, together with its subsidiaries, advises or manages over 110 investment
portfolios, including the fund, encompassing a broad range of investment
objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1998, the advisor received
compensation of 1.00% of average daily net assets consisting of a management fee
of 0.75% and an operating services fee of 0.25%.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio are
- - Edward C. Mitchell, Jr., C.F.A., Senior Portfolio Manager, who has been
responsible for the fund since 1988 and has been associated with the
subadvisor and/or its affiliates since 1979.
- - Margaret (Peg) W. Durkes, C.F.A., Assistant Portfolio Manager, who has been
responsible for the fund since 1997 and has been associated with the
subadvisor and/or its affiliates since 1993.
- - David S. Griffin, C.F.A., Assistant Portfolio Manager, who has been
responsible for the fund since 1993 and has been associated with the
subadvisor and/or its affiliates since 1991.
OTHER INFORMATION
- --------------------------------------------------------------------------------
SALES CHARGES
Purchases of Class A shares of AIM Advisor Flex Fund are subject to the maximum
5.50% initial sales charge as listed under the heading "CATEGORY I Initial Sales
Charges" in the "Shareholder Information--Choosing a Share Class" section of
this prospectus. Purchases of Class B and Class C shares are subject to the
contingent deferred sales charges listed in that section.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, quarterly.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term gains, if any, annually and short-term
capital gains (including any net gains from foreign currency transactions), if
any, quarterly.
4
<PAGE> 36
---------------------
AIM ADVISOR FLEX FUND
---------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
The information for the fiscal year or period ended December 31, 1998, has
been audited by KPMG LLP, whose report, along with the fund's financial
statements, is included in the fund's annual report, which is available upon
request. Information for prior years was audited by other public accountants.
<TABLE>
<CAPTION>
CLASS A(a)
--------------------
YEAR ENDED
DECEMBER 31,
--------------------
1998 1997(b)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 19.74 $ 16.63
Income from investment operations:
Net investment income 0.39 0.41(c)
Net gains on securities (both realized and unrealized) 2.16 3.63
Total from investment operations 2.55 4.04
Less distributions:
Dividends from net investment income (0.39) (0.43)
Distributions from net realized gains (1.84) (0.50)
Total distributions (2.23) (0.93)
Net asset value, end of period $ 20.06 $ 19.74
Total return(d) 13.26% 24.60%
- -------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $46,286 $25,151
Ratio of expenses to average net assets(e) 1.23%(f) 1.45%
Ratio of net investment income to average net assets(g) 1.99%(f) 2.34%
Portfolio turnover rate 34% 17%
- -------------------------------------------------------------------------------------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.52% and 1.55% for 1998-1997.
(f) Ratios are based on average net asset of $36,085,767.
(g) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.70% and 2.24% for 1998-1997.
5
<PAGE> 37
---------------------
AIM ADVISOR FLEX FUND
---------------------
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
- --------------------------------------------------------------------------------
MARCH 3,
THROUGH
DECEMBER 31, 1998
<S> <C>
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.69
Income from investment operations:
Net investment income 0.22
Net gains on securities (both realized and unrealized) 1.22
Total from investment operations 1.44
Less distributions:
Dividends from net investment income (0.23)
Distributions from net realized gains (1.84)
Total distributions (2.07)
Net asset value, end of period $ 20.06
Total return(a) 7.25%
- --------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $ 3,592
Ratio of expenses to average net assets(b) 2.00%(c)(d)
Ratio of net investment income to average net assets(e) 1.22%(c)(d)
Portfolio turnover rate 34%
- --------------------------------------------------------------------------------
</TABLE>
(a) Does not deduct contingent deferred sales charges and for periods less than
one year is not annualized.
(b) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.19% (annualized).
(c) Ratios are based on average net assets of $1,313,596.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.03% (annualized).
<TABLE>
<CAPTION>
CLASS C(a)
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1998 1997(b) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.74 $ 16.63 $ 15.66 $ 12.63 $ 13.54
Income from investment operations:
Net investment income 0.25 0.30(c) 0.30 0.32 0.32
Net gains (losses) on securities (both
realized and unrealized) 2.14 3.60 1.81 3.09 (0.23)
Total from investment operations 2.39 3.90 2.11 3.41 0.09
Less distributions:
Dividends from net investment income (0.23) (0.29) (0.29) (0.32) (0.31)
Distributions from net realized gains (1.84) (0.50) (0.85) (0.06) (0.69)
Total distributions (2.07) (0.79) (1.14) (0.38) (1.00)
Net asset value, end of period $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
Total return(d) 12.41% 23.64% 13.61% 27.30% 0.64%
- -----------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $ 670,256 $ 603,179 $ 489,918 $ 399,162 $ 243,848
Ratio of expenses to average net assets 2.00%(e)(f) 2.20% 2.26% 2.28% 2.25%
Ratio of net investment income to average
net assets 1.22%(f)(g) 1.59% 1.81% 2.28% 2.32%
Portfolio turnover rate 34% 17% 26% 5% 36%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.19%.
(f) Ratios are based on average net assets of $636,501,142.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.03%.
6
<PAGE> 38
-------------------
THE AIM FUNDS
-------------------
Shareholder Information
- --------------------------------------------------------------------------------
In addition to the fund, A I M Advisors, Inc. serves as investment advisor to
many other mutual funds (the AIM Funds). The following information is about all
the AIM Funds.
CHOOSING A SHARE CLASS
Many of the AIM Funds have multiple classes of shares, each class representing
an interest in the same portfolio of investments. When choosing a share class,
you should consider the factors below:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Initial sales charge - No initial sales charge - No initial sales charge
- - Reduced or waived initial sales - Contingent deferred sales - Contingent deferred sales
charge for certain purchases charge on redemptions within charge on redemptions within
six years one year
- - Lower distribution and service - 12b-1 fee of 1.00% - 12b-1 fee of 1.00%
(12b-1) fee than Class B or
Class C shares (See "Fee Table
and Expense Example")
- Converts to Class A shares - Does not convert to Class A
after eight years along with a shares
pro rata portion of its
reinvested dividends and
distributions(1)
- - Generally more appropriate for - Purchase orders limited to - Generally more appropriate
long-term investors amounts less than $250,000 for short-term investors
</TABLE>
(1) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve
Shares.
AIM Global Trends Fund: If you held Class B shares on May 29,
1998 and continue to hold them, those shares will convert to
Class A shares of that fund seven years after your date of
purchase. If you exchange those shares for Class B shares of
another AIM Fund, the shares into which you exchanged will
not convert to Class A shares until eight years after your
date of purchase of the original shares.
- --------------------------------------------------------------------------------
DISTRIBUTION AND SERVICE (12B-1) FEES
Each AIM Fund (except AIM Tax-Free Intermediate Fund) has adopted 12b-1 plans
that allow the AIM Fund to pay distribution fees to A I M Distributors, Inc.
(the distributor) for the sale and distribution of its shares and fees for
services provided to shareholders, all or a substantial portion of which are
paid to the dealer of record. Because the AIM Fund pays these fees out of its
assets on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
A- 1 MCF--05/99
<PAGE> 39
-------------------
THE AIM FUNDS
-------------------
SALES CHARGES
Generally, you will not pay a sales charge on purchases or redemptions of Class
A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM Money
Market Fund. You may be charged a contingent deferred sales charge if you redeem
AIM Cash Reserve Shares of AIM Money Market Fund acquired through certain
exchanges. Sales charges on all other AIM Funds and classes of those Funds are
detailed below. As used below, the term "offering price" with respect to all
categories of Class A shares includes the initial sales charge.
INITIAL SALES CHARGES
The AIM Funds are grouped into three categories with respect to initial sales
charges. The "Other Information" section of your prospectus will tell you in
what category your particular AIM Fund is classified.
<TABLE>
<CAPTION>
CATEGORY I INITIAL SALES CHARGES
- -----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $25,000 5.50% 5.82%
$ 25,000 but less than $50,000 5.25 5.54
$ 50,000 but less than $100,000 4.75 4.99
$100,000 but less than $250,000 3.75 3.90
$250,000 but less than $500,000 3.00 3.09
$500,000 but less than $1,000,000 2.00 2.04
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY II INITIAL SALES CHARGES
- -----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $50,000 4.75% 4.99%
$ 50,000 but less than $100,000 4.00 4.17
$100,000 but less than $250,000 3.75 3.90
$250,000 but less than $500,000 2.50 2.56
$500,000 but less than $1,000,000 2.00 2.04
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CATEGORY III INITIAL SALES CHARGES
- -----------------------------------------------------------
INVESTOR'S
SALES CHARGE
--------------------------
AMOUNT OF INVESTMENT AS A % OF AS A % OF
IN SINGLE TRANSACTION OFFERING PRICE INVESTMENT
- -----------------------------------------------------------
<S> <C> <C>
Less than $100,000 1.00% 1.01%
$100,000 but less than $250,000 0.75 0.76
$250,000 but less than $1,000,000 0.50 0.50
- -----------------------------------------------------------
</TABLE>
CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES
You can purchase $1,000,000 or more of Class A shares at net asset value.
However, if you purchase shares of that amount in Categories I or II, they will
be subject to a contingent deferred sales charge (CDSC) of 1% if you redeem them
prior to 18 months after the date of purchase. The distributor may pay a dealer
concession and/or a service fee for purchases of $1,000,000 or more.
CONTINGENT DEFERRED SALES CHARGES FOR
CLASS B AND CLASS C SHARES
You can purchase Class B and Class C shares at their net asset value per share.
However, when you redeem them, they are subject to a CDSC in the following
percentages:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE MADE CLASS B CLASS C
- ----------------------------------------------------------
<S> <C> <C>
First 5% 1%
Second 4 None
Third 3 None
Fourth 3 None
Fifth 2 None
Sixth 1 None
Seventh and following None None
- ----------------------------------------------------------
</TABLE>
COMPUTING A CDSC
The CDSC on redemptions of shares is computed based on the lower of their
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will
assume that you have redeemed shares on which there is no CDSC first and, then,
shares in the order of purchase.
REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS
You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial consultant must
provide sufficient information at the time of purchase to verify that your
purchase qualifies for such treatment.
REDUCED SALES CHARGES
You may be eligible to buy Class A shares at reduced initial sales charge rates
under Rights of Accumulation or Letters of Intent under certain circumstances.
Rights of Accumulation
You may combine your new purchases of Class A shares with Class A shares
currently owned for the purpose of qualifying for the lower initial sales charge
rates that apply to larger purchases. The applicable initial sales charge for
the new purchase is based on the total of your current purchase and the current
value of all Class A shares you own.
Letters of Intent
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of AIM Funds during a
MCF--05/99 A- 2
<PAGE> 40
-------------------
THE AIM FUNDS
-------------------
13-month period. The amount you agree to purchase determines the initial sales
charge you pay. If the full face amount of the LOI is not invested by the end of
the 13-month period, your account will be adjusted to the higher initial sales
charge level for the amount actually invested.
INITIAL SALES CHARGE EXCEPTIONS
You will not pay initial sales charges
- - on shares purchased by reinvesting dividends and distributions;
- - when exchanging shares among certain AIM Funds;
- - when using the reinstatement privilege; and
- - when a merger, consolidation, or acquisition of assets of an AIM Fund occurs.
CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS
You will not pay a CDSC
- - if you redeem Class B shares you held for more than six years;
- - if you redeem Class C shares you held for more than one year;
- - if you redeem shares acquired through reinvestment of dividends and
distributions; and
- - on increases in the net asset value of your shares.
There may be other situations when you may be able to purchase or redeem shares
at reduced or without sales charges. Consult the fund's Statement of Additional
Information for details.
PURCHASING SHARES
MINIMUM INVESTMENTS PER AIM FUND ACCOUNT
The minimum investments for AIM Fund accounts (except for investments in AIM
Small Cap Opportunities Fund) are as follows:
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENTS INVESTMENTS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Savings Plans (money-purchase/profit sharing $ ($25 per AIM Fund investment for $25
plans, 401(k) plans, Simplified Employee Pension salary deferrals from Savings Plans)
(SEP) accounts, Salary Reduction (SARSEP)
accounts, Savings Incentive Match Plans for
Employee IRA (Simple IRA) accounts, 403(b) or
457 plans)
Automatic Investment Plans 50 50
IRA, Education IRA or Roth IRA 25 50
All other accounts 50 50
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
HOW TO PURCHASE SHARES
You may purchase shares using one of the options below.
PURCHASE OPTIONS
- -
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Through a Financial Consultant Contact your financial consultant. Same
By Mail Mail completed Account Application Mail your check and the remittance
and purchase payment to the slip from your confirmation
transfer agent, statement to the transfer agent.
A I M Fund Services, Inc.,
P.O. Box 4739,
Houston, TX 77210-4739.
By Wire Mail completed Account Application Call the transfer agent to receive
to the transfer agent. Call the a reference number. Then, use the
transfer agent at (800) 959-4246 to wire instructions at left.
receive a reference number. Then,
use the following wire
instructions:
Beneficiary Bank ABA/Routing #:
113000609
Beneficiary Account Number:
00100366807
Beneficiary Account Name: A I M
Fund Services, Inc.
RFB: Fund Name, Reference #
OBI: Your Name, Account #
By AIM Bank Connection(SM) Open your account using one of the Mail completed AIM Bank
methods described above. Connection(SM) form to the transfer
agent. Once the transfer agent has
received the form, call the
transfer agent to place your
purchase order.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
A- 3 MCF--05/99
<PAGE> 41
-------------------
THE AIM FUNDS
-------------------
SPECIAL PLANS
AUTOMATIC INVESTMENT PLAN
You can arrange for periodic investments in any of the AIM Funds by authorizing
the AIM Fund to withdraw the amount of your investment from your bank account on
a day or dates you specify and in an amount of at least $50. You may stop the
Automatic Investment Plan at any time by giving the transfer agent notice ten
days prior to your next scheduled withdrawal.
DOLLAR COST AVERAGING
Dollar Cost Averaging allows you to make automatic monthly or quarterly
exchanges, if permitted, from one AIM Fund account to one or more other AIM Fund
accounts with the identical registration. The account from which exchanges are
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the 10th or 25th day of the month, whichever
you specify, in the amount you specify. The minimum amount you can exchange to
another AIM Fund is $50.
AUTOMATIC DIVIDEND INVESTMENT
All of your dividends and distributions may be paid in cash or invested in any
AIM Fund at net asset value. Unless you specify otherwise, your dividends and
distributions will automatically be reinvested in the same AIM Fund. You may
invest your dividends and distributions (1) into another AIM Fund in the same
class of shares; or (2) from Class A shares into AIM Cash Reserve Shares of AIM
Money Market Fund, or vice versa.
You must comply with the following requirements to be eligible to invest your
dividends and distributions in shares of another AIM Fund:
(1) Your account balance (a) in the AIM Fund paying the dividend must be at
least $5,000; or (b) in the AIM Fund receiving the dividend must be at least
$500;
(2) Both accounts must have identical registration information; and
(3) You must have completed an authorization form to reinvest dividends into
another AIM Fund.
PORTFOLIO REBALANCING PROGRAM
If you have at least $5,000 in your account, you may participate in the
Portfolio Rebalancing Program. Under this Program, you can designate how the
total value of your AIM Fund holdings should be rebalanced, on a percentage
basis, between two and ten of your AIM Funds on a quarterly, semiannual or
annual basis. Your portfolio will be rebalanced through the exchange of shares
in one or more of your AIM Funds for shares of the same class of one or more
other AIM Funds in your portfolio. If you wish to participate in the Program,
make changes or cancel the Program, the transfer agent must receive your request
to participate, changes, or cancellation in good order at least five business
days prior to the next rebalancing date, which is normally the 28th day of the
last month of the period you choose. You may realize taxable gains from these
exchanges. We may modify, suspend or terminate the Program at any time on 60
days' prior written notice.
RETIREMENT PLANS
Shares of most of the AIM Funds can be purchased through
tax-sheltered retirement plans made available to corporations, individuals and
employees of non-profit organizations and public schools. A plan document must
be adopted to establish a retirement plan. You may use AIM Funds-sponsored
retirement plans, which include IRAs, Education IRAs, Roth IRAs, 403(b) plans,
401(k) plans, SIMPLE IRA plans, SEP/SARSEP plans and Money Purchase/Profit
Sharing plans, or another sponsor's retirement plan. The plan custodian of the
AIM Funds-sponsored retirement plan assesses an annual maintenance fee of $10.
Contact your financial consultant for details.
REDEEMING SHARES
REDEMPTION FEES
We will not charge you any fees to redeem your shares; however, your broker or
financial consultant may charge service fees for handling these transactions.
Your shares may be subject to a contingent deferred sales charge (CDSC).
REDEMPTION OF AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ACQUIRED
BY EXCHANGE
If you redeem AIM Cash Reserve Shares acquired by exchange from Class A shares
subject to a CDSC within 18 months of the purchase of the Class A shares, you
will be charged a CDSC.
REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND
If you redeem Class B shares you acquired by exchange via a tender offer by AIM
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM
Floating Rate Fund will be applied instead of the CDSC normally applicable to
Class B shares.
MCF--05/99 A- 4
<PAGE> 42
-------------------
THE AIM FUNDS
-------------------
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Through a Financial Contact your financial consultant.
Consultant
By Mail Send a written request to the transfer agent. Requests must
include (1) original signatures of all registered owners;
(2) the name of the AIM Fund and your account number; (3) if
the transfer agent does not hold your shares, endorsed share
certificates or share certificates accompanied by an
executed stock power; and (4) signature guarantees, if
necessary (see below). The transfer agent may require that
you provide additional information, such as corporate
resolutions or powers of attorney, if applicable. If you are
redeeming from an IRA account, you must include a statement
of whether or not you are at least 59 1/2 years old and
whether you wish to have federal income tax withheld from
your proceeds. The transfer agent may require certain other
information before you can redeem from an employer-sponsored
retirement plan. Contact your employer for details.
By Telephone Call the transfer agent. You will be allowed to redeem by
telephone if (1) the proceeds are to be mailed to the
address on record with us or transferred electronically to a
pre-authorized checking account; (2) the address on record
with us has not been changed within the last 30 days; (3)
you do not hold physical share certificates; (4) you can
provide proper identification information; (5) the proceeds
of the redemption do not exceed $50,000; and (6) you have
not previously declined the telephone redemption privilege.
Certain accounts, including retirement accounts and 403(b)
plans, may not redeem by telephone. The transfer agent must
receive your call during the hours the New York Stock
Exchange (NYSE) is open for business in order to effect the
redemption at that day's closing price.
</TABLE>
- --------------------------------------------------------------------------------
TIMING AND METHOD OF PAYMENT
We normally will send out checks within one business day, and in any event no
more than seven days, after we accept your request to redeem. If you redeem
shares recently purchased by check, you will be required to wait up to ten
business days before we will send your redemption proceeds. This delay is
necessary to ensure that the purchase check has cleared.
REDEMPTION BY MAIL
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.
REDEMPTION BY TELEPHONE
If you redeem by telephone, we will mail you a check in the amount of the
redemption proceeds to your address of record (if there has been no change
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine and are not
liable for telephone instructions that are reasonably believed to be genuine.
PAYMENT FOR SYSTEMATIC WITHDRAWALS
You may arrange for regular monthly or quarterly withdrawals from your account
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.
You must have an account balance of at least $5,000 to establish a Systematic
Withdrawal Plan. You can stop this plan at any time by giving ten days prior
notice to the transfer agent.
EXPEDITED REDEMPTIONS
(AIM Cash Reserve Shares of AIM Money Market Fund only)
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try
to transmit payment of redemption proceeds on that same day. If we receive your
redemption order after 11:30 a.m. Eastern Time and before the close of trading
on the NYSE, we generally will transmit payment on the next business day.
REDEMPTIONS BY CHECK
(Class A shares of AIM Tax-Exempt Cash Fund and AIM Cash Reserve Shares of AIM
Money Market Fund only)
You may redeem shares of these AIM Funds by writing checks in amounts of $250 or
more if you have completed an authorization form. Redemption by check is not
available for retirement accounts.
SIGNATURE GUARANTEES
We require a signature guarantee when you redeem by mail and
(1) the amount is greater than $50,000;
(2) you request that payment be made to someone other than the name registered
on the account;
(3) you request that payment be sent somewhere other than the bank of record on
the account; or
(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.
The transfer agent will accept a guarantee of your signature by a number of
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.
A- 5 MCF--05/99
<PAGE> 43
-------------------
THE AIM FUNDS
-------------------
REINSTATEMENT PRIVILEGE (Class A shares only)
You may, within 90 days after you sell Class A shares (except Class A shares of
AIM Tax-Exempt Cash Fund), reinvest all or part of your redemption proceeds in
Class A shares of any AIM Fund at net asset value in an identically registered
account. If you sold Class A shares of AIM Limited Maturity Treasury Fund or AIM
Tax-Free Intermediate Fund, you will incur an initial sales charge reflecting
the difference between the initial sales charges on those Funds and the ones in
which you will be investing. In addition, if you paid a contingent deferred
sales charge (CDSC) on any reinstated amount, you will not be subject to a CDSC
if you later redeem that amount. You must notify the transfer agent in writing
at the time you reinstate that you are exercising your reinstatement privilege.
You may exercise this privilege only once per year.
REDEMPTIONS BY THE AIM FUNDS
If your account has been open at least one year, you have not made an additional
purchase in the account during the past six calendar months, and the value of
your account falls below $500 for three consecutive months due to redemptions or
exchanges (excluding retirement accounts), the AIM Funds have the right to
redeem the account after giving you 60 days' prior written notice. You may avoid
having your account redeemed during the notice period by bringing the account
value up to $500 or by utilizing the Automatic Investment Plan.
If an AIM Fund determines that you have provided incorrect information in
opening an account or in the course of conducting subsequent transactions, the
AIM Fund may, at its discretion, redeem the account and distribute the proceeds
to you.
EXCHANGING SHARES
You may, under certain circumstances, exchange shares in one AIM Fund for those
of another AIM Fund. Before requesting an exchange, review the prospectus of the
AIM Fund you wish to acquire. Exchange privileges also apply to holders of the
Connecticut General Guaranteed Account, established for tax-qualified group
annuities, for contracts purchased on or before June 30, 1992.
PERMITTED EXCHANGES
Except as otherwise stated below, you may exchange your shares for shares of the
same class of another AIM Fund. You also may exchange AIM Cash Reserve Shares of
AIM Money Market Fund for Class A shares of another AIM Fund, or vice versa. You
may be required to pay an initial sales charge when exchanging from a Fund with
a lower initial sales charge than the one into which you are exchanging. If you
exchange from Class A shares not subject to a CDSC into Class A shares subject
to those charges, you will be charged a CDSC when you redeem the exchanged
shares. The CDSC charged on redemption of those shares will be calculated
starting on the date you acquired those shares through exchange.
You also may exchange AIM Cash Reserve Shares of AIM Money Market Fund for
Advisor Class shares, but only if you acquired the AIM Cash Reserve Shares
through an exchange from Advisor Class shares.
YOU WILL NOT PAY A SALES CHARGE WHEN EXCHANGING:
(1) Class A shares with an initial sales charge (except for Class A shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for
Class A shares of another AIM Fund or AIM Cash Reserve Shares of AIM Money
Market Fund;
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund for
(a) one another;
(b) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or
(c) Class A shares of another AIM Fund, but only if
(i) you acquired the original shares before May 1, 1994; or
(ii) you acquired the original shares on or after May 1, 1994 by way of
an exchange from shares with higher sales charges;
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM
Tax-Exempt Cash Fund for
(a) one another;
(b) Class A shares of an AIM Fund subject to an initial sales charge (except
for Class A shares of AIM Limited Maturity Treasury Fund and AIM
Tax-Free Intermediate Fund), but only if you acquired the original
shares
(i) prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;
(ii) on or after May 1, 1994 by exchange from Class A shares subject to
an initial sales charge (except for Class A shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(c) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
Intermediate Fund, but only if you acquired the original shares by
exchange from Class A shares subject to an initial sales charge; or
(4) Class B shares for other Class B shares, and Class C shares for other Class
C shares.
EXCHANGES NOT PERMITTED
You may not exchange Class A shares subject to contingent deferred sales charges
for Class A shares of AIM Limited Maturity Treasury Fund, AIM Tax-Free
Intermediate Fund or AIM Tax-Exempt Cash Fund.
EXCHANGE CONDITIONS
The following conditions apply to all exchanges:
- - You must meet the minimum purchase requirements for the AIM Fund into which
you are exchanging;
- - Shares of the AIM Fund you wish to acquire must be qualified for sale in your
state of residence;
MCF--05/99 A- 6
<PAGE> 44
-------------------
THE AIM FUNDS
-------------------
- - Exchanges must be made between accounts with identical registration
information;
- - The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);
- - Shares must have been held for at least one day prior to the exchange; and
- - If you have physical share certificates, you must return them to the transfer
agent prior to the exchange.
TERMS OF EXCHANGE
Under unusual market conditions, an AIM Fund may delay the purchase of shares
being acquired in an exchange for up to five business days if it determines that
it would be materially disadvantaged by the immediate transfer of exchange
proceeds. There is no fee for exchanges. The exchange privilege is not an option
or right to purchase shares. Any of the participating AIM Funds or the
distributor may modify or discontinue this privilege at any time.
BY MAIL
If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account
registration and account number, the dollar amount or number of shares to be
exchanged and the names of the AIM Funds from which and into which the exchange
is to be made.
BY TELEPHONE
Conditions that apply to exchanges by telephone are the same as redemptions by
telephone, including that the transfer agent must receive exchange requests
during the hours the NYSE is open for business; however, you still will be
allowed to exchange by telephone even if you have changed your address of record
within the preceding 30 days.
EXCHANGING CLASS B AND CLASS C SHARES
If you make an exchange involving Class B or Class C shares, the amount of time
you held the original shares will be added to the holding period of the Class B
or Class C shares, respectively, into which you exchanged for the purpose of
calculating contingent deferred sales charges (CDSC) if you later redeem the
exchanged shares. If you redeem Class B shares acquired by exchange via a tender
offer by AIM Floating Rate Fund, you will be credited with the time period you
held the shares of AIM Floating Rate Fund for the purpose of computing the early
withdrawal charge applicable to those shares.
EACH AIM FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR
CANCEL ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR
CONDITIONS OF PURCHASE OF SHARES OF ANY AIM FUND; OR WITHDRAW ALL OR ANY PART
OF THE OFFERING MADE BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF
INVESTORS, EACH AIM FUND AND THE DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED
MARKET-TIMING ACTIVITY.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of each AIM Fund's shares is the fund's net asset value per share. The
AIM Funds value portfolio securities for which market quotations are readily
available at market value. The AIM Funds value short-term investments maturing
within 60 days at amortized cost, which approximates market value. AIM Money
Market Fund and AIM Tax-Exempt Cash Fund value all of their securities at
amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund value
variable rate securities that have an unconditional demand or put feature
exercisable within seven days or less at par, which reflects the market value of
such securities.
The AIM Funds value all other securities and assets at their fair value.
Securities and other assets quoted in foreign currencies are valued in U.S.
dollars based on the prevailing exchange rates on that day. In addition, if,
between the time trading ends on a particular security and the close of the
NYSE, events occur that materially affect the value of the security, the AIM
Funds may value the security at its fair value as determined in good faith by or
under the supervision of the Board of Directors or Trustees of the AIM Fund. The
effect of using fair value pricing is that an AIM Fund's net asset value will be
subject to the judgment of the Board of Directors or Trustees or its designee
instead of being determined by the market. Because some of the AIM Funds may
invest in securities that are primarily listed on foreign exchanges, the value
of those funds' shares may change on days when you will not be able to purchase
or redeem shares.
Each AIM Fund determines the net asset value of its shares as of the close of
the NYSE on each day the NYSE is open for business. AIM Money Market Fund also
determines its net asset value as of 12:00 noon Eastern Time on each day the
NYSE is open for business.
TIMING OF ORDERS
You can purchase, exchange or redeem shares during the hours the NYSE is open
for business. The AIM Funds price purchase, exchange and redemption orders at
the net asset value calculated after the transfer agent receives an order in
good form. An AIM Fund may postpone the right of redemption only under unusual
circumstances, as allowed by the Securities and Exchange Commission, such as
when the NYSE restricts or suspends trading.
A- 7 MCF--05/99
<PAGE> 45
-------------------
THE AIM FUNDS
-------------------
TAXES
In general, dividends and distributions you receive are taxable as ordinary
income or long-term capital gains for federal income tax purposes, whether you
reinvest them in additional shares or take them in cash. Distributions are
taxable to you at different rates depending on the length of time the fund holds
its assets. Different tax rates apply to ordinary income and long-term capital
gain distributions, regardless of how long you have held your shares. Every
year, you will be sent information showing the amount of dividends and
distributions you received from each AIM Fund during the prior year.
Any long-term or short-term capital gains realized from redemptions of AIM
Fund shares will be subject to federal income tax. Exchanges of shares for
shares of another AIM Fund are treated as a sale, and any gain realized on the
transaction will generally be subject to federal income tax.
The foreign, state and local tax consequences of investing in AIM Fund shares
may differ materially from the federal income tax consequences described above.
You should consult your tax advisor before investing.
MCF--05/99 A- 8
<PAGE> 46
---------------------
AIM ADVISOR FLEX FUND
---------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you have questions about this fund, another fund in The AIM Family of
Funds--Registered Trademark-- or your account, or wish to obtain free copies of
the fund's current SAI or annual or semiannual reports, please contact us
- ---------------------------------------------------------
<TABLE>
<S> <C>
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 347-4246
BY E-MAIL: [email protected]
ON THE INTERNET: http://www.aimfunds.com
(prospectuses and annual
and semiannual reports
only)
</TABLE>
- ---------------------------------------------------------
You also can obtain copies of the fund's SAI and other information at the SEC's
Public Reference Room in Washington, DC, on the SEC's website
(http://www.sec.gov), or by sending a letter, including a duplicating fee, to
the SEC's Public Reference Section, Washington, DC 20549-6009. Please call the
SEC at 1-800-SEC-0330 for information about the Public Reference Room.
- -----------------------------------
AIM Advisor Flex Fund
SEC 1940 Act file number: 811-3886
- -----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com FLX-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 47
APPENDIX III
AIM
ADVISOR FLEX FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31, 1998
INVEST WITH DISCIPLINE
-- Registratered Trademark --
<PAGE> 48
[ COVER IMAGE ]
------------------------------------------------------------
THE CIRCUS BY GEORGES PIERRE SEURAT, 1859-1891,
FRENCH ONE OF FRENCH ARTIST GEORGES SEURAT'S MOST
FAMOUS PAINTINGS, THE CIRCUS FEATURES A GRACEFUL
RIDER BALANCING ON THE BACK OF A WHITE HORSE. WHILE
THE MOOD OF THE PAINTING IS CAREFREE, THE WORK WAS
PAINSTAKINGLY EXECUTED. SEURAT PIONEERED A TECHNIQUE
CALLED "POINTILLISM" USING TINY BRUSHSTROKES OF
CONTRASTING COLORS. SEURAT PLANNED HIS PAINTINGS TO
THE LAST DETAIL AND CAREFULLY PLACED EACH DOT, MUCH
THE SAME WAY A FUND MANAGER CHOOSES THE STOCKS FOR A
PORTFOLIO. VIEWED AS A WHOLE, THE POINTS FORM A
HARMONIOUS COMPOSITION.
------------------------------------------------------------
AIM Advisor Flex Fund is for shareholders who seek to achieve a high total
return on investment through capital appreciation and current income through
investments in a combination of equity securities and fixed and variable income
securities.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Advisor Flex Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed at net asset value
without a sales charge.
o During the fiscal year ended 12/31/98 the Fund paid distributions of $2.07
per share for Class B and C shares, $2.23 per share for Class A shares.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differences in sales charge structure and Fund
expenses.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general.
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
o The unmanaged Lipper Flexible Portfolio Index represents an average of the
performance of the 30 largest funds in the flexible portfolio fund category.
It is compiled by Lipper, Inc., an independent mutual funds performance
monitor. Results shown reflect reinvestment of dividends.
o The Lehman Aggregate Bond Index is an unmanaged index generally considered
to be representative of corporate debt securities.
o The NASDAQ (National Association of Securities Dealers Automated Quotation
system) Composite Index is a group of more than 4,500 unmanaged
over-the-counter securities widely regarded by investors to be
representative of the small- and medium sized company stock universe.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY. THERE IS A RISK THAT
YOU COULD LOSE A PORTION OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
AIM ADVISOR FLEX FUND
<PAGE> 49
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
As the fiscal year opened, markets were recovering from the
concerns produced by financial crises in Asia during 1997,
[PHOTO OF and this optimism early in 1998 led several market indexes
Charles T. to all-time highs in spring and early summer. However, the
Bauer, year was to bring two particularly serious financial shocks,
Chairman of first the debt default by Russia, and later the gathering
the Board of crisis in Brazil, which devalued its currency shortly after
THE FUND the fiscal year closed. The result was another year of
APPEARS HERE] significant market volatility here and abroad.
Optimism yielded to pessimism over the summer amid
global financial crises and a widespread decline in U.S.
corporate earnings growth. Particularly from July through
October, a major market correction for equities, including
previously high-flying blue chips, bolstered U.S. Treasury
issues, whose safety attracts investors in doubtful times.
Beginning in late September, the U.S. Federal Reserve Board
intervened to pump liquidity and confidence into markets. Investors responded
favorably, and the year closed on a positive note with domestic equities
rallying and bonds displaying much less momentum.
Some stock indexes produced excellent total return for the year, with the
S&P 500 index of large-company stocks up a dramatic 28.60%. But focusing on one
market benchmark may give you an incomplete view. There was wide divergence
among market segments this fiscal year. For example, the Russell 2000 index of
small-company stocks declined 2.55%. Even within the S&P 500, the bigger the
company, the better the performance.
HOW SHOULD INVESTORS RESPOND?
We understood how unnerving 1998's level of volatility could have been. Of
course, our repeated message to you is to keep a long-term outlook on
investments rather than responding to short-term fluctuations. And we are
pleased to note that most mutual fund shareholders remained cool headed and did
not pull out of the markets during 1998. In the end, most were rewarded for
their long-term perspective.
In view of recent volatility and the divergent performance of market
sectors, this may be a very good time to meet with your financial consultant to
review your current asset allocation and the diversification of your portfolio.
Broad portfolio diversification remains one of the most fundamental principles
of investing, along with long-term thinking and realistic expectations.
YOUR FUND MANAGERS' COMMENTS
On the pages that follow, your Fund's managers, experienced professionals who
have weathered previous periods of market turbulence, offer more detailed
discussion of how markets behaved, how they managed the portfolio in light of
recent volatility, and what they foresee for markets and your Fund. We hope you
find their discussion informative.
YEAR 2000 CONCERN
Many of our shareholders have asked us about AIM's year 2000 readiness status.
We appreciate these concerns, and we take the year 2000 issue seriously. AIM has
devoted considerable effort to creating a comprehensive plan for assessing,
correcting and testing our in-house systems. We will also participate in an
industrywide testing effort scheduled to begin in March. But no matter how well
we prepare and test, no one can know for sure what the year 2000 will bring. Our
industry's systems are connected in complex ways to many third parties, and
there may be unforeseen problems when the year 2000 actually arrives. Though we
cannot predict what all those problems might be, we are working with our
business recovery team to develop contingency plans appropriate for a variety of
year 2000 scenarios.
We are pleased to send you this report on your Fund's fiscal year. If you
have any questions or comments, please contact our Client Services department at
800-959-4246, or e-mail your inquiry to us at [email protected]. You can
access information about your account through our AIM Investor Line at
800-246-5463 or at our Web site, www.aimfunds.com. We often post market updates
on our Web site.
We thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
----------------------------------
. . . WE ARE PLEASED
TO NOTE THAT MOST
MUTUAL FUND SHAREHOLDERS
REMAINED COOL HEADED AND
DID NOT PULL OUT OF THE
MARKETS DURING 1998.
----------------------------------
AIM ADVISOR FLEX FUND
<PAGE> 50
ANNUAL REPORT / MANAGERS' OVERVIEW
ALLOCATION STRATEGY HELPS FUND WEATHER
VOLATILE MARKET
THIS YEAR WAS PARTICULARLY TURBULENT FOR BOTH EQUITY AND FIXED-INCOME MARKETS.
HOW DID THE FUND PERFORM?
The Fund reported solid earnings in a year of intense volatility. Its Class C
shares produced a total annual return of 12.41%, while Class A shares had a
total annual return of 13.26%. Class B shares were introduced on March 3, 1998,
and reported a cumulative return of 7.25% since their inception. The Fund's net
assets rose from $628 million a year ago to $720 million as of December 31,
1998.
HOW WOULD YOU CHARACTERIZE MARKET CONDITIONS OVER THE FISCAL YEAR?
We would describe 1998 as a market with three definite phases: bull, decline,
bull. During the first stage, from January to mid-July, the market climbed,
spurred by strong economies in the United States and Europe. But by summer these
good sentiments began to disintegrate. In July the market entered its second
phase, abruptly declining. By August, market indexes such as the Dow plunged. A
convergence of international problems triggered the downturn: Currency
devaluation occurred in Thailand, Malaysia, Indonesia and Korea. A lingering
recession gripped Japan. Crippled by overwhelming debt, Russia suspended
repayment of much of its foreign debt and suffered deep currency devaluation.
Fears of a global credit crunch then spread to Latin America. Markets there
plunged as investors worried that Brazil could not sustain its exchange rate in
light of the country's increasing debt. The down market spurred a "flight to
quality," as investors turned away from riskier securities such as small-cap
stocks and high-yield bonds. Seeking a safe haven, they turned to the liquidity
of large-cap stocks and U.S. Treasuries.
The third phase came in October as markets stabilized and rallied,
encouraged by a series of interest rate cuts. Over the course of seven weeks,
the U.S. Federal Reserve Board lowered the key federal funds rate from 5.50% to
4.75%. The three cuts triggered an astounding market rally. By the end of the
fiscal year, major stock and bond indexes reported impressive total returns: the
S&P 500, up 28.6%; the Lehman Aggregate Bond Index, up 8.7% and 30-year U.S.
Treasuries, up 17.1%.
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
[Pie Chart]
================================================================================
PERCENTAGE OF HOLDINGS
- --------------------------------------------------------------------------------
Cash Equivalents 2.27%
Corporate Notes 6.17%
U.S. Government 12.81%
Common Stocks 78.75%
NUMBER OF HOLDINGS: 134
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
================================================================================
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
We maintained our high weighting in stocks throughout the fiscal year. Our asset
allocation as of December 31, 1998, was 79% stocks, 19% government and corporate
bonds.
Our asset allocation decisions are based on the expected return on stock
investments compared to the expected earnings on bond investments. Historically,
the spread between the expected returns of these investments has averaged about
3%. When that spread widened, we gradually shifted the portfolio to emphasize
stocks. This occurred in October, and we increased our equities to about 80% of
the portfolio. Our model proved beneficial for Fund shareholders as the equity
market had a tremendous rally in the fourth quarter, and the fund was well
positioned to take advantage of it.
----------------------------------
OUR ASSET ALLOCATION DECISIONS
ARE BASED ON THE EXPECTED
RETURN ON STOCK INVESTMENTS
COMPARED TO THE EXPECTED
EARNINGS ON BOND INVESTMENTS.
----------------------------------
See important Fund and index disclosures inside front cover.
AIM ADVISOR FLEX FUND
2
<PAGE> 51
ANNUAL REPORT / MANAGERS' OVERVIEW
The fixed-income portion of the portfolio was dedicated mostly to government
bonds, with a minor position in corporate securities. U.S. Treasuries were the
undisputed fixed-income leaders in 1998 in a classic case of supply and demand.
The investor flight to quality during market upheavals drove up demand for
Treasuries, particularly among foreign investors. At the same time, supply
diminished as the U.S. government, faced with a budget surplus for the first
time in decades, issued fewer Treasury securities. Meanwhile, corporate bonds
were less attractive in 1998 as earnings growth slowed across broad sectors of
the market.
WHAT STOCKS OR SECTOR WEIGHTINGS HELPED THE FUND'S PERFORMANCE?
The Fund's largest sector weighting was in computer hardware manufacturers,
particularly PC market leaders IBM and Compaq. Their respective stock prices
doubled over the course of the fiscal year. Our other top technology position
was EDS, the world's largest data-processing company. A leader in corporate
outsourcing, EDS has benefited from the need for corporations to fix the
so-called "millennium bug." The computer glitch requires older computers and
software to be re-programmed to recognize the year 2000. Technology stocks
powered the stock market rally in the fourth quarter, and the Fund benefited
from the great performance.
Besides technology stocks, our other major holdings include pharmaceutical
companies Merck, Mylan Laboratories, American Home Products and Abbott
Laboratories. Earnings growth for major U.S. drug companies has been strong in
recent years for several reasons, including expedited product approval by the
Federal Drug Administration, growing demand from an aging population, and the
recent success of new drugs.
Because of its value orientation, the Fund bought economically sensitive
stocks during the fourth quarter because their prices were low relative to the
market as a whole. Our purchases included consumer cyclical stocks (retailers,
auto-related companies, household furnishings), capital goods stocks
(manufacturing and machinery) and financial services stocks (banks and insurance
firms).
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
<TABLE>
<CAPTION>
=================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. International Business 2.05% 1. Computers (Hardware) 4.99%
Machines Corp. 2. Banks (Major Regional) 3.90
2. Compaq Computer Corp. 1.75 3. Oil (International Integrated) 3.76
3. Merck & Co., Inc. 1.54 4. Electric Companies 3.75
4. Nucor Corp. 1.50 5. Telephone 3.62
5. Mylan Laboratories, Inc. 1.42 6. Health Care 3.31
6. American Home Products Corp. 1.41 (Drugs-Major Pharmaceuticals)
7. Electronic Data Systems Corp. 1.40 7. Financial (Diversified) 3.01
8. Anheuser-Busch Companies, Inc. 1.37 8. Machinery (Diversified) 2.96
9. Abbott Laboratories 1.36 9. Health Care (Diversified) 2.77
10. Hanson PLC - ADR (United Kingdom) 1.35 10. Manufacturing (Diversified) 2.73
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
=================================================================================================
</TABLE>
WHAT IS YOUR OUTLOOK FOR THE FUND AND THE MARKETS IN GENERAL?
We expect continued volatility in the stock markets, perhaps as much as we
experienced in 1998. At the same time, we're optimistic that the United States
will avoid a recession in 1999. The economy is likely to experience annual gross
domestic product growth in the 1.5% to 2% range, so low inflation and low
interest rates should continue. With global markets experiencing weakness and
the U.S. economy expanding more slowly, many companies may find it difficult to
produce earnings growth.
For the fixed-income markets, a slowdown in the U.S. economy could benefit
government bonds, because it could lead to more interest rate cuts. At the same
time, corporate bonds could suffer if the economy slows and earnings falter. As
with stock markets, we expect another year of intense volatility.
Our asset allocation model continues to support a high concentration in
stocks. But should the performance differences between stocks and bonds change
significantly during the year, we remain prepared to adjust the Fund's
allocation as needed.
See important Fund and index disclosures inside front cover.
AIM ADVISOR FLEX FUND
3
<PAGE> 52
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM ADVISOR FLEX FUND VS. BENCHMARK INDEXES
2/24/88-12/31/98
- --------------------------------------------------------------------------------
AIM S&P 500 LIPPER FLEXIBLE
ADVISOR FLEX, INDEX PORTFOLIO FUND INDEX
CLASS C SHARES
- --------------------------------------------------------------------------------
2/24/88 10,000 10,000 10,000
12/31/88 10,357 10,721 10,324
12/31/89 12,143 14,113 12,104
12/31/90 11,941 13,676 12,217
12/31/91 14,901 17,835 15,510
12/31/92 16,053 19,192 16,388
12/31/93 17,736 21,124 18,474
12/31/94 17,850 21,402 17,980
12/31/95 22,723 29,437 22,223
12/31/96 25,816 36,193 25,357
12/31/97 31,919 48,264 29,983
12/31/98 35,881 62,055 34,935
================================================================================
PAST PERFORMANCE CANNOT GUARANTEE COMPARABLE FUTURE RESULTS.
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/98, including sales charges
CLASS C SHARES
Inception (2/24/88) 12.49%
10 years 13.23
5 years 15.13
1 year 11.41*
*12.41% excluding sales charges
CLASS A SHARES
Inception (12/31/96) 15.48%
1 year 7.03**
**13.26% excluding sales charges
CLASS B SHARES
Inception (3/3/98) 2.40%***
***cumulative total return since inception, 7.25% excluding sales charges
================================================================================
Source: Towers Data Systems HYPO--Registered Trademark--
================================================================================
Your Fund's total return includes sales charges, expenses, and management fees.
For Fund data performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover. The performance of the Fund's
Class B and C shares will differ from Class A shares due to differences in sales
charge structure and Fund expenses.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF
AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THESE CHARTS
The chart compares your Fund's Class C shares to benchmark indexes. It is
intended to give you a general idea of how your Fund performed compared to the
stock market over the period 2/24/88-12/31/98. It is important to understand
differences between your Fund and these indexes. An index measures performance
of a hypothetical portfolio. A market index such as the S&P 500 is not managed,
incurring no sales charges, expenses or fees. If you could buy all the
securities that make up a market index, you would incur expenses that would
affect the return on your investment. It is important to note that the S&P 500
is representative of the stock market only while a portion of AIM Advisor Flex
Fund is invested in the bond market. An index of funds such as the Lipper
Flexible Portfolio Fund Index includes a number of mutual funds grouped by
investment objective. Each of those funds interprets that objective differently,
and each employs a different management style and investment strategy.
AIM ADVISOR FLEX FUND
4
<PAGE> 53
ANNUAL REPORT / FOR CONSIDERATION
OF FINANCE AND THE FED
A few words from Federal Reserve Board Chairman Alan Greenspan can send the
markets into a frenzy or calm them down.
Why? In 1998, a year of record volatility in stock and bond markets, when
investors and analysts alike seemed genuinely puzzled as to what to do next, the
Federal Reserve Board became a constant in the midst of the unsettling
environment.
WHAT IS THE FED?
The Federal Reserve Board, or "The Fed," consists of seven presidential
appointees including Chairman Greenspan. In addition to overseeing the country's
Federal Reserve System--the central bank of the United States--members of the
Fed serve on the Federal Open Market Committee (FOMC), which decides monetary
policy. Other FOMC members include the chairman of the New York Federal Reserve
Bank and four other FOMC seats that are rotated among the remaining 11 Federal
Reserve Banks.
The FOMC meets eight times a year. These meetings are preceded by the
release of the so-called "Beige Book" (see sidebar) and are always followed with
a great deal of interest because it is here that decisions on monetary policy
are made. The meetings traditionally feature reports on international and
domestic economic developments, conditions in financial markets, and forecasts
for the future. Policy options are then laid out and discussed, and a vote is
taken on whether the Fed will act, often by adjusting interest rates.
WHY ARE ADJUSTMENTS TO INTEREST RATES SO CLOSELY FOLLOWED?
Interest rate changes by the Fed are important for several reasons: (1) they
frequently reflect economic trends; (2) they immediately affect bond markets;
(3) they usually affect the stock market because when rates are high, people
tend to be less apt to take on the greater risks of stocks; and (4) they often
have a trickle-down effect.
For example, an interest rate hike was considered during the first half of
1998 when the U.S. economy seemed in danger of overheating and sparking
inflation. A rate hike would have helped slow things down by making borrowing
more expensive. Instead, myriad financial difficulties abroad affected markets
and slowed the U.S. economy enough to persuade the Fed to lower the federal
funds rate--the interest rate banks charge each other for overnight credit--in
September. When that rate cut did little to calm markets and loosen credit in
the U.S., the Fed cut both the federal funds rate and the discount rate--the
interest rate at which banks borrow emergency funds from the Federal Reserve--in
October and set off rallies in stock and bond markets. The Fed cut both interest
rates again in November 1998, citing continued strains in financial markets and
spurring another jump in the stock market as a whole.
Consumers feel the effect of interest rate adjustments as they trickle down
through the banking system. Rate cuts by the Fed often prompt rate reductions on
home mortgages, car loans, and variable-rate credit cards. Conversely, rate
hikes
------------
THE
BEIGE
BOOK
------------
WHAT IS THE BEIGE BOOK?
The Beige Book report is published about two weeks before each FOMC meeting. The
report contains anecdotal data on current economic conditions in each Federal
Reserve Bank district, summarizing the information by district and sector.
Interviews with key business people, economists, market experts and other
sources supply the details for the report. You can find out more about the Fed's
Beige Book and other interesting topics by visiting the Fed's Web site at
www.bog.frb.fed.us.
AIM ADVISOR FLEX FUND
5
<PAGE> 54
ANNUAL REPORT / FOR CONSIDERATION
make all forms of loans more expensive.
Although the Fed does not directly control the financial markets, its
influence over short-term interest rates makes it a potent force.
WHAT ELSE DOES THE FED DO?
The Fed is an integral part of the Federal Reserve System (FRS), created by
Congress in 1913. The FRS includes 12 regional Federal Reserve Banks in New
York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis,
Philadelphia, Richmond, St. Louis, and San Francisco. A Federal Reserve Bank
o clears checks,
o lends money to banks needing emergency reserves,
o issues currency, and
o holds reserve deposits of member banks.
A bank must hold a percentage of its loans as liquid reserves, meaning
readily available. The Fed decides what this percentage will be and can lower it
to inject more money into the economy or raise it to tighten credit.
The Fed also determines the margin requirements for securities investors and
traders and which securities may be purchased on margin. (Margin is the minimum
amount of cash that a customer is required to deposit on the purchase of
securities.) Known as Regulation T, this rule prevents the overextension of
credit in securities transactions.
While these other functions of the Federal Reserve System do not generate as
many headlines as its interest rate moves, they are crucial to the Fed's purpose
of keeping the nation's banking system safe, flexible and stable.
FED RATE CUTS AND THE DOW
WEEKLY CLOSES, DOW JONES INDUSTRIAL AVERAGE*
7/3/98-12/31/98
================================================================================
1998 DJIA DOW Close
- --------------------------------------------------------------------------------
7/10/98 9,105.74
7/17/98 9,337.97
7/24/98 8,937.36
7/31/98 8,883.29
8/7/98 8,598.02
8/14/98 8,425
8/21/98 8,533.66
8/28/98 8,051.68
9/4/98 7,640.25
9/11/98 7,795.5
9/18/98 7,895.66
9/25/98 8,028.77
10/2/98 7,784.69
10/9/98 7,899.52
10/16/98 8,416.76
10/23/98 8,452.29
10/30/98 8,592.1
11/6/98 8,975.46
11/13/98 8,919.59
11/20/98 9,159.55
11/27/98 9,333.08
12/4/98 9,016.14
12/11/98 8,821.76
12/18/98 8,903.63
12/24/98 9,217.99
12/31/98 9,181.43
================================================================================
This graph shows the weekly closing levels for the Dow from July 3 through
December 31, 1998. While the Fed does not control the Dow, which is affected by
innumerable factors, its influence is clearly reflected in the index's behavior.
* The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
AIM ADVISOR FLEX FUND
6
<PAGE> 55
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS-78.75%
AEROSPACE/DEFENSE-2.03%
Boeing Co. (The) 110,000 $ 3,588,751
- --------------------------------------------------------------
Lockheed Martin Corp. 60,000 5,085,000
- --------------------------------------------------------------
Precision Castparts Corp. 135,000 5,973,750
- --------------------------------------------------------------
14,647,501
- --------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.81%
Archer-Daniels-Midland Co. 341,250 5,865,235
- --------------------------------------------------------------
AIRLINES-0.50%
Southwest Airlines Co. 160,000 3,590,001
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-2.03%
Cooper Tire & Rubber Co. 160,000 3,270,001
- --------------------------------------------------------------
Genuine Parts Co. 210,000 7,021,875
- --------------------------------------------------------------
Snap-on Inc. 125,000 4,351,562
- --------------------------------------------------------------
14,643,438
- --------------------------------------------------------------
AUTOMOBILES-1.02%
Ford Motor Co. 125,000 7,335,938
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.96%
Bank One Corp. 121,500 6,204,094
- --------------------------------------------------------------
National City Corp. 100,000 7,250,000
- --------------------------------------------------------------
Wachovia Corp. 90,000 7,869,375
- --------------------------------------------------------------
21,323,469
- --------------------------------------------------------------
BANKS (MONEY CENTER)-0.92%
BankAmerica Corp. 110,000 6,613,751
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-1.37%
Anheuser-Busch Companies, Inc. 150,000 9,843,751
- --------------------------------------------------------------
CHEMICALS-0.95%
Dow Chemical Co. (The) 75,000 6,820,312
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.24%
Great Lakes Chemical Corp. 100,000 4,000,000
- --------------------------------------------------------------
Morton International, Inc. 200,000 4,900,000
- --------------------------------------------------------------
8,900,000
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-4.99%
Compaq Computer Corp. 300,000 12,581,250
- --------------------------------------------------------------
Hewlett-Packard Co. 125,000 8,539,062
- --------------------------------------------------------------
International Business Machines
Corp. 80,000 14,780,000
- --------------------------------------------------------------
35,900,312
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-2.14%
Computer Associates International,
Inc. 125,000 5,328,125
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES)-(CONTINUED)
Electronic Data Systems Corp. 200,000 $ 10,050,000
- --------------------------------------------------------------
15,378,125
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.17%
SUPERVALU, Inc. 300,000 8,400,000
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.30%
Edison International 200,000 5,575,000
- --------------------------------------------------------------
Entergy Corp. 300,000 9,337,500
- --------------------------------------------------------------
GPU, Inc. 200,000 8,837,500
- --------------------------------------------------------------
23,750,000
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.80%
General Electric Co. 75,000 7,654,687
- --------------------------------------------------------------
Rockwell International Corp. 110,000 5,341,875
- --------------------------------------------------------------
12,996,562
- --------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.38%
W.W. Grainger, Inc. 65,500 2,726,437
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.72%
Raytheon Co.-Class A 100,000 5,168,750
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-3.01%
American General Corp. 110,000 8,580,000
- --------------------------------------------------------------
MGIC Investment Corp. 150,000 5,971,875
- --------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 100,000 7,100,000
- --------------------------------------------------------------
21,651,875
- --------------------------------------------------------------
FOODS-1.43%
H.J. Heinz Co. 50,000 2,831,250
- --------------------------------------------------------------
Unilever N.V.-ADR-New York Shares
(Netherlands) 90,000 7,464,375
- --------------------------------------------------------------
10,295,625
- --------------------------------------------------------------
FOOTWEAR-0.41%
Reebok International Ltd.(a) 200,000 2,975,000
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.77%
Abbott Laboratories 200,000 9,800,000
- --------------------------------------------------------------
American Home Products Corp. 180,000 10,136,250
- --------------------------------------------------------------
19,936,250
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-1.42%
Mylan Laboratories, Inc. 325,000 10,237,500
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.31%
Lilly (Eli) & Co. 50,000 4,443,750
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 56
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS)-(CONTINUED)
Merck & Co., Inc. 75,000 $ 11,076,562
- --------------------------------------------------------------
Schering-Plough Corp. 150,000 8,287,500
- --------------------------------------------------------------
23,807,812
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-1.03%
Columbia/HCA Healthcare Corp. 300,000 7,425,000
- --------------------------------------------------------------
HOUSEHOLD FURNITURE &
APPLIANCES-0.77%
Whirlpool Corp. 100,000 5,537,500
- --------------------------------------------------------------
HOUSEWARES-0.31%
Fortune Brands, Inc. 70,000 2,213,750
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-1.09%
Loews Corp. 80,000 7,860,000
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-2.38%
Ohio Casualty Corp. 150,000 6,168,750
- --------------------------------------------------------------
Old Republic International Corp. 200,000 4,500,000
- --------------------------------------------------------------
SAFECO Corp. 150,000 6,440,625
- --------------------------------------------------------------
17,109,375
- --------------------------------------------------------------
INSURANCE BROKERS-0.97%
Marsh & McLennan Co. 120,000 7,012,500
- --------------------------------------------------------------
IRON & STEEL-1.50%
Nucor Corp. 250,000 10,812,500
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-2.96%
Caterpillar, Inc. 100,000 4,600,000
- --------------------------------------------------------------
Deere & Co. 100,000 3,312,500
- --------------------------------------------------------------
Dover Corp. 100,000 3,662,500
- --------------------------------------------------------------
Hanson PLC-ADR (United Kingdom) 250,000 9,750,000
- --------------------------------------------------------------
21,325,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.73%
Illinois Tool Works, Inc. 75,000 4,350,000
- --------------------------------------------------------------
Minnesota Mining and Manufacturing
Co. 75,000 5,334,375
- --------------------------------------------------------------
Norsk Hydro A.S.A.-ADR (Norway) 125,000 4,273,437
- --------------------------------------------------------------
Textron, Inc. 75,000 5,695,312
- --------------------------------------------------------------
19,653,124
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.17%
Federal Signal Corp. 160,000 4,380,000
- --------------------------------------------------------------
York International Corp. 100,000 4,081,250
- --------------------------------------------------------------
8,461,250
- --------------------------------------------------------------
METALS MINING-0.74%
Phelps Dodge Corp. 105,000 5,341,875
- --------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-3.76%
Exxon Corp. 100,000 7,312,500
- --------------------------------------------------------------
Repsol S.A.-ADR (Spain) 150,000 8,193,750
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL (INTERNATIONAL INTEGRATED)-(CONTINUED)
Royal Dutch Petroleum Co.-ADR-New
York Shares (Netherlands) 125,000 $ 5,984,375
- --------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Argentina) 200,000 5,587,500
- --------------------------------------------------------------
27,078,125
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.56%
Westvaco Corp. 150,000 4,021,875
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.47%
IKON Office Solutions, Inc. 400,000 3,425,000
- --------------------------------------------------------------
PUBLISHING-0.08%
R.H. Donnelley Corp. 40,000 582,500
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.73%
Gannett Co., Inc. 80,000 5,295,000
- --------------------------------------------------------------
RAILROADS-0.72%
CSX Corp. 125,000 5,187,500
- --------------------------------------------------------------
RESTAURANTS-1.06%
McDonald's Corp. 100,000 7,662,500
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.63%
Lowe's Companies, Inc. 100,000 5,118,750
- --------------------------------------------------------------
Sherwin-Williams Co. 225,000 6,609,375
- --------------------------------------------------------------
11,728,125
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.24%
Dillards, Inc. 150,000 4,256,250
- --------------------------------------------------------------
J.C. Penney Co., Inc. 100,000 4,687,500
- --------------------------------------------------------------
8,943,750
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.69%
Rite Aid Corp. 100,000 4,956,250
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.53%
Kmart Corp.(a) 250,000 3,828,125
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.29%
Toys "R" Us, Inc.(a) 125,000 2,109,375
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.88%
Dun & Bradstreet Corp. 200,000 6,312,500
- --------------------------------------------------------------
SPECIALTY PRINTING-0.89%
Deluxe Corp. 175,000 6,398,437
- --------------------------------------------------------------
TELEPHONE-3.62%
Ameritech Corp. 65,000 4,119,375
- --------------------------------------------------------------
Bell Atlantic Corp. 140,000 7,953,750
- --------------------------------------------------------------
British Telecommunications PLC-ADR
(United Kingdom) 60,000 9,101,250
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Mexico) 100,000 4,868,750
- --------------------------------------------------------------
26,043,125
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 57
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TEXTILES (APPAREL)-1.74%
Liz Claiborne, Inc. 175,000 $ 5,523,437
- --------------------------------------------------------------
VF Corp. 150,000 7,031,250
- --------------------------------------------------------------
12,554,687
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.48%
Unifi, Inc.(a) 175,000 3,423,437
- --------------------------------------------------------------
TOBACCO-1.75%
Gallaher Group PLC-ADR (United
Kingdom) 110,000 2,990,625
- --------------------------------------------------------------
Philip Morris Companies, Inc. 180,000 9,630,000
- --------------------------------------------------------------
12,620,625
- --------------------------------------------------------------
WASTE MANAGEMENT-1.30%
Browning-Ferris Industries, Inc. 150,000 4,265,625
- --------------------------------------------------------------
Waste Management, Inc. 108,750 5,070,468
- --------------------------------------------------------------
9,336,093
- --------------------------------------------------------------
Total Common Stocks (Cost
$367,668,273) 567,066,547
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CORPORATE NOTES-6.17%
AUTOMOBILES-0.57%
Ford Motor Co., Notes,
7.50%, 11/15/99 $ 750,000 $ 763,778
- --------------------------------------------------------------
6.50%, 08/01/18 3,250,000 3,341,747
- --------------------------------------------------------------
4,105,525
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.94%
National City Corp., Sub Notes,
7.20%, 05/15/05 1,000,000 1,070,191
- --------------------------------------------------------------
Nationsbank Corp., Sr. Notes,
5.375%, 04/15/00 1,550,000 1,549,442
- --------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes,
6.25%, 08/04/08 4,000,000 4,164,400
- --------------------------------------------------------------
6,784,033
- --------------------------------------------------------------
BANKS (MONEY CENTER)-0.44%
First Union Corp., Unsec. Sub.
Notes, 6.40%, 04/01/08 3,000,000 3,145,320
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.51%
Anheuser Busch Co., Unsec. Notes,
5.375%, 09/15/08 3,700,000 3,710,323
- --------------------------------------------------------------
CHEMICALS-0.14%
Eastman Chemical, Notes, 6.375%,
01/15/04 1,000,000 997,400
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.44%
Motorola Inc., Notes, 6.50%,
03/01/08 3,000,000 3,174,600
- --------------------------------------------------------------
CONSUMER FINANCE-0.85%
Beneficial Corp., Medium Term
Notes, 6.625%, 09/27/04 3,000,000 3,092,760
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONSUMER FINANCE-(CONTINUED)
Commercial Credit Co., Unsec.
Notes, 5.55%, 02/15/01 $3,000,000 $ 3,007,020
- --------------------------------------------------------------
6,099,780
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.45%
Penn Power & Lighting, First
Mortgage Notes,
6.875%, 02/01/03 1,000,000 1,063,350
- --------------------------------------------------------------
6.55%, 03/01/06 1,900,000 2,002,619
- --------------------------------------------------------------
Union Electric, First Mortgage
Notes, 6.75%, 10/15/99 150,000 151,999
- --------------------------------------------------------------
3,217,968
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.22%
Boeing Co., Notes, 6.625%, 06/01/05 1,500,000 1,572,660
- --------------------------------------------------------------
FOODS-0.35%
Campbell Soup Co., Unsec. Notes,
4.75%, 10/01/03 2,600,000 2,555,332
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.41%
CNA Financial Corp., Unsec. Notes,
6.50%, 04/15/05 3,000,000 2,990,760
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.43%
Sherwin-Williams Co., Notes, 6.50%,
02/01/02 3,000,000 3,099,360
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.42%
Dillard Dept. Stores, Inc., Unsec.
Notes, 6.30%, 02/15/08 3,000,000 3,015,120
- --------------------------------------------------------------
Total Corporate Notes (Cost
$43,397,815) 44,468,181
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-2.61%
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC")-0.52%
Pass through certificates
6.50%, 07/01/01 2,141,748 2,164,493
- --------------------------------------------------------------
8.00%, 10/01/10 1,530,209 1,577,064
- --------------------------------------------------------------
3,741,557
- --------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")-1.34%
Pass through certificates
8.50%, 03/01/10 1,449,332 1,509,567
- --------------------------------------------------------------
6.50%, 06/01/11 to 05/01/26 6,152,443 6,238,374
- --------------------------------------------------------------
7.50%, 11/01/26 1,839,198 1,894,943
- --------------------------------------------------------------
9,642,884
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA")-0.75%
Pass through certificates
6.50%, 10/15/08 905,700 927,492
- --------------------------------------------------------------
7.00%, 10/15/08 952,794 984,055
- --------------------------------------------------------------
</TABLE>
9
<PAGE> 58
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
("GNMA")-(CONTINUED)
6.00%, 11/15/08 $1,074,971 $ 1,088,407
- --------------------------------------------------------------
7.50%, 03/15/26 2,331,182 2,414,218
- --------------------------------------------------------------
5,414,172
- --------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost $18,294,842) 18,798,613
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-10.20%
U.S. TREASURY BONDS-0.73%
7.625%, 02/15/25 4,000,000 5,261,561
- --------------------------------------------------------------
U.S. TREASURY NOTES-9.47%
8.75%, 08/15/00 4,000,000 4,255,521
- --------------------------------------------------------------
7.875%, 08/15/01 5,000,000 5,397,601
- --------------------------------------------------------------
7.50%, 05/15/02 3,000,000 3,261,660
- --------------------------------------------------------------
6.25%, 02/15/03 4,000,000 4,232,800
- --------------------------------------------------------------
7.25%, 05/15/04 6,000,000 6,724,980
- --------------------------------------------------------------
7.25%, 08/15/04 2,000,000 2,249,240
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY NOTES-(CONTINUED)
6.50%, 08/15/05 $7,000,000 $ 7,694,050
- --------------------------------------------------------------
9.375%, 02/15/06 4,000,000 5,101,240
- --------------------------------------------------------------
6.125%, 08/15/07 6,000,000 6,553,800
- --------------------------------------------------------------
5.50%, 02/15/08 8,000,000 8,474,320
- --------------------------------------------------------------
9.25%, 02/15/16 6,000,000 8,609,940
- --------------------------------------------------------------
7.25%, 08/15/22 4,500,000 5,603,715
- --------------------------------------------------------------
68,158,867
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $68,661,389) 73,420,428
- --------------------------------------------------------------
REPURCHASE AGREEMENT-1.01%(b)
SBC Warburg Dillon Read, Inc.,
4.75%, 01/04/99 (Cost
$7,293,570)(c) 7,293,570 7,293,570
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.74% 711,047,339
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.26% 9,086,204
- --------------------------------------------------------------
NET ASSETS-100.00% $720,133,543
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing securities.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviations:
ADR - American Depositary Receipt
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
10
<PAGE> 59
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$505,315,889) $711,047,339
- ---------------------------------------------------------
Receivables for:
Investments sold 5,865,395
- ---------------------------------------------------------
Capital stock sold 2,597,804
- ---------------------------------------------------------
Interest and dividends 3,321,795
- ---------------------------------------------------------
Investment for deferred compensation plan 7,757
- ---------------------------------------------------------
Other assets 15,418
- ---------------------------------------------------------
Total assets 722,855,508
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 616,563
- ---------------------------------------------------------
Deferred compensation plan 7,757
- ---------------------------------------------------------
Accrued advisory fees 453,322
- ---------------------------------------------------------
Accrued operating services fees 75,761
- ---------------------------------------------------------
Accrued distribution fees 1,529,511
- ---------------------------------------------------------
Accrued directors' fees and expenses 39,051
- ---------------------------------------------------------
Total liabilities 2,721,965
- ---------------------------------------------------------
Net assets applicable to shares outstanding $720,133,543
- ---------------------------------------------------------
NET ASSETS:
Class A $ 46,286,433
=========================================================
Class B $ 3,591,573
=========================================================
Class C $670,255,537
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 2,307,756
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 179,008
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 33,407,634
=========================================================
Class A:
Net asset value and redemption price per
share $ 20.06
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $20.06 divided by
94.50%) $ 21.23
=========================================================
Class B:
Net asset value and offering price per
share $ 20.06
=========================================================
Class C:
Net asset value and offering price per
share $ 20.06
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 11,514,476
- ---------------------------------------------------------
Dividends (net of $247,098 foreign
withholding tax) 10,195,106
- ---------------------------------------------------------
Total investment income 21,709,582
- ---------------------------------------------------------
EXPENSES:
Advisory fees 5,051,593
- ---------------------------------------------------------
Operating services fees 2,996,689
- ---------------------------------------------------------
Distribution fees-Class A 126,300
- ---------------------------------------------------------
Distribution fees-Class B 10,941
- ---------------------------------------------------------
Distribution fees-Class C 6,365,011
- ---------------------------------------------------------
Directors' fees and expenses 5,841
- ---------------------------------------------------------
Total expenses 14,556,375
- ---------------------------------------------------------
Less: Fees waived by advisor (1,328,869)
- ---------------------------------------------------------
Net expenses 13,227,506
- ---------------------------------------------------------
Net investment income 8,482,076
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 59,176,179
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities 11,782,197
- ---------------------------------------------------------
Net gain from investment securities 70,958,376
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 79,440,452
=========================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 60
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 8,482,076 $ 9,048,951
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities 59,176,179 23,883,293
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 11,782,197 86,058,520
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 79,440,452 118,990,764
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (693,499) (246,939)
- -----------------------------------------------------------------------------------------
Class B (14,661) --
- -----------------------------------------------------------------------------------------
Class C (7,001,855) (8,674,714)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (3,877,358) (610,538)
- -----------------------------------------------------------------------------------------
Class B (270,410) --
- -----------------------------------------------------------------------------------------
Class C (56,203,971) (14,999,384)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 21,305,857 24,377,889
- -----------------------------------------------------------------------------------------
Class B 3,715,719 --
- -----------------------------------------------------------------------------------------
Class C 55,402,752 19,575,501
- -----------------------------------------------------------------------------------------
Net increase in net assets 91,803,026 138,412,579
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 628,330,517 489,917,938
- -----------------------------------------------------------------------------------------
End of period $720,133,543 $628,330,517
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $510,018,210 $426,093,882
- -----------------------------------------------------------------------------------------
Undistributed net investment income 938,111 166,050
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 3,445,772 8,121,332
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 205,731,450 193,949,253
- -----------------------------------------------------------------------------------------
$720,133,543 $628,330,517
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Flex Fund (the "Fund") is a series portfolio of AIM Advisor Funds,
Inc. (the "Company"). The Company is a Maryland corporation and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of five diversified
portfolios. The Fund currently offers three different classes of shares: Class A
shares, Class B shares and Class C shares. Class A shares are sold with a
front-end sales charge. Class B shares and Class C shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class will
be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only to
the Fund. The Fund's investment objective is to achieve a high total return on
investment through capital appreciation and current income, without regard to
federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. Each security reported on
the NASDAQ National Market System is valued at the last sales price on the
valuation date, or absent a last sales price, at the mean of the
12
<PAGE> 61
closing bid and asked prices. Debt obligations (including convertible bonds)
are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, coupon rate and maturity date. Securities for
which market prices are not provided by any of the above methods are valued
at the mean between last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations are not readily
available or are questionable are valued at fair value as determined in good
faith by or under the supervision of the Company's Board of Directors.
Investments with maturities of 60 days or less are valued on the basis of
amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid quarterly. On December 31, 1998 additional paid-in capital
was increased by $3,500,000 and undistributed net realized gains was
decreased by $3,500,000 as a result of equalization credits and in order to
comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Bond Premiums-It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
D. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements.
E. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Capital Management, Inc. ("ICM") whereby AIM pays ICM an
annual rate of 0.20% of the Fund's average daily net assets.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. This
agreement provides that AIM pays all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1998, AIM was paid $1,703,905 for such services. As of
June 1, 1998, AIM has voluntarily agreed to limit the operating services fees to
an annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the period June 1, 1998 through December 31, 1998, AIM
voluntarily waived operating services fees in the amount of $1,292,783.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The
Fund, pursuant to the Class B Plan, pays AIM Distributors compensation at an
annual rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges, that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $90,214, $10,941 and $6,365,011, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $36,086 for the Class A shares.
AIM Distributors received commissions of $33,479 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1998,
AIM Distributors received commissions of $100,172 in contingent deferred sales
charges imposed on redemptions of shares. Certain officers and directors of the
Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average daily net assets of the Fund are less
than $500 million, the Fund's expenses shall not exceed 1.55% for Class A and
2.20% for Class C; on the next $500 million of net assets, expenses shall not
exceed 1.50% for Class A and 2.15% for Class C; on the next $1 billion of net
assets, expenses shall not exceed 1.45% for Class A and 2.10% for Class C; and
on all assets over $2 billion, expenses shall not exceed 1.40% for Class A and
2.05% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $4,762
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
13
<PAGE> 62
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, the Fund did
not borrow under the line of credit agreement. The funds which are party to the
line of credit are charged a commitment fee of 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1998 was
$232,418,225 and $222,893,137, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $222,128,397
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (16,396,947)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $205,731,450
==========================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended December
31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997*
-------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 1,076,842 $ 22,390,887 1,255,277 $ 24,015,843
- --------------------------------------------------------------------------------------------------------------------
Class B** 175,059 3,648,126 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 5,318,582 109,967,149 4,707,789 86,294,017
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 223,596 4,399,200 42,162 821,435
- --------------------------------------------------------------------------------------------------------------------
Class B** 14,140 277,225 -- --
- --------------------------------------------------------------------------------------------------------------------
Class C 3,067,888 60,325,811 1,120,103 21,660,078
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (266,823) (5,484,230) (23,298) (459,389)
- --------------------------------------------------------------------------------------------------------------------
Class B** (10,191) (209,632) -- --
- --------------------------------------------------------------------------------------------------------------------
Class C (5,531,566) (114,890,208) (4,738,134) (88,378,594)
- --------------------------------------------------------------------------------------------------------------------
4,067,527 $ 80,424,328 2,363,899 $ 43,953,390
====================================================================================================================
</TABLE>
* Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
** Class B shares commenced sales on March 3, 1998.
14
<PAGE> 63
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998, and for a share of
Class C capital stock outstanding during each of the years in the five-year
period ended December 31, 1998.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
----------------------- ------------
1998 1997(b) 1998
------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 19.74 $ 16.63 $ 20.69
- ------------------------------------------------------------ ------- ---------- ----------
Income from investment operations:
Net investment income 0.39 0.41(c) 0.22
- ------------------------------------------------------------ ------- ---------- ----------
Net gains on securities (both realized and unrealized) 2.16 3.63 1.22
- ------------------------------------------------------------ ------- ---------- ----------
Total from investment operations 2.55 4.04 1.44
- ------------------------------------------------------------ ------- ---------- ----------
Less distributions:
Dividends from net investment income (0.39) (0.43) (0.23)
- ------------------------------------------------------------ ------- ---------- ----------
Distributions from net realized gains (1.84) (0.50) (1.84)
- ------------------------------------------------------------ ------- ---------- ----------
Total distributions (2.23) (0.93) (2.07)
- ------------------------------------------------------------ ------- ---------- ----------
Net asset value, end of period $ 20.06 $ 19.74 $ 20.06
- ------------------------------------------------------------ ------- ---------- ----------
Total return(d) 13.26% 24.60% 7.25%
- ------------------------------------------------------------ ------- ---------- ----------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,286 $ 25,151 $ 3,592
- ------------------------------------------------------------ ------- ---------- ----------
Ratio of expenses to average net assets(e) 1.23%(f) 1.45% 2.00%(f)(g)
- ------------------------------------------------------------ ------- ---------- ----------
Ratio of net investment income to average net assets(h) 1.99%(f) 2.34% 1.22%(f)(g)
- ------------------------------------------------------------ ------- ---------- ----------
Portfolio turnover rate 34% 17% 34%
- ------------------------------------------------------------ ------- ---------- ----------
</TABLE>
<TABLE>
<S> <C>
(a) Per share information and shares have been restated to
reflect a 4 for 1 stock split, effected in the form of a
300% stock dividend, on November 7, 1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct sales charges and for periods less than one
year is not annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.52% and 1.55% for 1998-1997
for Class A and 2.19% (annualized) for 1998 for Class B.
(f) Ratios are based on average net assets of $36,085,767 and
$1,313,596 for Class A and Class B, respectively.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 1.70% and 2.24%
for 1998-1997 for Class A and 1.03% (annualized) for 1998
for Class B.
</TABLE>
<TABLE>
<CAPTION>
CLASS C(a)
----------------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.74 $ 16.63 $ 15.66 $ 12.63 $ 13.54
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.25 0.30(c) 0.30 0.32 0.32
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 2.14 3.60 1.81 3.09 (0.23)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 2.39 3.90 2.11 3.41 0.09
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.23) (0.29) (0.29) (0.32) (0.31)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (1.84) (0.50) (0.85) (0.06) (0.69)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (2.07) (0.79) (1.14) (0.38) (1.00)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total return(d) 12.41% 23.64% 13.61% 27.30% 0.64%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $670,256 $603,179 $489,918 $399,162 $243,848
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of expenses to average net assets 2.00%(e)(f) 2.20% 2.26% 2.28% 2.25%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of net investment income to average net assets 1.22%(f)(g) 1.59% 1.81% 2.28% 2.32%
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Portfolio turnover rate 34% 17% 26% 5% 36%
- ------------------------------------------------------------ -------- -------- -------- -------- ---------
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.19% for 1998.
(f) Ratios are based on average net assets of $636,501,142.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.03% for 1998.
15
<PAGE> 64
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Advisor Flex Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Flex Fund (a portfolio of AIM
Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1998, and the related
statement of operations, the statement of changes in net
assets, and the financial highlights for the year then
ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audit. The accompanying statement of changes
in net assets for the year ended December 31, 1997 and
the financial highlights for each of the years in the
four-year period ended December 31, 1997, were audited by
other auditors whose report thereon dated February 5,
1998, expressed an unqualified opinion on such statement
and financial highlights.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1998, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Flex Fund as of December 31, 1998, the results of
its operations, the changes in its net assets and the
financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
KPMG LLP
Houston, Texas
February 5, 1999
16
<PAGE> 65
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President INVESCO Capital Management, Inc.
1315 Peachtree Street, N.E.
Edward K. Dunn Jr. Dana R. Sutton Atlanta, GA 30309
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, TRANSFER AGENT
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley
President, Mercantile Bankshares Vice President A I M Fund Services, Inc.
P.O. Box 4739
Jack Fields Stuart W. Coco Houston, TX 77210-4739
Chief Executive Officer Vice President
Texana Global, Inc.; CUSTODIAN
Formerly Member Melville B. Cox
of the U.S. House of Representatives Vice President State Street Bank and Trust Company
225 Franklin Street
Carl Frischling Karen Dunn Kelley Boston, MA 02110
Partner Vice President
Kramer, Levin, Naftalis & Frankel COUNSEL TO THE FUND
Jonathan C. Schoolar
Robert H. Graham Vice President Ballard Spahr
President and Chief Executive Officer Andrews & Ingersoll, LLP
A I M Management Group Inc. Renee A. Friedli 1735 Market Street
Assistant Secretary Philadelphia, PA 19103
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.: P. Michelle Grace COUNSEL TO THE DIRECTORS
Commissioner, New York City Dept. for Assistant Secretary
the Aging; and member of the Board of Director Kramer, Levin, Naftalis & Frankel
Metropolitan Transportation Authority of Jeffrey H. Kupor 919 Third Avenue
New York State Assistant Secretary New York, NY 10022
Lewis F. Pennock Nancy L. Martin DISTRIBUTOR
Attorney Assistant Secretary
A I M Distributors, Inc.
Ian W. Robinson Ofelia M. Mayo 11 Greenway Plaza
Consultant; Formerly Executive Assistant Secretary Suite 100
Vice President and Houston, TX 77046
Chief Financial Officer Lisa A. Moss
Bell Atlantic Management Assistant Secretary AUDITORS
Services, Inc.
Kathleen J. Pflueger KPMG LLP
Louis S. Sklar Assistant Secretary 700 Louisiana
Executive Vice President Houston, TX 77002
Hines Interests Samuel D. Sirko
Limited Partnership Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Advisor Flex Fund Class A, Class B and Class C shares paid ordinary
dividends in the amount of $0.4906, $0.3346 and $0.3346 per share, respectively,
during the Fund's tax year ended December 31, 1998. Of these amounts, 74.25% is
eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $60,426,809 for the
Fund's tax year ended December 31, 1998. Of long-term capital gains distributed,
100% is 20% rate gain.
REQUIRED STATE INCOME TAX INFORMATION
Of the total income dividends paid, 32.98% was derived from U.S. Treasury
obligations.
<PAGE> 66
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Asian Growth Fund since 1976 and managed approximately $109
AIM Capital Development Fund AIM Developing Markets Fund(2) billion in assets for more than 6.2 million
AIM Constellation Fund AIM Europe Growth Fund(2) shareholders, including individual investors,
AIM Mid Cap Equity Fund(2), (A) AIM European Development Fund corporate clients, and financial institutions,
AIM Select Growth Fund(3) AIM International Equity Fund as of December 31, 1998.
AIM Small Cap Growth Fund(2), (B) AIM Japan Growth Fund(2) The AIM Family of Funds--Registered Trademark--
AIM Small Cap Opportunities Fund AIM Latin American Growth Fund(2) is distributed nationwide, and AIM today is the
AIM Value Fund AIM New Pacific Growth Fund(2) 10th-largest mutual fund complex in the U.S. in
AIM Weingarten Fund assets under management, according to Strategic
Insight, an independent mutual fund monitor.
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor MultiFlex Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund GLOBAL GROWTH & INCOME FUNDS
AIM Basic Value Fund(2), (C) AIM Global Growth & Income Fund(2)
AIM Charter Fund AIM Global Utilities Fund
INCOME FUNDS GLOBAL INCOME FUNDS
AIM Floating Rate Fund(2) AIM Emerging Markets Debt Fund(2), (D)
AIM High Yield Fund AIM Global Government Income Fund(2)
AIM High Yield Fund II AIM Global Income Fund
AIM Income Fund AIM Strategic Income Fund(2)
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund THEME FUNDS
AIM Global Consumer Products and Services Fund(2)
TAX-FREE INCOME FUNDS AIM Global Financial Services Fund(2)
AIM High Income Municipal Fund AIM Global Health Care Fund(2)
AIM Municipal Bond Fund AIM Global Infrastructure Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Resources Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2), (E)
MONEY MARKET FUNDS
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (2)
Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E) On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your financial consultant or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money.
<PAGE> 67
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
AIM ADVISOR MULTIFLEX FUND -- CLASS A SHARES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS JUNE 16, 1999
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of Class A Shares of AIM Advisor MultiFlex Fund, a
portfolio of AIM Advisor Funds, Inc., on June 16, 1999 at 3:00 p.m. Central
time, and at any adjournment thereof, all of the shares of the Fund which the
undersigned would be entitled to vote if personally present. IF THIS PROXY IS
SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
THE APPROVAL OF THE PROPOSAL.
CONTROL NUMBER: NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY CARD. All joint owners should sign.
When signing as executor, administrator, attorney,
trustee or guardian or as custodian for a minor,
please give full title as such. If a corporation,
please sign in full corporate name and indicate
the signer's office. If a partner, sign in the
partnership name.
--------------------------------------------------
Signature
--------------------------------------------------
Signature (if held jointly)
Dated
---------------------------------------------
<PAGE> 68
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" THE PROPOSAL.
TO VOTE, FILL IN BOX COMPLETELY. EXAMPLE: [X]
1. To approve a Plan of Reorganization providing for the reclassification of the
shares of AIM Advisor MultiFlex Fund into shares of AIM Advisor Flex Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF
<PAGE> 69
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
AIM ADVISOR MULTIFLEX FUND -- CLASS B SHARES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS JUNE 16, 1999
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of Class B Shares of AIM Advisor MultiFlex Fund, a
portfolio of AIM Advisor Funds, Inc., on June 16, 1999 at 3:00 p.m. Central
time, and at any adjournment thereof, all of the shares of the Fund which the
undersigned would be entitled to vote if personally present. IF THIS PROXY IS
SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
THE APPROVAL OF THE PROPOSAL.
CONTROL NUMBER: NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY CARD. All joint owners should sign.
When signing as executor, administrator, attorney,
trustee or guardian or as custodian for a minor,
please give full title as such. If a corporation,
please sign in full corporate name and indicate
the signer's office. If a partner, sign in the
partnership name.
--------------------------------------------------
Signature
--------------------------------------------------
Signature (if held jointly)
Dated
---------------------------------------------
<PAGE> 70
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" THE PROPOSAL.
TO VOTE, FILL IN BOX COMPLETELY. EXAMPLE: [X]
1. To approve a Plan of Reorganization providing for the reclassification of the
shares of AIM Advisor MultiFlex Fund into shares of AIM Advisor Flex Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF
<PAGE> 71
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
PROXY PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF
AIM ADVISOR MULTIFLEX FUND -- CLASS C SHARES
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS JUNE 16, 1999
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of Class C Shares of AIM Advisor MultiFlex Fund, a
portfolio of AIM Advisor Funds, Inc., on June 16, 1999 at 3:00 p.m. Central
time, and at any adjournment thereof, all of the shares of the Fund which the
undersigned would be entitled to vote if personally present. IF THIS PROXY IS
SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
THE APPROVAL OF THE PROPOSAL.
CONTROL NUMBER: NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY CARD. All joint owners should sign.
When signing as executor, administrator, attorney,
trustee or guardian or as custodian for a minor,
please give full title as such. If a corporation,
please sign in full corporate name and indicate
the signer's office. If a partner, sign in the
partnership name.
--------------------------------------------------
Signature
--------------------------------------------------
Signature (if held jointly)
Dated
---------------------------------------------
<PAGE> 72
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
................................................................................
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" THE PROPOSAL.
TO VOTE, FILL IN BOX COMPLETELY. EXAMPLE: [X]
1. To approve a Plan of Reorganization providing for the reclassification of the
shares of AIM Advisor MultiFlex Fund into shares of AIM Advisor Flex Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF
