<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 240.14a-11(c) or Rule 240.14a-12
AIM ADVISOR FUNDS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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<PAGE> 2
AIM ADVISOR FUNDS, INC.
AIM ADVISOR FLEX FUND
AIM ADVISOR INTERNATIONAL VALUE FUND
AIM ADVISOR REAL ESTATE FUND
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
--------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 1, 2000
--------------------
TO THE SHAREHOLDERS:
AIM Advisor Funds, Inc. (the company) is holding a special meeting of
shareholders on Friday, September 1, 2000 at 3:00 p.m., Central time. The place
of the meeting is the company's offices at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173.
The company, a Maryland corporation, consists of the following series
portfolios: AIM Advisor Flex Fund, AIM Advisor International Value Fund and AIM
Advisor Real Estate Fund. This proxy statement relates to all of these series
portfolios (together, the funds).
The purposes of the meeting are as follows:
(1) To elect ten directors, each of whom will serve until his or her
successor is elected and qualified.
(2) To approve an Agreement and Plan of Reorganization which provides for
the reorganization of the company as a Delaware business trust.
(3) To approve a new Master Investment Advisory Agreement with A I M
Advisors, Inc.
(4) To approve new Master Sub-Advisory Agreement:
a. Between A I M Advisors, Inc. and INVESCO, Inc. for AIM Advisor
Flex Fund and AIM Advisor Real Estate Fund.
b. Between A I M Advisors, Inc. and INVESCO Global Asset Management
(N.A.), Inc. for AIM Advisor International Value Fund.
(5) To approve a new Master Distribution Plan (Class A and Class C Shares)
for the Class A and Class C shares of the funds.
(6) To approve changing the fundamental investment restrictions of the
funds.
(7) To approve changing the investment objectives of the funds and making
them non-fundamental.
(8) To ratify the selection of KPMG LLP as independent accountants for
each of the funds for the fiscal year ending in 2000.
<PAGE> 3
(9) To transact such other business as may properly come before the
meeting.
You may vote at the meeting if you are the record owner of shares of the
funds as of the close of business on June 23, 2000. If you attend the meeting,
you may vote your shares in person. If you expect to attend the meeting in
person, please notify the company by calling 1-800-952-3502. If you do not
expect to attend the meeting, please fill in, date, sign and return the proxy
card in the enclosed envelope which requires no postage if mailed in the United
States.
It is important that you return your signed proxy card promptly so that a
quorum may be assured. If we do not hear from you after a reasonable amount of
time, you may receive a telephone call from our proxy solicitor, Shareholder
Communications Corporation, reminding you to vote your shares.
Thank you for your cooperation and continued support.
By order of the Board,
/s/ CAROL F. RELIHAN
Carol F. Relihan
Secretary
July 10, 2000
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<PAGE> 4
AIM ADVISOR FUNDS, INC.
AIM ADVISOR FLEX FUND
AIM ADVISOR INTERNATIONAL VALUE FUND
AIM ADVISOR REAL ESTATE FUND
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
-----------------------------
PROXY STATEMENT
DATED JULY 10, 2000
-----------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 1, 2000
WHO IS ASKING FOR MY VOTE?
The Board of Directors (the Board) of AIM Advisor Funds, Inc. (the company)
is sending you this proxy statement and the enclosed proxy card (or cards) on
behalf of the three separate series portfolios of the company listed above
(together, the funds). The Board is soliciting your proxy to vote at the 2000
special meeting of shareholders of the company (the meeting).
WHEN AND WHERE WILL THE MEETING BE HELD?
The meeting will be held at the company's offices, 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173, at 3:00 p.m., Central time, on Friday, September
1, 2000. If you expect to attend the meeting in person, please notify the
company by calling 1-800-952-3502.
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<PAGE> 5
WHAT PROPOSALS APPLY TO MY FUND?
The following table summarizes each proposal to be presented at the meeting
and the funds whose shareholders the Board is soliciting with respect to each
proposal:
<TABLE>
<CAPTION>
PROPOSAL AFFECTED FUNDS
-------- --------------
<S> <C>
1. Electing directors All funds
2. Approving an Agreement and Plan of Reorganization, All funds
under which the company will reorganize as a Delaware
business trust
3. Approving a new advisory agreement with
A I M Advisors, Inc. All funds
4. Approving new sub-advisory agreements:
a. Between A I M Advisors, Inc. and INVESCO, Inc. AIM Advisor Flex Fund (Flex) and
AIM Advisor Real Estate Fund (Real Estate)
b. Between A I M Advisors, Inc. and INVESCO Global AIM Advisor International Value Fund
Asset Management (N.A.), Inc. (International Value)
5. Approving a new distribution plan for the funds' All funds
Class A and Class C shares
6. Changing the funds' fundamental investment restrictions All funds
7. Changing the investment objectives of the funds and All funds
making them non-fundamental
8. Ratifying the Board's selection of independent All funds
accountants
9. Considering other matters All funds
</TABLE>
WHO IS ELIGIBLE TO VOTE?
The Board is sending this proxy statement, the attached notice of meeting
and the enclosed proxy card on or about July 10, 2000 to all shareholders
entitled to vote. Shareholders who owned shares of common stock of any class of
a fund at the close of business on June 23, 2000 (the record date) are entitled
to vote. The number of shares outstanding on the record date for each class of
each fund is in Appendix A. Each share of common stock of a fund that you own
entitles you to one vote on each proposal set forth in the table above that
applies to that fund (a fractional share has a fractional vote.)
WHAT ARE THE DIFFERENT WAYS I CAN VOTE?
VOTING BY PROXY
Whether you plan to attend the meeting or not, the Board urges you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the meeting and vote.
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The Board has named Robert H. Graham, Gary T. Crum and Lewis F. Pennock as
proxies. If you properly fill in your proxy card and send it to the company in
time to vote, your proxy will vote your shares as you have directed. If you sign
the proxy card but do not make specific choices, your proxy will vote your
shares with respect to Proposals 1 through 8 as recommended by the Board.
If any other matter is presented, your proxy will vote in accordance with
his best judgment. At the time this proxy statement was printed, the
Board knew of no matters that needed to be acted on at the meeting other than
those discussed in this proxy statement.
If you appoint a proxy, you may revoke it at any time before it is
exercised. You can do this by sending in another proxy with a later date or by
notifying the company's secretary in writing before the meeting that you have
revoked your proxy.
VOTING IN PERSON
If you do attend the meeting and wish to vote in person, you will be given
a ballot when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring a letter from the nominee
indicating that you are the beneficial owner of the shares on the record date
and authorizing you to vote.
VOTING BY TELEPHONE
You may vote by telephone if you are contacted by Shareholder
Communications Corporation.
VOTING ON THE INTERNET
You may also vote your shares on the Internet at the funds' website at
http://www.aimfunds.com by following instructions that appear on the enclosed
proxy insert.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
The Board recommends that shareholders vote FOR each of the proposals
described in this proxy statement.
WHAT IS THE QUORUM REQUIREMENT?
A quorum of shareholders is necessary to hold a valid meeting. The presence
in person or by proxy of shareholders entitled to cast one-third of all votes
entitled to be cast at the meeting shall constitute a quorum at all meetings of
the shareholders, except with respect to any matter which by law or the Charter
of the company requires the separate approval of one or more classes or series
of the capital stock of the company, in which case the holders of one-third of
the shares
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of each such class or series (or of such classes or series voting together as a
single class) entitled to vote on the matter shall constitute a quorum.
Under rules applicable to broker-dealers, if your broker holds your shares
in its name, the broker will be entitled to vote your shares on Proposals 1 and
8 (election of directors and ratification of selection of accountants) even if
it has not received instructions from you. Your broker will not be entitled to
vote on Proposals 2, 3, 4, 5, 6, 7 and 9 (approving an Agreement and Plan of
Reorganization for the company, approving a new advisory agreement for your
fund, approving a new sub-advisory agreement for your fund, approving a new
distribution plan for the Class A and Class C shares of your fund, changing your
fund's investment restrictions, changing your fund's investment objective and
making it non-fundamental, and considering other matters) unless it has received
instructions from you. If your broker does not vote your shares on Proposals 2,
3, 4, 5, 6 and 7 because it has not received instructions from you, these shares
will be considered broker non-votes.
Broker non-votes and abstentions with respect to any proposal will count as
present for establishing a quorum.
WHAT IS THE VOTE NECESSARY TO APPROVE EACH PROPOSAL?
The affirmative vote of a plurality of votes cast is necessary to elect the
directors, meaning that the nominees receiving the most votes will be elected
(Proposal 1). In an uncontested election for directors, the plurality
requirement is not a factor.
The affirmative vote of a majority of the outstanding shares of the company
entitled to vote at the meeting is required to approve the Agreement and Plan of
Reorganization to reorganize the company as a Delaware business trust (Proposal
2). Broker non-votes and abstentions will not count as votes cast and will have
the effect of votes against Proposal 2.
The affirmative vote of a majority of the outstanding voting securities as
defined in the Investment Company Act of 1940, as amended (the 1940 Act), of
each applicable fund, is required to:
o approve the funds' new advisory agreement (Proposal 3);
o approve the funds' new sub-advisory agreements (Proposal 4);
o approve new fundamental investment restrictions for the funds
(Proposal 6); and
o change the investment objectives of the funds and make them
non-fundamental (Proposal 7).
Holders of each class of each fund must separately approve the new
distribution plan for the Class A and Class C shares of such fund (Proposal 5).
The vote necessary to approve such plan is the affirmative vote of a majority
of the outstanding voting securities (as defined in the 1940 Act) of such class.
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<PAGE> 8
The 1940 Act defines a majority of the outstanding voting securities
(a 1940 Act majority) of a fund (or class) as the lesser of (a) the vote of
holders of 67% or more of the voting securities of the fund (or class) present
in person or by proxy, if the holders of more than 50% of the outstanding voting
securities of the fund (or class) are present in person or by proxy, or (b) the
vote of the holders of more than 50% of the outstanding voting securities of
the fund (or class). Broker non-votes and abstentions will not count as votes
cast and will have the effect of votes against Proposals 3 through 7.
The affirmative vote of a majority of votes cast is necessary to ratify the
selection of KPMG LLP as your fund's independent accountants (Proposal 8). For
Proposal 8, abstentions will not count as votes cast and will have no effect on
the outcome of the vote.
CAN THE MEETING BE ADJOURNED?
The proxies may propose to adjourn the meeting to permit further
solicitation of proxies or for other purposes. Any such adjournment will require
the affirmative vote of a majority of the votes cast. The proxies cannot adjourn
the meeting beyond October 21, 2000 without informing shareholders of the
adjournment.
HOW CAN I OBTAIN MORE INFORMATION ABOUT THE FUNDS?
UPON YOUR REQUEST, EACH FUND WILL FURNISH YOU A FREE COPY OF ITS MOST
RECENT ANNUAL REPORT AND THE MOST RECENT SEMIANNUAL REPORT SUCCEEDING THE ANNUAL
REPORT, IF ANY. YOU SHOULD DIRECT YOUR REQUEST TO A I M FUND SERVICES, INC. AT
P.O. BOX 4739, HOUSTON, TEXAS 77210-4739, OR BY CALLING 1-800-347-4246.
PROPOSAL 1: ELECTION OF DIRECTORS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THE ELECTION OF DIRECTORS?
Proposal 1 applies to shareholders of all funds.
WHO ARE THE NOMINEES FOR DIRECTOR?
For election of directors at the meeting, the Board has approved the
nomination of Charles T. Bauer, Bruce L. Crockett, Owen Daly II, Edward K. Dunn,
Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Prema Mathai-Davis,
Lewis F. Pennock and Louis S. Sklar, each to serve as director until his or her
successor is elected and qualified.
The proxies will vote for the election of these nominees unless you
withhold authority to vote for any or all of them in the proxy. Each of the
nominees has indicated that he or she is willing to serve as a director. If any
or all of the nominees should become unavailable for election due to events not
now known or
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<PAGE> 9
anticipated, the persons named as proxies will vote for such other nominee or
nominees as the directors who are not interested persons of the company, as
defined in the 1940 Act (the independent directors), may recommend.
All of the nominees presently are directors of the company. The nominees
serve as directors, trustees or officers of the following open-end management
investment companies advised or managed by A I M Advisors, Inc. (AIM): AIM
Advisor Funds, Inc., AIM Equity Funds, AIM Funds Group, AIM International Funds,
Inc., AIM Investment Securities Funds, AIM Special Opportunities Funds, AIM
Summit Fund, Inc., AIM Tax-Exempt Funds, AIM Variable Insurance Funds,
Short-Term Investments Co., Short-Term Investments Trust and Tax-Free
Investments Co. (these investment companies and their series portfolios, if any,
are referred to collectively as the AIM funds). Robert H. Graham also serves as
a director or trustee and officer of other open-end and closed-end management
investment companies managed or advised by AIM. No director or nominee is a
party adverse to the company or any of its affiliates in any material pending
legal proceedings, nor does any director or nominee have an interest materially
adverse to the company.
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<PAGE> 10
The following table sets forth information concerning the nominees:
<TABLE>
<CAPTION>
Name, Address and Age Director Since Principal Occupation During Past 5 Years
--------------------- -------------- ----------------------------------------
<S> <C> <C>
*Charles T. Bauer (81) August 4, 1997 Director and Chairman, A I M Management Group Inc.;
11 Greenway Plaza A I M Advisors, Inc., A I M Capital Management, Inc.;
Suite 100 A I M Distributors, Inc.; A I M Fund Services, Inc. and
Houston, TX 77046-1173 Fund Management Company; and Executive Vice Chairman
and Director, AMVESCAP PLC.
Bruce L. Crockett (56) August 4, 1997 Director, ACE Limited (insurance company). Formerly,
906 Frome Lane Director, President and Chief Executive Officer,
McLean, VA 22102 COMSAT Corporation; and Chairman, Board of Governors
of INTELSAT (international communications company).
Owen Daly II (75) August 4, 1997 Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company), CF & I Steel Corp., Monumental Life
Baltimore, MD 21210 Insurance Company and Monumental General Insurance
Company; and Chairman of the Board of Equitable
Bancorporation.
Edward K. Dunn, Jr. (65) March 10, 1998 Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, Mortgage Corporation. Formerly, Vice Chairman of the
8th Floor, Suite 805 Board of Directors and President and Chief Operating
Baltimore, MD 21201 Officer, Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares.
Jack M. Fields (48) August 4, 1997 Chief Executive Officer, Texana Global, Inc. (foreign
434 New Jersey Avenue, S.E. trading company) and Twenty First Century Group, Inc.
Washington, D.C. 20003 (a governmental affairs company); and Director,
Telscape International and Administaff. Formerly,
Member of the U.S. House of Representatives.
</TABLE>
------------------
* Mr. Bauer is an interested person of AIM and the company, as defined in the
1940 Act, primarily because of his positions with AIM and its affiliated
companies, as set forth above, and through his ownership of stock of AMVESCAP
PLC, which, through A I M Management Group Inc., owns all of the outstanding
stock of AIM. Mr. Bauer has notified the Board that he intends to retire from
his positions as officer and director of the fund effective September 30, 2000.
The Board does not presently intend to fill the vacancy that will result from
Mr. Bauer's retirement. Effective September 30, 2000, Mr. Graham will succeed
Mr. Bauer as Chairman of the Board.
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<PAGE> 11
<TABLE>
<CAPTION>
Name, Address and Age Director Since Principal Occupation During Past 5 Years
--------------------- -------------- ----------------------------------------
<S> <C> <C>
**Carl Frischling (63) August 4, 1997 Partner, Kramer Levin Naftalis & Frankel LLP (law
919 Third Avenue firm). Formerly, Partner, Reid & Priest (law firm).
New York, NY 10022
***Robert H. Graham (53) August 4, 1997 Director, President and Chief Executive Officer, A I M
11 Greenway Plaza Management Group Inc.; Director and President, A I M
Suite 100 Advisors, Inc.; Director and Senior Vice President,
Houston, TX 77046-1173 A I M Capital Management, Inc., A I M Distributors,
Inc., A I M Fund Services, Inc. and Fund Management
Company; and Director and Chief Executive Officer,
Managed Products, AMVESCAP PLC.
Prema Mathai-Davis (49) September 10, 1998 Formerly, Chief Executive Officer, YWCA of the U.S.A.
350 Fifth Avenue, Suite 301
New York, NY 10118
Lewis F. Pennock (57) August 4, 1997 Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
Louis S. Sklar (60) August 4, 1997 Executive Vice President, Development and Operations,
The Williams Tower Hines Interests Limited Partnership (real estate
50th Floor development).
2800 Post Oak Boulevard
Houston, TX 77056
</TABLE>
WHAT ARE THE RESPONSIBILITIES OF THE BOARD?
The Board is responsible for the general oversight of the funds' business
and for assuring that the funds are managed in the best interests of each fund's
respective shareholders. The Board periodically reviews the funds' investment
performance as well as the quality of other
--------------------
** Mr. Frischling is an interested person of the company, as defined in the 1940
Act, primarily because of payments received by his law firm from the company for
services to the independent directors of the company.
*** Mr. Graham is an interested person of AIM and the company, as defined in the
1940 Act, primarily because of his positions with AIM and its affiliated
companies, as set forth above, and through his ownership of stock of AMVESCAP
PLC, which, through A I M Management Group Inc., owns all of the outstanding
stock of AIM. services provided to the funds and their shareholders by each of
the fund's service providers, including AIM and its
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<PAGE> 12
affiliates. At least annually, the Board reviews the fees paid by the company
for these services and the overall level of the funds' operating expenses.
WHY ARE DIRECTORS BEING ELECTED AT THE PRESENT TIME?
Under the 1940 Act, the Board may fill vacancies on the Board or appoint
new directors only if, immediately thereafter, at least two-thirds of the
directors will have been elected by shareholders. Currently, seven of the
company's ten directors have been elected by shareholders. As directors retire,
resign or otherwise cease their service as directors in the future, the company
may be unable to fill the vacancies created by such action because three of the
company's ten directors have not been elected by shareholders. To provide the
Board with the flexibility to fill vacancies created when directors cease their
service as directors, and in light of the fact that only seven of the company's
directors have been elected by shareholders, the Board believes it is
appropriate for shareholders to elect directors at the present time.
HOW LONG CAN DIRECTORS SERVE ON THE BOARD?
Directors generally hold office until their successors are elected and
qualified. Pursuant to a policy adopted by the Board, each duly elected or
appointed independent director may continue to serve as a director until
December 31 of the year in which the director turns 72. Independent directors
who were 65 or older and serving on the board of one or more of the AIM funds
when the policy was initially adopted in 1992 may continue to serve until
December 31 of the year in which the director turns 75. A director of the
company may resign or be removed for cause by a vote of the holders of a
majority of the outstanding shares of the company at any time. A majority of the
Board may extend from time to time the retirement date of a director. The Board
has agreed to extend the retirement date of Mr. Daly, who otherwise would have
retired December 31, 2000, to December 31, 2001. In making this decision, the
Board took into account Mr. Daly's experience and active participation as a
director.
WHAT ARE SOME OF THE WAYS IN WHICH THE BOARD REPRESENTS MY INTERESTS?
The Board seeks to represent shareholder interests by:
o reviewing the funds' investment performance on an individual basis
with the funds' respective managers;
o reviewing the quality of the various other services provided to the
funds and their shareholders by each of the fund's service providers,
including AIM and its affiliates;
o discussing with senior management of AIM steps being taken to address
any performance deficiencies;
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<PAGE> 13
o reviewing the fees paid to AIM and its affiliates to ensure that such
fees remain reasonable and competitive with those of other mutual
funds, while at the same time providing sufficient resources to
continue to provide high-quality services in the future;
o monitoring potential conflicts between the funds and AIM and its
affiliates to ensure that the funds continue to be managed in the best
interests of their shareholders; and
o monitoring potential conflicts among funds to ensure that shareholders
continue to realize the benefits of participation in a large and
diverse family of funds.
WHAT ARE THE COMMITTEES OF THE BOARD?
The standing Committees of the Board are the Audit Committee, the
Capitalization Committee, the Investments Committee and the Nominating and
Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for:
o considering management's recommendations of independent accountants
for each fund and evaluating such accountants' performance, costs and
financial stability;
o with AIM, reviewing and coordinating audit plans prepared by the
funds' independent accountants and management's internal audit staff;
and
o reviewing financial statements contained in periodic reports to
shareholders with the funds' independent accountants and management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for:
o increasing or decreasing the aggregate number of shares of any class
of the company's common stock by classifying and reclassifying the
company's authorized but unissued shares of common stock, up to the
company's authorized capital;
o fixing the terms of such classified or reclassified shares of common
stock; and
o issuing such classified or reclassified shares of common stock upon
the terms set forth in the applicable fund's prospectus, up to the
company's authorized capital.
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<PAGE> 14
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly,
Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr. Mathai-Davis. The
Investment Committee is responsible for:
o overseeing AIM's investment-related compliance systems and procedures
to ensure their continued adequacy; and
o considering and acting, on an interim basis between meetings of the
full Board, on investment-related matters requiring Board
consideration, including dividends and distributions, brokerage policy
and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for:
o considering and nominating individuals to stand for election as
independent directors as long as the company maintains a distribution
plan pursuant to Rule 12b-1 under the 1940 Act;
o reviewing from time to time the compensation payable to the
independent directors; and
o making recommendations to the Board regarding matters related to
compensation, including deferred compensation plans and retirement
plans for the independent directors.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as directors, provided (i) that such
person is a shareholder of record at the time he or she submits such names and
is entitled to vote at the meeting of shareholders at which directors will be
elected, and (ii) that the Nominating and Compensation Committee or the Board,
as applicable, shall make the final determination of persons to be nominated.
HOW OFTEN DOES THE BOARD MEET?
The Board typically conducts regular meetings nine times a year to review
the operations of the funds and of the other AIM funds. Typically, five of these
nine meetings are held in person, each over a two-day period. One or more
Committees of the Board generally meet in conjunction with each in-person
meeting of the Board. In addition, the Board or any Committee may hold special
meetings by telephone or in person to discuss specific matters that may require
action prior to the next regular meeting.
During the fiscal year ended December 31, 1999, the Board held 9 meetings,
the Audit Committee held 5 meetings, the Investments Committee held 4 meetings
and the Nominating and Compensation Committee held 5 meetings. The
Capitalization Committee did not meet. All of the current directors and
Com-
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<PAGE> 15
mittee members then serving attended at least 75% of the meetings of the Board
or applicable Committee, if any, held during the fiscal year ended December 31,
1999.
WHAT ARE THE DIRECTORS PAID FOR THEIR SERVICES?
Each director is reimbursed for expenses incurred in connection with each
meeting of the Board or any Committee attended. Each director who is not also an
officer of the company is compensated for his or her services according to a fee
schedule which recognizes the fact that such director also serves as a director
or trustee of all of the other AIM funds. Each such director receives a fee,
allocated among the AIM funds for which he or she serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued for
each director:
<TABLE>
<CAPTION>
TOTAL
RETIREMENT BENEFITS COMPENSATION
AGGREGATE COMPENSATION ACCRUED BY ALL FROM ALL
DIRECTOR FROM THE COMPANY(1) AIM FUNDS(2) AIM FUNDS(3)
-------- ------------------- ------------ ------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
Bruce L. Crockett 4,735 37,485 103,500
Owen Daly II 4,735 122,898 103,500
Edward K. Dunn Jr. 4,735 0 103,500
Jack M. Fields 4,634 15,826 101,500
Carl Frischling(4) 4,735 97,791 103,500
Robert H. Graham 0 0 0
Prema Mathai-Davis 4,655 0 101,500
Lewis F. Pennock 4,735 45,766 103,500
Ian W. Robinson(5) 1,304 94,442 25,000
Louis S. Sklar 4,655 90,232 101,500
</TABLE>
--------------------
(1) The total amount of compensation deferred by all directors of the company
during the fiscal year ended December 31, 1999, including earnings thereon,
was $31,806.
(2) During the fiscal year ended December 31, 1999, the total amount of
expenses allocated to the company in respect of such retirement benefits
was $6,864. Data reflects compensation for the calendar year ended December
31, 1999.
(3) Each independent director serves as director or trustee of twelve
registered investment companies advised by AIM. Data reflects total
compensation earned during the calendar year ended December 31, 1999.
(4) During the fiscal year ended December 31, 1999, the company paid $4,844 in
legal fees for services rendered by Kramer Levin Naftalis & Frankel LLP.
Mr. Frischling, a director of the company, is a partner in such firm.
(5) Mr. Robinson was a director until March 12, 1999, when he retired.
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<PAGE> 16
A I M Management Group Inc. (AIM Management) has requested proposals from
real estate development firms in the greater Houston area in connection with
exploring possible options upon the expiration of the lease of AIM Management's
current office space on December 31, 2003. Mr. Sklar is employed by Hines
Interests Limited Partnership (Hines). Two of Hines' affiliates, Hines Corporate
Properties, LLC and Sugarland Properties Incorporated (collectively, Hines
Affiliates), have each submitted office space proposals to AIM Management for
evaluation. Mr. Sklar would have an indirect financial interest, and may have a
direct equity interest, in these proposals. Since the Hines Affiliates'
proposals are among many being evaluated by AIM Management, it is not currently
possible to determine the extent of any such interest, or to determine whether
AIM Management will proceed with negotiations with Hines Affiliates on any
specific proposal.
AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees, each director (who is not an employee of any of the AIM
funds, AIM Management or any of their affiliates) may be entitled to certain
benefits upon retirement from the Board. Pursuant to such retirement plan, a
director becomes eligible to retire and to receive full benefits under the plan
when he or she has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the applicable
AIM funds). Each eligible director is entitled to receive an annual benefit from
the applicable AIM funds commencing on the first day of the calendar quarter
coincident with or following his or her date of retirement equal to a maximum of
75% of the annual retainer paid or accrued by the applicable AIM funds for such
director during the twelve-month period immediately preceding the director's
retirement (including amounts deferred under a separate agreement between the
applicable AIM funds and the director) and based on the number of such
director's years of service (not in excess of 10 years of service) completed
with respect to any of the applicable AIM funds. Such benefit is payable to each
eligible director in quarterly installments. If an eligible director dies after
attaining the normal retirement date but before receipt of all benefits under
the plan, the director's surviving spouse (if any) shall receive a quarterly
survivor's benefit equal to 50% of the amount payable to the deceased director
for no more than ten years beginning the first day of the calendar quarter
following the date of the director's death. Payments under the plan are not
secured or funded by any applicable AIM fund.
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<PAGE> 17
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming the retainer amount reflected
below and various years of service. The estimated credited years of service for
Messrs. Crockett, Daly, Dunn, Fields, Frischling, Pennock, Robinson and Sklar
and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 18, 11, 10 and 1 years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Annual Retirement
-----------------
Number of Years of Service Compensation Paid By All
-------------------------- ------------------------
With the Applicable AIM Funds Applicable AIM Funds
----------------------------- --------------------
<S> <C>
10 $67,500
9 $60,750
8 $54,000
7 $47,250
6 $40,500
5 $33,750
</TABLE>
DEFERRED COMPENSATION AGREEMENTS
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (the
deferring directors) have each executed a deferred compensation agreement.
Pursuant to the agreements, the deferring directors may elect to defer receipt
of up to 100% of their compensation payable by the company, and such amounts are
placed into a deferral account. Currently, the deferring directors may select
various AIM funds in which all or part of their deferral accounts shall be
deemed to be invested. Distributions from the deferring directors' accounts will
be paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the agreement) beginning on the date the
deferring director's retirement benefits commence under the plan. The Board, in
its sole discretion, may accelerate or extend the distribution of such deferral
accounts after the deferring director's termination of service as a director of
the company. If a deferring director dies prior to the distribution of amounts
in his or her deferral account, the balance of the deferral account will be
distributed to his or her designated beneficiary in a single lump sum payment as
soon as practicable after such deferring director's death. The agreements are
not funded and, with respect to the payments of amounts held in the deferral
accounts, the deferring directors have the status of unsecured creditors of the
company and of each other AIM fund from which they are deferring compensation.
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<PAGE> 18
WHAT ARE OFFICERS PAID FOR THEIR SERVICES?
The company does not pay its officers for the services they provide to the
company. Instead, the officers, who are also officers or employees of AIM or its
affiliates, are compensated by AIM Management or its affiliates.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 1?
----------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
----------------------------------------------------------------
PROPOSAL 2: APPROVAL OF AN AGREEMENT AND
PLAN OF REORGANIZATION TO REORGANIZE
THE COMPANY AS A DELAWARE BUSINESS TRUST
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 2 applies to shareholders of all funds.
WHAT AM I BEING ASKED TO APPROVE?
The company currently is organized as a Maryland corporation. The Board has
approved an Agreement and Plan of Reorganization (the plan), which provides for
a series of transactions to convert each fund of the company (a current fund) to
a corresponding series (a new fund) of a newly created open-end management
investment company organized as a business trust (the trust) under the Delaware
Business Trust Act. Under the plan, each current fund will transfer all its
assets to a new corresponding fund in exchange solely for voting shares of
beneficial interest in the new fund and the new fund's assumption of all the
current fund's liabilities (collectively, the reorganization). A form of the
plan relating to the proposed reorganization is in Appendix B. If Proposal 2 is
not approved by the shareholders, the company will continue to operate as a
Maryland corporation.
The reorganization is being proposed primarily to provide the company with
greater flexibility in conducting its business operations. The operations of
each new fund following the reorganization will be substantially similar to
those of its predecessor current fund, except that each new fund's advisory
agreement will conform to the changes proposed in Proposal 3, to the extent
Proposal 3 is approved; each new fund's sub-advisory agreement will conform to
the changes proposed in Proposal 4, to the extent Proposal 4 is approved; each
new fund's distribution plan with respect to its Class A and Class C shares will
conform to the changes proposed in Proposal 5, to the extent Proposal 5 is
approved; the fundamental investment restrictions for the new funds will conform
to the changes proposed in Proposal 6, to the extent that Proposal 6 is
approved; and the
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<PAGE> 19
investment objectives for the new funds will be changed and made non-fundamental
as proposed in Proposal 7, if Proposal 7 is approved. Finally, as described
below, the trust's Agreement and Declaration of Trust differs from the company's
Charter in certain respects that are expected to improve the company's and each
fund's operations.
WHAT ARE THE REASONS FOR THE PROPOSED REORGANIZATION?
The reorganization is being proposed because, as noted above, AIM and the
Board believe that the Delaware business trust organizational form offers a
number of advantages over the Maryland corporate organizational form. As a
result of these advantages, the Delaware business trust organizational form has
been increasingly used by mutual funds, including many AIM funds.
The Delaware business trust organizational form offers greater flexibility
than the Maryland corporate form. A Maryland corporation is governed by the
detailed requirements imposed by Maryland corporate law and by the terms of its
Charter. A Delaware business trust is subject to fewer statutory requirements.
The trust will be governed primarily by the terms of an Agreement and
Declaration of Trust (trust instrument). In particular, the trust will have
greater flexibility to conduct business without the necessity of engaging in
expensive proxy solicitations to shareholders. For example, under Maryland
corporation law, amendments to the company's Charter would typically require
shareholder approval. Under Delaware law, unless the trust instrument of a
Delaware business trust provides otherwise, amendments to it may be made without
first obtaining shareholder approval. In addition, unlike Maryland corporation
law, which restricts the delegation of a board of directors' functions, Delaware
law permits the board of trustees of a Delaware business trust to delegate
certain of its responsibilities. For example, the board of trustees of a
Delaware business trust may delegate the responsibility of declaring dividends
to duly empowered committees of the board or to appropriate officers. Finally,
Delaware law permits the trustees to adapt a Delaware business trust to future
contingencies. For example, the trustees may, without a shareholder vote, change
a Delaware business trust's domicile or organizational form. In contrast, under
Maryland corporation law, a company's board of directors would be required to
obtain shareholder approval prior to changing domicile or organizational form.
The reorganization will also have certain other effects on the company, its
shareholders and management, which are described below under the heading "How
Will the Trust Compare to the Company?"
WHAT WILL THE PROPOSED REORGANIZATION INVOLVE?
To accomplish the reorganization, the trust has been formed as a Delaware
business trust pursuant to its trust instrument, and each new fund has been
established as a series of the trust. On the closing date, each current fund
will transfer all of its assets to the corresponding classes of the new fund in
exchange
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<PAGE> 20
solely for a number of full and fractional Class A, Class B and Class C shares
of the new fund equal to the number of full and fractional shares of common
stock of the corresponding classes of the current fund then outstanding and the
new fund's assumption of the current fund's liabilities. Immediately thereafter,
each current fund will distribute those new fund shares to its shareholders in
complete liquidation and will, as soon as practicable thereafter, be terminated.
Upon completion of the reorganization, each shareholder of each current fund
will be the owner of full and fractional shares of the corresponding new fund
equal in number and aggregate net asset value to the shares he or she held in
the current fund.
The obligations of the company and the trust under the plan are subject to
various conditions stated therein. To provide against unforeseen events, the
plan may be terminated or amended at any time prior to the closing of the
reorganization by action of the Board, notwithstanding the approval of the plan
by the shareholders of the company. However, no amendments may be made that
would materially adversely affect the interests of shareholders of any current
fund. The company and the trust may at any time waive compliance with any
condition contained in the plan, provided that the waiver does not materially
adversely affect the interests of shareholders of any current fund.
The plan authorizes the company to acquire one share of each class of each
new fund and, as the sole shareholder of the trust prior to the reorganization,
to do each of the following:
o Approve with respect to each new fund a new investment advisory
agreement that will be substantially identical to that described in
Proposal 3. Information on the new advisory agreement, including a
description of the differences between it and the current advisory
agreement, is set forth below under Proposal 3. A form of the new
advisory agreement is in Appendix C. If Proposal 3 is not approved by
a current fund's shareholders, the trust will approve with respect to
such fund an investment advisory agreement that is substantially
identical to such fund's existing investment advisory agreement.
o Approve with respect to each new fund a new sub-advisory agreement
that will be substantially identical to that described in Proposal 4.
Information on the new sub-advisory agreements, including a
description of the differences between them and the current
sub-advisory agreements, is set forth below under Proposal 4. Forms of
the new sub-advisory agreements are in Appendix D. If Proposal 4 is
not approved by a current fund's shareholders, the trust will approve
with respect to such fund a sub-advisory agreement that is
substantially identical to such fund's existing sub-advisory
agreement.
o Assuming that Proposal 3 is approved by shareholders, approve with
respect to each new fund a new administrative services agreement with
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<PAGE> 21
AIM that will be substantially identical to the company's existing
administrative services agreement with AIM, except that it will
eliminate all references to the company's existing operating services
agreement with AIM. If Proposal 3 is not approved by a current fund's
shareholders, the trust will approve for such fund an operating
services agreement with AIM that will be substantially identical to
such fund's existing operating services agreement and an
administrative services agreement with AIM that is substantially
identical to such fund's existing administrative services agreement.
o Approve with respect to each new fund new distribution agreements with
A I M Distributors, Inc. The proposed distribution agreement for the
new funds' Class B shares will provide for substantially the same
distribution services as currently provided by A I M Distributors,
Inc. for the current funds' Class B shares. The proposed distribution
agreement for the new funds' Class A and Class C shares will be in the
form of agreement currently used by other retail funds distributed by
AIM Distributors, Inc. It will therefore differ from the current
funds' current Class A and Class C share distribution agreement,
although the services to be provided are substantially the same.
o Approve a new distribution plan under the 1940 Act with respect to
each class of each new fund. The proposed distribution plan for each
new fund's Class B shares will be substantially identical to the
corresponding current fund's existing distribution plan for its Class
B shares. The proposed distribution plan for each new fund's Class A
and Class C shares will be substantially identical to that described
in Proposal 5. Information on the new distribution plan for each new
fund's Class A and Class C shares, including a description of the
differences between it and the current distribution plan, is set forth
below under Proposal 5. A form of the new distribution plan for each
new fund's Class A and Class C shares is in Appendix E. If Proposal 5
is not approved by a current fund's shareholders, the trust will
approve for such fund a Class A and Class C share distribution plan
that will be substantially identical to such fund's existing Class A
and Class C share distribution plan.
o Approve with respect to each new fund a custodian agreement with State
Street Bank and Trust Company and a transfer agency and servicing
agreement with A I M Fund Services, Inc., each of which currently
provides such services to the corresponding current fund, and a
multiple class plan pursuant to Rule 18f-3 of the 1940 Act, all of
which will be substantially identical to the current agreement and
plan that exist for the corresponding current fund.
o Elect the directors of the company as the trustees of the trust to
serve without limit in time, except as they may resign or be removed
by action of the trust's trustees or shareholders, and except as they
retire in
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<PAGE> 22
accordance with the trust's retirement policy for trustees. The
trust's retirement policy for trustees is substantially identical to
the company's retirement policy for directors.
o Ratify the selection of KPMG LLP, the accountants for each current
fund, as the independent public accountants for each new fund.
o Approve such other agreements and plans as are necessary for each new
fund's operation as a series of an open-end management investment
company.
The trust's transfer agent will establish for each shareholder an account
containing the appropriate number of shares of each class of each new fund. Such
accounts will be identical in all respects to the accounts currently maintained
by the company's transfer agent for each shareholder of the current funds.
Shares held in the current fund accounts will automatically be designated as
shares of the new funds. Certificates for current fund shares issued before the
reorganization will represent shares of the corresponding new fund after the
reorganization. The trust will not normally issue share certificates. Any
account options or privileges on accounts of shareholders under the current
funds will be replicated on the new fund account.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION?
The company and the trust will receive an opinion of Ballard Spahr Andrews
& Ingersoll, LLP to the effect that the reorganization will constitute a
tax-free reorganization under section 368(a)(1)(F) of the Internal Revenue Code
of 1986, as amended. Accordingly, the current funds, the new funds and the
shareholders of the new funds will recognize no gain or loss for federal income
tax purposes as a result of the reorganization. Shareholders of the current
funds should consult their tax advisers regarding the effect, if any, of the
reorganization in light of their individual circumstances and as to state and
local consequences, if any, of the reorganization.
WILL I HAVE APPRAISAL RIGHTS?
Appraisal rights are not available to shareholders. However, shareholders
retain the right to redeem their shares of the current funds or the new funds,
as the case may be, at any time before or after the reorganization.
HOW WILL THE TRUST COMPARE TO THE COMPANY?
STRUCTURE OF THE TRUST
The trust has been established under the laws of the State of Delaware by
the filing of a certificate of trust in the office of the Secretary of State of
Delaware. The trust has established series corresponding to and having identical
designations as the series portfolios of the company. The trust has also
estab-
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<PAGE> 23
lished classes with respect to each new fund corresponding to and having
identical designations as the classes of each current fund. Each new fund will
have the same investment objectives, policies, and restrictions as its
predecessor current fund, except that the new funds' fundamental restrictions,
investment objectives, and fundamental policies will conform to the changes
proposed in Proposals 6 and 7 (assuming approval of each of these Proposals by
the shareholders). If either Proposal 6 or 7 is not approved by shareholders,
the new funds affected by the non-approval will continue to be subject to the
corresponding current funds' existing fundamental restrictions, investment
objectives, and fundamental policies, as applicable. The trust's fiscal year end
(July 31) is the same as that of the company, which recently changed its fiscal
year end. The trust will not have any operations prior to the reorganization.
Initially, the company will be the sole shareholder of the trust.
As a Delaware business trust, the trust's operations are governed by its
trust instrument and Bylaws and applicable Delaware law rather than by the
company's Charter and Amended and Restated Bylaws and applicable Maryland law.
Certain differences between the two domiciles and organizational forms are
summarized below. The operations of the trust will continue to be subject to the
provisions of the 1940 Act and the rules and regulations thereunder.
TRUSTEES AND OFFICERS OF THE TRUST
Subject to the provisions of the trust instrument, the business of the
trust will be managed by its trustees, who serve indefinite terms and who have
all powers necessary or convenient to carry out their responsibilities. The
responsibilities, powers and fiduciary duties of the trustees are substantially
the same as those of the directors of the company.
The trustees of the trust would be those persons elected at this meeting to
serve as directors of the company. Information concerning the nominees for
election as directors of the company, all of whom presently serve in such
positions, is set forth above under Proposal 1. The current officers of the
company, as well as certain AIM personnel, have been elected to serve as
officers of the trust and the current officers of the company will perform the
same functions following the reorganization that they now perform on behalf of
the company.
SHARES OF THE TRUST
The beneficial interests in the new funds will be represented by
transferable shares, par value $0.001 per share. Shareholders do not have the
right to demand or require the trust to issue share certificates, although the
trust, in its sole discretion, may issue them. The trustees have the power under
the trust instrument to establish new series and classes of shares; the
company's directors currently have a similar right. The trust instrument permits
the trustees to issue an unlimited number of shares of each class and series.
The company is
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<PAGE> 24
authorized to issue only the number of shares specified in the Charter and may
issue additional shares only with Board approval and after payment of a fee to
the State of Maryland on any additional shares authorized.
Each current fund currently has three classes of shares: Class A, Class B,
and Class C. The trust has established for each new fund the classes that
currently exist for its predecessor current fund. Except as discussed in this
proxy statement, shares of each class of the new funds will have rights,
privileges and terms substantially similar to those of the corresponding class
of the current funds.
SHAREHOLDER MEETING REQUIREMENTS
Maryland law provides that a special meeting of shareholders shall be
called upon the written request of shareholders holding at least 25% of the
company's shares. The company's Amended and Restated Bylaws allow a special
meeting of shareholders to be called upon the written request of shareholders
holding 10% of the company's shares. The trust's Bylaws provide that a special
meeting of shareholders for the purpose of voting on the removal of any trustee
may be called by the holders of 10% or more of the outstanding shares of the
trust.
The trust, like the company, will operate as an open-end management
investment company registered with the Securities and Exchange Commission (SEC)
under the 1940 Act. As permitted by SEC rules, the trust will adopt as its own
the registration statement of the company. Shareholders of the new funds
therefore will have the power to vote at special meetings with respect to, among
other things, changes in any fundamental investment objectives and the
fundamental restrictions and policies of the new funds; approval of certain
changes to investment advisory contracts and plans of distribution; and
additional matters relating to the trust required by the 1940 Act.
SHAREHOLDER VOTING RIGHTS
Under Maryland law, shareholders of the company have the right to vote on
the following matters: the substantive amendment or complete restatement of the
company's Charter; generally, a consolidation, merger, or share exchange
involving the company or a transfer of the company's assets not in the ordinary
course of business; and the voluntary or, in some cases, involuntary dissolution
of the company.
Shareholders of the trust will have only those voting rights that are
explicitly set forth in the trust instrument. Under the trust instrument,
shareholders of the trust have the right to vote on the following matters: the
election or removal of trustees, provided that a meeting of shareholders has
been called for that purpose; the termination of the trust or any fund or class,
provided that a meeting of shareholders has been called for that purpose,
unless there are fewer than 100 holders of record of the trust or such
terminating fund or class; the sale of all
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<PAGE> 25
or substantially all of the assets of the trust or any fund or class, unless the
primary purpose of such sale is to change the trust's domicile or organizational
form; under certain circumstances, the merger or consolidation of the trust or
any fund or class with and into another company or with and into another fund or
class of the trust; and the amendment of the section of the trust instrument
that governs shareholders' voting rights.
REMOVAL OF DIRECTORS AND TRUSTEES
The company's Charter permits removal of a director prior to the expiration
of his or her term of office for cause, and not otherwise, by the affirmative
vote of a majority of all votes entitled to be cast for the election of
directors. Under the trust instrument, a trustee may be removed by a written
instrument, signed by at least two-thirds of the number of trustees prior to
such removal, or by the affirmative vote of holders of two-thirds of the trust's
outstanding shares at a special meeting called for that purpose.
SHAREHOLDERS' RIGHTS OF INSPECTION
Maryland law provides generally that persons who have been shareholders of
record for six months or more and who own of record at least 5% of a current
fund's outstanding shares of any class may inspect that current fund's books of
account and stock ledger. Under the trust instrument and the trust's Bylaws, new
fund shareholders who have held shares of record for at least six months and who
hold at least 5% of the outstanding shares of any class of a new fund are
permitted, upon written request, to inspect a list of the shareholders of that
class.
SHAREHOLDER LIABILITY
Maryland law provides that a shareholder is not obligated to the company
with respect to the stock held therein, except to the extent that (1) the
subscription price or other agreed consideration for the stock has not been paid
(subject to limited exceptions); (2) the shareholder knowingly accepted an
illegal distribution; or (3) the shareholder is subject to any liability imposed
by law upon the dissolution, voluntary or involuntary, of the company.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations; however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. However, the trust instrument disclaims
shareholder liability for acts or obligations of the trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the trust or the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the trust. The trust instrument provides
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<PAGE> 26
for indemnification out of the property of a new fund for all losses and
expenses of any shareholder of such new fund held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss due to shareholder liability is limited to circumstances in which a new
fund would be unable to meet its obligations and the complaining party was held
not to be bound by the liability disclaimer.
LIABILITY OF DIRECTORS AND TRUSTEES
Under its Charter, the company limits the liability of and indemnifies its
present and past directors and officers to the maximum extent permitted by
Maryland law and the 1940 Act. Directors may be personally liable to the company
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of their duties or by reason of reckless disregard of their duties
as directors. In the event of any litigation or other proceeding against a
director or officer of the company, Maryland law permits the company to
indemnify the director or officer for certain expenses and to advance money for
such expenses unless (a) it is established that the act or omission of the
director or officer was material to the matter giving rise to the proceeding and
the act or omission was committed in bad faith or was the result of active and
deliberate dishonesty; (b) the director or officer actually received an improper
personal benefit in money, property or services; or (c) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe the
act or omission was unlawful.
The trust instrument provides indemnification for current and former
trustees, officers, employees and agents of the trust to the fullest extent
permitted by Delaware law, the trust's Bylaws and other applicable law. Trustees
of the trust may be personally liable to the trust and its shareholders by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of their duties or by reason of reckless disregard of their duties as trustees.
AMENDMENT OF CHARTER AND TRUST INSTRUMENT
Under the company's Charter and Maryland law, the Charter may be amended
upon (a) adoption by the Board of a resolution setting forth the proposed
amendment and declaring that such amendment is advisable and (b) approval of
such resolution by the holders of a majority of the company's outstanding
shares. The trust instrument may be amended by a majority of the trustees
without any shareholder vote, except that the shareholders will have the right
to vote on any amendment that affects their voting rights, that reduces the
indemnification provided to shareholders or former shareholders, that is
required to have shareholder approval by law or by the trust instrument, or that
is submitted to the shareholders by the trustees.
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<PAGE> 27
ACTION BY DIRECTORS AND TRUSTEES
Under the company's Charter, the directors of the company may act by
unanimous written consent instead of holding a meeting. Under the trust
instrument, the trustees of the trust may act by written consent of at least
seventy-five percent of the trustees instead of holding a meeting.
INDEPENDENT OR DISINTERESTED TRUSTEES
The trust instrument provides that a trustee who is not an interested
person of the trust (as defined in the 1940 Act) shall be deemed to be
independent and disinterested under the Delaware Business Trust Act and other
applicable Delaware law when making any determinations or taking any action as a
trustee. The trust instrument further provides that service by a person as a
trustee or director of one or more trusts, corporations or other entities of a
fund complex (as defined in the 1940 Act) shall not be considered in determining
whether a trustee is independent or disinterested under the Delaware Business
Trust Act and other applicable law. The company's Charter does not contain these
provisions, although Section 2-405.3 of the Maryland General Corporation Law
provides that directors of the company that are not interested persons (as
defined in the 1940 Act) shall be deemed to be independent and disinterested
when making any determination or taking any action as a director.
The foregoing is only a summary of certain differences between and among
the company's Charter and Amended and Restated Bylaws and Maryland law and the
trust instrument and the trust's Bylaws and Delaware law. It is not a complete
list of the differences. Shareholders should refer to the provisions of these
documents and state law directly for a more thorough comparison. Copies of the
Charter and Amended and Restated Bylaws of the company, and of the trust
instrument and the trust's Bylaws, are available to shareholders without charge
upon written request to the company or the trust.
WHEN WILL PROPOSAL 2 BE IMPLEMENTED?
Assuming your approval of Proposal 2, the company currently contemplates
that the reorganization will close on September 11, 2000. However, the
reorganization may close on another date if circumstances warrant.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 2?
----------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
----------------------------------------------------------------
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PROPOSAL 3: APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 3 applies to shareholders of all funds.
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve a new advisory agreement between AIM
and the company for your fund. The Board is asking you to vote on this new
agreement because the company may amend its advisory agreement only with
shareholder approval. A form of the company's proposed Master Investment
Advisory Agreement is in Appendix C. The proposed advisory agreement amends the
current advisory agreement primarily by:
o omitting references to the provision of operating and administrative
services to the funds;
o omitting certain expense limitations that are no longer applicable;
o clarifying existing non-exclusivity provisions;
o clarifying existing delegation provisions and expressly permitting AIM
to delegate its rights, duties and obligations to unaffiliated
sub-advisors;
o adding provisions regarding affiliated brokerage;
o adding certain provisions relating to certain functions to be
performed by AIM in connection with the funds' securities lending
program;
o adding certain provisions limiting the liability of AIM and the funds;
o adding certain provisions limiting the liability of the company's
shareholders;
o omitting certain limitations on AIM's ability to receive advisory
fees;
o omitting certain prohibitions on activities by AIM;
o revising the description of the costs and expenses to be borne by the
funds; and
o making certain miscellaneous changes to conform the current advisory
agreement to AIM's uniform model investment advisory agreement.
At meetings held on May 9 and 10, 2000, the Board voted to recommend that
you approve a Proposal to adopt the new advisory agreement.
WHO IS THE FUNDS' INVESTMENT ADVISOR?
AIM became the investment advisor for each of the funds on the dates
indicated in Appendix F. The current Investment Advisory Agreement, as
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amended, was executed and the funds' shareholders last voted on such agreement,
on the dates indicated in Appendix F. The Board, including a majority of the
independent directors, last approved the current advisory agreement at meetings
held on May 9 and 10, 2000.
AIM is a wholly owned subsidiary of AIM Management, a holding company that
has been engaged in the financial services business since 1976. The address of
AIM and AIM Management is 11 Greenway Plaza, Suite 100, Houston, Texas 77046.
AIM was organized in 1976, and, together with its subsidiaries, advises or
manages approximately 120 investment portfolios encompassing a broad range of
investment objectives. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, United Kingdom. AMVESCAP
PLC and its subsidiaries are an independent investment management group engaged
in institutional investment management and retail mutual fund businesses in the
United States, Europe and the Pacific region. A list of the principal executive
officer and the directors of AIM is in Appendix G.
DO ANY OF THE COMPANY'S DIRECTORS OR EXECUTIVE OFFICERS HOLD POSITIONS WITH AIM?
Charles T. Bauer, Robert H. Graham, Gary T. Crum, Carol F. Relihan,
Melville B. Cox and Dana R. Sutton, all of whom are directors and/or executive
officers of the company, also are directors and/or officers of AIM. Each of them
also beneficially owns shares of AMVESCAP PLC and/or options to purchase shares
of AMVESCAP PLC. Additional information concerning these affiliations is in
Appendix M.
WHAT ARE THE TERMS OF THE CURRENT ADVISORY AGREEMENT?
Under the current advisory agreement, AIM, subject to the supervision of
the Board and in conformance with the stated policies of the funds, manages the
investment operations of the funds. In this regard, it is AIM's responsibility
not only to make investment decisions for the funds but also to place the
purchase and sale orders for the portfolio transactions of the funds. The
current advisory agreement provides that, in fulfilling its responsibilities,
AIM may engage the services of other investment managers with respect to one or
more of the funds. In accordance with policies established by the Board, AIM may
take into account sales of shares of the funds and other funds advised by AIM in
selecting broker-dealers to effect portfolio transactions on behalf of the
funds.
AIM is also responsible for furnishing to the funds, at AIM's expense, the
services of persons believed to be competent to perform all supervisory and
administrative services required by the funds, in the judgment of the directors,
to conduct their respective businesses effectively, as well as the offices,
equipment and other facilities necessary for their operations. Such functions
include the maintenance of each fund's accounts and records and the preparation
of all
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requisite corporate documents such as tax returns and reports to the SEC and
shareholders. Operational services which are necessary for the day-to-day
operations of the funds currently are provided for under a separate operating
services agreement between the company and AIM.
The current advisory agreement provides that AIM will pay or cause to be
paid all of the costs and expenses associated with the company's operations and
activities, except those expressly assumed by the company. Expenses assumed by
the company include:
o all broker's commissions, issue and transfer taxes, and other costs
chargeable to the company in connection with securities transactions
to which the company is a party or in connection with securities owned
by the company's series;
o the interest on indebtedness, if any, incurred by the company;
o extraordinary expenses, including unexpected franchise or income
taxes, or business license and other corporate fees (not including SEC
and state securities registration fees) that are not anticipated which
the company will be required to pay to federal, state, county, city or
other governmental agents, and fees and disbursements of fund counsel
in connection with litigation by or against the company;
o the expenses of distributing shares of the company by only if and to
the extent permissible under a plan of distribution adopted by the
fund pursuant to Rule 12b-1 under the Investment Company Act; and
o all fees paid by the company for operational services which are
necessary for the day to day operations of the company's series under
the operating services agreement.
The current advisory agreement will continue in effect from year to year
for each fund only if such continuance is specifically approved at least
annually by (i) the Board or the vote of a majority of the outstanding voting
securities of that fund (as defined in the 1940 Act), and (ii) the affirmative
vote of a majority of independent directors by votes cast in person at a meeting
called for such purpose. The current advisory agreement provides that the Board,
a majority of the outstanding voting securities of a fund or AIM may terminate
the agreement for a fund on 60 days' written notice without penalty. The
agreement terminates automatically in the event of its assignment.
The annual rates at which AIM receives fees from each fund under the
current advisory agreement, as well as the dollar amounts of advisory fees net
of any expense limitations or fee waivers, paid to AIM by each fund and the
dollar amount of advisory fees (if any) waived by AIM for each fund for the
fiscal period or year ended December 31, 1999, are in Appendix H.
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CAN AIM DELEGATE ANY OF ITS DUTIES UNDER THE ADVISORY AGREEMENT?
The current advisory agreement permits AIM, upon receipt of the company's
written approval, to make use of its affiliated companies and their employees.
AIM has delegated to two affiliated sub-advisors certain of its obligations
under the current advisory agreement. See Proposal 4 for information concerning
the funds' sub-advisors and sub-advisory agreements, including the fees payable
thereunder.
WHAT ADDITIONAL SERVICES ARE PROVIDED BY AIM AND ITS AFFILIATES?
AIM and its affiliates also provide additional services to the company and
the funds. AIM currently provides or arranges for the provision of operating
services to the funds pursuant to an operating services agreement with the
company. AIM also provides or arranges for others to provide administrative
services to the funds pursuant to an administrative services agreement with the
company. A I M Distributors, Inc. serves as the principal underwriter for each
of the Class A, Class B and Class C shares of the funds, and A I M Fund
Services, Inc. serves as the funds' transfer agent. These companies are wholly
owned subsidiaries of AIM. Information concerning fees paid to AIM and its
affiliates for these services is in Appendix I.
WHAT ADVISORY FEES DOES AIM CHARGE FOR SIMILAR FUNDS IT MANAGES?
The advisory fee schedules for other funds advised by AIM with similar
investment objectives as the funds are in Appendix J.
WHAT ARE THE TERMS OF THE PROPOSED ADVISORY AGREEMENT?
The primary differences between the current advisory agreement and the
proposed advisory agreement that the Board approved are:
o To omit references to the provision of operating and administrative
services to the funds by AIM, because such services are covered by a
separate administrative services agreement between AIM and the
company;
o To omit certain expense limitations that are no longer applicable;
o To clarify non-exclusivity provisions that are set forth in the
current advisory agreement;
o To clarify delegation provisions that are set forth in the current
advisory agreement and to expressly permit AIM to delegate its rights,
duties and obligations to unaffiliated sub-advisors;
o To add provisions regarding affiliated brokerage;
o To add certain provisions relating to certain functions to be
performed by AIM in connection with the funds' securities lending
program;
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o To add certain provisions limiting the liability of AIM and the funds;
o To add certain provisions limiting the liability of shareholders of
the company;
o To omit certain limitations on AIM's ability to receive advisory fees;
o To omit certain prohibitions on activities by AIM;
o To revise the description of the costs and expenses to be borne by the
fund; and
o To make certain miscellaneous changes to conform the current advisory
agreement to AIM's uniform model investment advisory agreement.
Each of these changes is discussed more fully below. Except for these
changes, the terms of the current advisory agreement and the proposed advisory
agreement are substantially similar, except for the effective dates and the
renewal dates.
ADMINISTRATIVE AND OPERATING SERVICES
The current advisory agreement requires AIM to provide or arrange for the
provision of certain operating and administrative services to the funds. These
services are described in an Amended and Restated Operating Services Agreement
dated as of July 1, 1999 and a Master Administrative Services Agreement dated
July 1, 1999. The Board proposes to separate the advisory services and the
operating and administrative services that AIM provides to the company, so that
the provision of all operating and administrative services is dealt with solely
in the Master Administrative Services Agreement. As a result, the proposed
advisory agreement omits all references to the Amended and Restated Operating
Services Agreement and the Master Administrative Services Agreement. This
omission will not change the operating or administrative services that AIM
provides to the company or the compensation AIM receives for providing such
services. Neither the proposed advisory agreement nor the new administrative
services agreement will include AIM's current contractual obligation under the
Amended and Restated Operating Services Agreement to reduce its fees or
reimburse expenses for any fund to the extent necessary to ensure that the
aggregate fees and expense reimbursements paid to all persons who provide
operating services to such fund do not exceed 0.45% of the fund's average daily
net assets on an annual basis. However, these aggregate fees and expense
reimbursements have not exceeded 0.45% for any fund in the past and are not
expected to exceed 0.45% for any fund in the future. As a result, the Board
believes that this change is a matter of form rather than a substantive change
in the relationship between AIM and the company.
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EXPENSE LIMITATIONS
The current advisory agreement requires AIM to reimburse the funds on an
annual basis for the excess of the funds' expenses over certain annual expense
limitations set forth in securities regulations of the states in which the
funds' shares are qualified for sale. States can no longer impose expense
limitations because federal law has pre-empted these state regulations.
Accordingly, the Board believes that this expense limitation provision should be
omitted from the proposed advisory agreement.
NON-EXCLUSIVITY PROVISIONS
The current advisory agreement provides that AIM does not owe an exclusive
duty to the company. The current advisory agreement expressly permits AIM to
render investment advisory, administrative and other services to other entities
(including investment companies). The current advisory agreement also provides
that the directors, officers, employees and shareholders of the company may
serve as directors, officers, employees or shareholders of AIM and its
affiliates and that the directors, officers, employees and shareholders of AIM
and its affiliates may serve as directors, officers or employees of the company.
The Board believes that the non-exclusivity provision in the current advisory
agreement should be divided into two separate provisions: one dealing with AIM
and the other dealing with officers and directors of AIM and the company. The
Board also believes that the non-exclusivity provision dealing with officers and
directors of the company should be expanded to expressly permit the officers and
directors of AIM to serve as partners, officers, directors or trustees of any
other firm or trust, including other investment advisory companies.
The non-exclusivity provisions of the proposed advisory agreement are
similar to the provision in the current advisory agreement. However, the
proposed advisory agreement explicitly states that the company recognizes that
AIM's obligations to other clients may adversely affect the company's ability to
participate in certain investment opportunities.
DELEGATION
Although the current advisory agreement permits AIM to use its affiliated
companies and their employees to render the services required to be performed
under the advisory agreement, the current advisory agreement does not expressly
permit AIM to delegate its rights, duties and obligations to unaffiliated
sub-advisors. The proposed advisory agreement expands the extent to which AIM
can delegate its rights, duties and obligations by expressly providing that AIM
may delegate any or all of its rights, duties or obligations under the agreement
to one or more sub-advisors, regardless of whether the sub-advisors are
affiliated with AIM. It also provides that AIM may replace sub-advisors from
time to time in accordance with applicable federal securities laws and rules and
regulations in effect or interpreted from time to time by the SEC or with
exemptive orders or
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other similar relief. If, in accordance with the laws, rules, interpretations
and exemptions, AIM is not required to seek shareholder approval of the
appointment of a sub-advisor, it may do so upon approval of the Board.
AFFILIATED BROKERAGE
Although AIM does not currently execute trades through brokers or dealers
that are affiliated with AIM, the proposed advisory agreement includes a new
provision that would permit such trades, subject to compliance with applicable
federal securities laws, rules, interpretations and exemptions.
SECURITIES LENDING
If a fund engages in securities lending, AIM will provide the fund
investment advisory services and related administrative services. The proposed
advisory agreement includes a new provision that specifies the administrative
services to be rendered by AIM if a fund engages in securities lending
activities, as well as the compensation AIM may receive for such administrative
services. Services to be provided include: (a) overseeing participation in the
securities lending program to ensure compliance with all applicable regulatory
and investment guidelines; (b) assisting the securities lending agent or
principal (the agent) in determining which specific securities are available for
loan; (c) monitoring the agent to ensure that securities loans are effected in
accordance with AIM's instructions and with procedures adopted by the Board; (d)
preparing appropriate periodic reports for, and seeking appropriate approvals
from, the Board with respect to securities lending activities; (e) responding to
agent inquiries; and (f) performing such other duties as may be necessary.
In accordance with an exemptive order issued by the SEC, before a fund may
participate in a securities lending program, the Board must approve such
participation. In addition, the Board must evaluate the securities lending
arrangements annually, and must determine that it is in the best interests of
the shareholders of the fund to invest in AIM-advised money market funds any
cash collateral a fund receives as security for the borrower's obligation to
return the loaned securities. If a fund invests the cash collateral in
AIM-advised money market funds, AIM will receive additional advisory fees from
these money market funds, because the invested cash collateral will increase the
assets of these funds and AIM receives advisory fees based upon the assets of
these funds.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the current advisory fee schedule. As
compensation for the related administrative services AIM will provide, a lending
fund shall pay AIM a fee equal to 25% of the net monthly interest or fee income
retained or paid to the fund from such activities. AIM currently intends to
waive this fee, and has agreed to seek Board approval prior to its receipt of
all or a portion of such fee.
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LIABILITY OF AIM AND THE COMPANY
The proposed advisory agreement includes a new provision that limits AIM's
liability to the company or the funds or any shareholder of the funds, absent
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties on the part of AIM or any of its officers, directors or
employees. The proposed advisory agreement also includes a new provision that
clarifies that no fund shall be liable for the obligations of another fund, and
the liability of AIM to one fund shall not automatically render AIM liable to
any other fund.
LIABILITY OF SHAREHOLDERS
The proposed advisory agreement expressly notes that AIM's obligations
under the agreement are not binding on any shareholders of the company
individually and that shareholders are entitled to the same limitation on
personal liability as shareholders of private corporations for profit.
LIMITATION ON ADVISORY FEES
The current advisory agreement provides that no advisory fee shall be paid
to AIM with respect to any of the funds' assets that are invested in any other
investment company for which AIM serves as investment advisor or sub-advisor.
The proposed advisory agreement would omit this provision and, by doing so,
would permit AIM to collect advisory fees with respect to assets of the funds
that are invested in certain affiliated money market funds that have AIM as an
investment advisor. AIM may invest the funds' assets in affiliated money market
funds for cash management purposes. Investments of the funds' assets in
affiliated money market funds will be governed by the terms of an exemptive
order that AIM has obtained from the SEC permitting such investments. This
exemptive order requires the Board to determine the appropriate level of fees
for AIM to receive with respect to the funds' assets that are invested in
affiliated money market funds.
CERTAIN ACTIVITIES BY AIM
The current advisory agreement provides that, in connection with purchases
or sales of securities for the funds, neither AIM nor its officers or employees
will either act as principal or agent for any party other than the funds or
receive any commissions. The proposed advisory agreement would omit this
provision and will instead require AIM to comply with all applicable provisions
of the 1940 Act and any rules and regulations adopted thereunder. The 1940 Act
would generally prohibit or limit these types of transactions.
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COSTS AND EXPENSES
The current advisory agreement requires AIM to pay all of the costs and
expenses associated with the company's operations and activities, except for
certain costs and expenses expressly assumed by the company under the agreement.
In contrast, the proposed advisory agreement would provide that all of the
ordinary business expenses incurred in the operations of the funds and the
offering of their shares shall be borne by the funds unless specifically
provided otherwise in the agreement. The proposed advisory agreement includes a
list of various types of expenses to be borne by the funds. Although this list
and the list of costs and expenses expressly assumed by the company under the
current advisory agreement are not identical, the types and categories of
expenses to be borne by the funds are generally the same. One exception is that
under the current advisory agreement, the company has expressly assumed the
expenses of distributing the funds' shares if and to the extent permissible
under a distribution plan adopted by the company pursuant to Rule 12b-1 under
the 1940 Act. The proposed advisory agreement does not expressly include
distribution expenses in the list of expenses to be borne by the funds, although
the funds will continue to bear distribution expenses under the proposed
advisory agreement as permitted by Rule 12b-1 under the 1940 Act.
Also, the current advisory agreement states that AIM shall bear the costs
and expenses of all personnel, facilities, equipment and supplies reasonably
necessary to provide the services required under the agreement. The proposed
advisory agreement would omit this provision because it is implicit in the
agreement.
MISCELLANEOUS CHANGES
If shareholders approve the proposed advisory agreement, the agreement
would also differ from the current advisory agreement in the following ways:
o The proposed advisory agreement would require AIM to give the company
and the funds the benefit of its best judgment, efforts and facilities
in acting as investment advisor. The current advisory agreement does
not explicitly include this provision.
o The proposed advisory agreement would deem AIM and any sub-advisors to
be independent contractors and would state that they have no authority
to act for or represent the company in any way or otherwise be deemed
to be an agent of the company. The current advisory agreement does not
explicitly include this provision.
o The proposed advisory agreement would state that any investment
program undertaken by AIM, as well as any other activities undertaken
by AIM on behalf of the funds, shall at all times be subject to any
directives of the Board. The current advisory agreement does not
explicitly include this provision.
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o Amendments to the proposed advisory agreement will be effective if in
writing and signed by the party against which enforcement of the
amendment is sought. Amendments to the current advisory agreement will
be effective only if in writing and signed by both AIM and the
company.
WHAT FACTORS DID THE DIRECTORS CONSIDER IN APPROVING THE ADVISORY AGREEMENT?
At the request of AIM, the Board discussed the approval of the proposed
advisory agreement at meetings held in person on May 9 and 10, 2000. The
independent directors also discussed approval of the proposed advisory agreement
with independent counsel at that meeting. In evaluating the proposed advisory
agreement, the Board requested and received information from AIM to assist in
its deliberations.
The Board considered the following factors in determining the
reasonableness and fairness of the proposed changes to the current advisory
agreement with respect to each fund.
o The qualifications of AIM to provide investment advisory services. The
Board reviewed the credentials and experience of the officers and
employees of AIM who provide investment advisory services to the
funds, and noted that the persons providing services to the funds
would not change if the new advisory agreement is approved by
shareholders.
o The range of investment advisory services provided by AIM. The Board
reviewed the services to be provided by AIM under the new advisory
agreement, and noted that no changes in the level or type of services
provided by AIM would occur if the new advisory agreement is approved
by shareholders, other than the provision by AIM of certain
administrative services if a fund engages in securities lending.
o The qualifications of AIM to provide a range of management and
operating and administrative services. The Board reviewed the general
nature of the non-investment advisory services performed by AIM and
its affiliates, such as operating, administrative, transfer agency and
distribution services, and the fees received by AIM and its affiliates
for performing such services. In addition to reviewing such services,
the Board also considered the organizational structure employed by AIM
and its affiliates to provide those services. The Board reviewed the
proposed elimination from the new advisory agreement of references to
the provision by AIM of operating and administrative services. The
Board also reviewed the proposed form of administrative services
agreement, noted that the services to be provided under the existing
operating services agreement and existing administrative services
agreement and the proposed administrative services agreement are the
same, and concluded that the administrative services to be provided by
AIM would not change if all references
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to operating and administrative services were deleted from the new
advisory agreement.
o The performance record of the funds. The Board determined that AIM has
provided high quality services with respect to each fund, after
considering performance information that it received during the past
year from AIM regarding the funds. The Board also determined that each
fund's performance would not have been affected if the proposed
advisory agreement had been in effect during the past fiscal year,
since no changes to advisory fees are being proposed, other than to
permit AIM's receipt of fees for providing administrative services in
connection with securities lending and to permit AIM's receipt of fees
with respect to assets of the funds that are invested in affiliated
money market funds. Fees with respect to securities lending would be
paid only to the extent that a fund engages in securities lending, and
therefore are not paid if the fund does not engage in securities
lending. The Board noted that the funds do not currently engage in
securities lending, but that such arrangements provide the opportunity
for both the fund and AIM to obtain additional income. The Board noted
that AIM currently intends to waive its right to receive any fees
under the proposed investment advisory agreement for the
administrative services it may provide in connection with securities
lending activities. The Board also noted that AIM has agreed to seek
Board approval prior to its receipt of all or a portion of such fees.
The Board also noted that the Board must determine the appropriate
level of fees for AIM to receive with respect to assets of the funds
that are invested in affiliated money market funds.
o The profitability of AIM. The Board reviewed information concerning
the profitability of AIM's (and its affiliates') investment advisory
and other activities and its financial condition. The Board noted that
no changes to the advisory fees were being proposed, other than to
permit AIM's receipt of fees for providing administrative services in
connection with securities lending and to permit AIM's receipt of fees
with respect to assets of the funds that are invested in affiliated
money market funds. The Board further noted that AIM currently intends
to waive its right to receive any fees for providing administrative
services in connection with securities lending and has agreed to seek
Board approval prior to its receipt of all or a portion of such fees.
The Board noted that, in accordance with an exemptive order issued by
the SEC, the Board must determine the appropriate level of fees for
AIM to receive with respect to assets of the funds that are invested
in affiliated money market funds. The Board also noted that, in
accordance with a second exemptive order issued by the SEC, before a
fund may participate in a securities lending program, the Board must
approve such participation. In addition, the Board must evaluate the
securities lending arrangements annually and determine that it is in
the best interests of the shareholders of the fund to
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invest in AIM-advised money market funds any cash collateral a fund
receives as security for the borrower's obligation to return the
loaned securities. If a fund invests the cash collateral in
AIM-advised money market funds, AIM will receive additional advisory
fees from these money market funds, because the invested cash
collateral will increase the assets of these funds and AIM receives
advisory fees based upon the assets of these funds. The Board noted
that the cash collateral relates to assets of a fund that have already
been invested, and the investment of the cash collateral is intended
to benefit a fund by providing it with additional income. The Board
also noted that an investment of the cash collateral in an AIM-advised
money market fund would have a positive effect on the profitability of
AIM.
o The terms of the proposed agreement. The Board reviewed the terms of
the proposed agreement, including the changes discussed above. The
Board determined that these changes reflect the current environment in
which the funds operate, and that AIM should have the flexibility to
take advantage of that environment.
After considering the above factors, the Board concluded that it is in the
best interests of the funds and their shareholders to approve the new advisory
agreement.
The Board reached its conclusion after careful discussion and analysis. The
Board believes that it has carefully and thoroughly examined the pertinent
issues and alternatives. In recommending that you approve the proposed advisory
agreement, the independent directors have considered what they believe to be in
your best interests. In so doing, they were advised by independent counsel,
retained by the independent directors and paid for by the company, as to the
nature of the matters to be considered and the standards to be used in reaching
their decision.
WHEN WILL PROPOSAL 3 BE IMPLEMENTED?
If approved, the new advisory agreement will become effective on September
11, 2000 and will expire, unless renewed, on or before June 30, 2001. If
shareholders do not approve the proposed advisory agreement with respect to a
fund, the current advisory agreement will continue in effect for such fund.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 3?
--------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
--------------------------
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PROPOSAL 4: APPROVAL OF NEW SUB-ADVISORY AGREEMENTS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4 applies to shareholders of all funds.
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve for your fund a new sub-advisory
agreement between AIM and your fund's current sub-advisor. The Board is asking
you to vote on these new sub-advisory agreements because the sub-advisory
agreements may only be amended with shareholder approval. Forms of the proposed
Master Intergroup Sub-Advisory Contract for Mutual Funds between AIM and
INVESCO, Inc., and between AIM and INVESCO Global Asset Management (N.A.), Inc.
are in Appendix D.
At meetings held on June 13 and 14, 2000, the Board voted to recommend
that you approve a Proposal to adopt a new sub-advisory agreement for your fund.
WHO ARE THE FUNDS' SUB-ADVISORS?
The sub-advisor to Flex and Real Estate is INVESCO, Inc., a Delaware
corporation (INVESCO), which has its principal office at 1315 Peachtree Street,
N.E., Atlanta, Georgia 30309. The sub-advisor to International Value is INVESCO
Global Asset Management (N.A.), Inc., a Delaware corporation (IGAM), which has
its principal office at 1315 Peachtree Street, N.E., Atlanta, Georgia 30309.
Both INVESCO and IGAM are registered as investment advisors under the Investment
Advisers Act of 1940, as amended, and are indirect, wholly owned subsidiaries of
AMVESCAP PLC. INVESCO has acted as an investment advisor since 1979 and IGAM has
acted as an investment advisor since 1997.
INVESCO and IGAM became the sub-advisor for their respective fund or funds
on the dates indicated in Appendix F. The current Sub-Advisory Agreements, as
amended, were executed on the dates indicated in Appendix F. The Board,
including a majority of the independent directors, last approved the current
sub-advisory agreements at meetings held on May 9 and 10, 2000. A list of the
principal executive officer and the directors of each of INVESCO and IGAM is
in Appendix G.
Prior to June 19, 2000, INVESCO Global Asset Management, Limited, an
affiliate of IGAM, served as the sub-advisor to International Value. Effective
June 19, 2000, the current Sub-Advisory Agreement for International Value was
transferred from INVESCO Global Asset Management, Limited to IGAM, with IGAM
assuming the rights and obligations under the current Sub-Advisory Agreement.
The transfer occurred in connection with a corporate reorganization and did
not result in any change in the persons providing advisory services to the fund.
Prior to January 1, 2000, INVESCO Realty Advisors, Inc., an affiliate of
INVESCO, served as the sub-advisor to Real Estate. Effective January 1, 2000,
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the current Sub-Advisory Agreement for Real Estate was transferred from INVESCO
Realty Advisors, Inc. to INVESCO, with INVESCO assuming the rights and
obligations under the current Sub-Advisory Agreement. The transfer occurred in
connection with a corporate reorganization and did not result in any change in
the persons providing advisory services to the fund.
WHAT ARE THE TERMS OF THE CURRENT SUB-ADVISORY AGREEMENTS?
Under the current sub-advisory agreements, INVESCO provides general
investment advice and portfolio management to Flex and Real Estate and IGAM
provides general investment advice and portfolio management to International
Value. Under the terms of their current sub-advisory agreements with the funds,
the sub-advisors, subject to the supervision of the directors of the company and
in conformance with the stated policies of the funds, manage the investment
operations of the funds. The sub-advisors not only make investment decisions for
the funds, but also place the purchase and sale orders for the portfolio
transactions of the funds. The sub-advisors may follow a policy of considering
sales of shares of the company as a factor in the selection of broker-dealers to
execute portfolio transactions.
Specifically, the sub-advisors are required to perform the following
services under the current sub-advisory agreements:
o to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the funds and to execute all purchases and sales of
portfolio securities;
o to maintain a continuous investment program for the funds, consistent with
(i) the investment policies as set forth in the company's Charter, bylaws
and registration statement and (ii) the company's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended;
o to determine what securities are to be purchased or sold for the funds,
unless otherwise directed by the Board or AIM, and to execute transactions
accordingly;
o to provide to the funds the benefit of all of the investment analysis and
research, the reviews of current economic conditions and of trends, and the
consideration of long-range investment policy now or hereafter generally
available to investment advisory customers of the sub-advisor;
o to determine what portion of the funds should be invested in the various
types of securities authorized for purchase by the funds; and
o to make recommendations as to the manner in which voting rights, rights to
consent to company action and any other rights pertaining to the funds'
securities shall be exercised.
The current sub-advisory agreements will each continue from year to year
for each fund only if such continuance is specifically approved at least
annually by (i) the Board or the vote of a majority of the outstanding voting
securities of
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that fund (as defined in the 1940 Act), and (ii) the affirmative vote of a
majority of independent directors by votes cast at a meeting called for such
purpose. The sub-advisory agreements are terminable on 60 days' written notice
by either party thereto, by the Board, or by a vote of a majority of the
outstanding voting securities of a fund, and will terminate automatically if
assigned.
For the services to be rendered and the expenses to be assumed by INVESCO
and IGAM under the current sub-advisory agreements, AIM pays to each sub-advisor
a fee which is computed daily and paid as of the last day of each month on the
basis of each fund's daily net asset value, using for each daily calculation the
most recently determined net asset value of the fund. The annual rates at which
each sub-advisor receives fees from AIM under the current sub-advisory
agreements, as well as the dollar amounts of sub-advisory fees, net of any
expense limitations or fee waivers, paid to each sub-advisor or its predecessor
by AIM and the dollar amount of advisory fees (if any) waived by the
sub-advisors or their predecessors for each fund for the fiscal period or year
ended December 31, 1999 are in Appendix H.
HOW DO THE TERMS OF THE PROPOSED SUB-ADVISORY AGREEMENTS DIFFER FROM THE CURRENT
SUB-ADVISORY AGREEMENTS?
The proposed sub-advisory agreements differ from the current sub-advisory
agreements primarily because they:
o Clarify that the sub-advisor will provide a continuous investment program
to all or a portion of the securities, investments and cash of the
applicable fund. This change permits AIM to retain the right to manage all
or some of the assets. For example, AIM may retain the right to provide a
continuous investment program for each fund's cash.
o Explicitly acknowledge the sub-advisor's duty to maintain compliance
procedures for the applicable fund that the sub-advisor and AIM reasonably
believe are adequate to ensure the fund's compliance with the 1940 Act and
the investment objectives and policies of the fund.
o Eliminate the section entitled "Allocation of Charges and Expenses" in the
current sub-advisory agreements since this information was duplicative of
the terms in both the current and proposed advisory agreements and
unnecessary in the sub-advisory agreements.
o Revise the compensation section so that the sub-advisor would receive an
annual fee equal to a percentage of AIM's compensation on the sub-advised
assets. The current sub-advisory agreements provide that a sub-advisor
receives a percentage of average daily net assets.
o Expand the existing non-exclusivity provisions by providing that the
directors, officers and employees of the sub-advisor may engage in any
39
<PAGE> 43
other business or devote their time and attention in part to the management
or other aspects of any other business.
o Add provisions limiting the liability of the sub-advisor, absent willful
misfeasance, bad faith or gross negligence on the part of the sub-advisor
or reckless disregard by the sub-advisor of its obligations and duties
under the agreement
o Add provisions proportionately reducing the fee payable to the sub-advisor
or requiring the sub-advisor to proportionately reimburse AIM, as
applicable, in situations where AIM's compensation as advisor is reduced
because of contractual fee waivers or expense limitations.
o Permit amendments to the sub-advisory agreements to be effective if in
writing and signed by the party against which enforcement of the amendment
is sought, rather than requiring amendments to be signed by both parties.
o Omit certain limitations on the ability of the sub-advisor and its
directors, officers and employees to act as principal or agent for any
party other than the funds or to receive any commissions, as the proposed
sub-advisory agreements will cover this concept by requiring the
sub-advisors to comply with all applicable provisions of the 1940 Act and
any rules and regulations adopted thereunder.
o Omit certain limitations on the sub-advisor's ability to receive advisory
fees with respect to any of the funds' assets that are invested in any
other investment company for which the sub-advisor acts as investment
advisor or sub-advisor.
WHAT FEES ARE CHARGED BY THE SUB-ADVISORS TO SIMILAR FUNDS ADVISED BY THEM?
The advisory fee schedules for other funds advised by INVESCO and IGAM with
similar investment objectives as the funds are in Appendix J.
Except for the above changes, the terms of the current sub-advisory
agreements and the proposed sub-advisory agreements are substantially similar,
except for the effective dates and the renewal dates.
WHAT FACTORS DID THE DIRECTORS CONSIDER IN APPROVING THE SUB-ADVISORY
AGREEMENTS?
At the request of AIM the Board discussed the approval of the proposed
sub-advisory agreements at meetings in person held on June 13 and 14, 2000. The
independent directors also discussed approval of the proposed sub-advisory
agreements with independent counsel at that meeting. In evaluating the proposed
sub-advisory agreements, the Board requested and received information from AIM
and the sub-advisors to assist in its deliberations.
40
<PAGE> 44
The Board considered the following factors in determining the
reasonableness and fairness of the proposed changes in the current sub-advisory
agreements with respect to each fund.
o The qualifications of INVESCO and IGAM to provide sub-advisory
services. The Board reviewed the credentials and experience of the
officers and employees of INVESCO and IGAM who provide sub-advisory
services to the funds, and noted that the persons providing services
to the funds would not change if the new sub-advisory agreements are
approved by shareholders.
o The range of sub-advisory services provided by the sub-advisors. The
Board reviewed the services to be provided by the sub-advisors under
the new sub-advisory agreements, and noted that no changes in the
level or type of services provided by the sub-advisors would occur if
the new sub-advisory agreements are approved by shareholders.
o The fees payable to the sub-advisors for their services. The Board
noted that the compensation payable to the sub-advisors would change
under the proposed sub-advisory agreements. If the proposed
sub-advisory agreements are approved, each sub-advisor will receive
compensation based on that portion of the assets of a fund that it
manages (the sub-advised assets), rather than on all assets of a fund.
In addition, the fees paid would be a percentage of the advisory fees
that AIM receives on the sub-advised assets, rather than a percentage
of the average daily net assets of the fund. The Board noted that
these changes had been agreed to by AIM and the sub-advisors, as well
as by AMVESCAP, the indirect parent of AIM and the sub-advisors. The
Board also noted that the proposed changes to the compensation to the
sub-advisors had no effect on the fund, since the fees are payable by
AIM.
o The performance record of the funds. The Board determined that the
sub-advisors have provided high quality services with respect to the
funds, after considering performance information that it received
during the past year from the sub-advisors regarding the funds. The
Board also determined that each fund's performance would not have been
affected if the proposed sub-advisory agreements had been in effect
during the past fiscal year, since no changes to the sub-advisory fees
are being proposed other than providing that the sub-advisors will
receive an annual fee equal to a percentage of AIM's compensation on
the sub-advised assets, as opposed to a percentage of average daily
net assets. The Board noted that the proposed change in the
sub-advisors' compensation will not affect the compensation that the
funds pay to AIM as investment advisor and, therefore, will not have
any effect on the performance of the funds.
o The profitability of the sub-advisors. The Board reviewed information
concerning the profitability of each sub-advisor's (and its
affiliates')
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<PAGE> 45
investment advisory and other activities and its financial condition.
The Board noted that no changes to the sub-advisory fees were being
proposed other than providing that the sub-advisors will receive an
annual fee equal to a percentage of AIM's compensation on the
sub-advised assets, as opposed to a percentage of average daily net
assets. The Board noted that the change to the sub-advisory fees may
reduce the amounts payable to the sub-advisors, but that the
sub-advisors had assured the Board that any potential reduction would
not affect the nature or quality of the services provided by the
sub-advisors to the funds. The Board also noted that the proposed
change in the sub-advisors' compensation will not affect the
compensation that the funds pay to AIM as investment advisor.
o The terms of the proposed agreements. The Board reviewed the terms of
the proposed agreements, including the changes discussed above. The
Board determined that these changes reflect the current environment in
which the funds operate, and that the sub-advisors should have the
flexibility to take advantage of that environment.
After considering the above factors, the Board concluded that it is in the
best interests of the funds and their shareholders to approve the new
sub-advisory agreements.
The Board reached its conclusion after careful discussion and analysis. The
Board believes that it has carefully and thoroughly examined the pertinent
issues and alternatives. In recommending that you approve the proposed
sub-advisory agreements, the independent directors have considered what they
believe to be in your best interests. In so doing, they were advised by
independent counsel, retained by the independent directors and paid for by the
company, as to the nature of the matters to be considered and the standards to
be used in reaching their decision.
WHEN WILL PROPOSAL 4 BE IMPLEMENTED?
If approved, the new sub-advisory agreements will become effective on
September 11, 2000 and will expire, unless renewed, on or before June 30, 2001.
If shareholders do not approve a proposed sub-advisory agreement with respect to
a fund, the current sub-advisory agreement will continue in effect for such
fund.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 4?
---------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
---------------------------------------------------------
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<PAGE> 46
PROPOSAL 5: APPROVAL OF A NEW DISTRIBUTION PLAN
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 5 applies to holders of Class A, B and C shares of the funds. The
new distribution plan is for the Class A and Class C shares of the funds.
Holders of Class B shares are being asked to approve the new plan, however,
because Class B shares automatically convert to Class A shares at the end of
the month in which the eighth anniversary of the purchase of Class B shares
occurs.
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve a new distribution plan pursuant to
Rule 12b-1 of the 1940 Act for the Class A and Class C shares of your fund. This
new distribution plan is the form of distribution plan adopted by other retail
funds having A I M Distributors, Inc. (AIM Distributors) as their distributor
(AIM Distributors funds). The Board believes that having the funds and other AIM
Distributors funds operate pursuant to similar plans will enhance operating
efficiencies of the funds and AIM Distributors. The new distribution plan would
not increase the maximum rate of fees that may be paid pursuant to the plan. A
form of the company's proposed Master Distribution Plan (Class A and Class C
Shares) is in Appendix E.
At meetings held on May 9 and 10, 2000, the Board voted to recommend that
you approve the new distribution plan.
WHAT ARE THE TERMS OF THE CURRENT DISTRIBUTION PLAN?
The current distribution plan for the funds' Class A and Class C shares, as
amended, was adopted by the company on August 4, 1997. The current distribution
plan was last amended on June 21, 1999.
The current distribution plan provides that each fund may incur certain
distribution and marketing fees which may not exceed a maximum annual rate of
0.35% of the average net assets attributable to Class A shares and 1.00% of the
average net assets attributable to Class C shares. For both Class A and Class C
shares, this expense includes the payment of 0.25% of average annual net assets
to broker-dealers and other qualifying financial institutions as a "service fee"
for providing account maintenance or personal service to existing shareholders.
The plan authorizes each applicable fund, subject to the annual limitations
described above, to pay AIM Distributors (or other broker-dealers): (1) the
costs and expenses incurred in preparation, printing and distribution of the
company's sales literature and prospectuses and statements of additional
information for prospective investors; (2) amounts from time to time to support
marketing shares of the company through programs with broker-dealers selling
company shares; and (3) overhead expenses which include the costs of AIM
Distributors' personnel whose primary responsibilities involve marketing the
company. In addition, the plan provides that the company may pay, subject to the
annual limitations, such other distribution costs and expenses as the Board may
from time to time specify.
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<PAGE> 47
The current distribution plan will continue in effect from year to year for
each fund or class thereof only if such continuance is specifically approved at
least annually by (i) the Board or the vote of a majority of the outstanding
voting securities of that fund or class (as defined in the 1940 Act), and (ii)
the affirmative vote of a majority of independent directors by votes cast in
person at a meeting called for such purpose. The current distribution plan
provides that a majority of the independent directors or a majority of the
outstanding voting securities of a fund may terminate the plan for a class or a
fund without penalty.
The amount of distribution and services fees paid to AIM Distributors by
the company pursuant to the current distribution plan with respect to the Class
A and Class C shares of each fund for the fiscal period or year ended December
31, 1999, both in the aggregate and as a percentage of each fund's average net
assets during the period, are as follows:
<TABLE>
<CAPTION>
Aggregate Percentage of
Amount Average Net Assets
------ ------------------
<S> <C> <C>
Class A
AIM Advisor Flex Fund $ 113,871* 0.25%
AIM Advisor International Value Fund 67,620* 0.25%
AIM Advisor Real Estate Fund 47,262* 0.25%
Class C
AIM Advisor Flex Fund $6,967,734 1.00%
AIM Advisor International Value Fund 993,935 1.00%
AIM Advisor Real Estate Fund 263,496 1.00%
</TABLE>
---------------
* Net of fee waivers
The following table shows those broker-dealers who received from AIM
Distributors 10% or more of the foregoing aggregate amounts paid under the
current distribution plan:
<TABLE>
<CAPTION>
Aggregate Percentage of
Amount Average Net Assets
------ ------------------
<S> <C> <C>
AIM Advisor Flex Fund
Class A:
Merrill Lynch Pierce Fenner and Smith, Inc. $ 27,810 24.42%
Pershing & Co. $ 29,191 25.63%
AIM Advisor International Value Fund
Class A:
Merrill Lynch Pierce Fenner and Smith, Inc. $ 8,532 12.62%
Morgan Keegan $ 25,221 37.29%
Class C:
Merrill Lynch Pierce Fenner and Smith, Inc. $444,140 44.69%
</TABLE>
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<PAGE> 48
WHAT ARE THE TERMS OF THE PROPOSED DISTRIBUTION PLAN?
The primary differences between the current distribution plan for the
funds' Class A and Class C shares and the proposed distribution plan that the
Board approved are:
o To change the way payments are made under the plan. Under the proposed
plan, AIM Distributors will retain in full the amount, if any, that
the distribution fees paid to it by a fund exceed the amount spent by
AIM Distributors to provide the services specified in the plan. Any
excess will be treated as compensation to AIM Distributors. Under the
current plan AIM Distributors and its service providers are required
to return to a fund the amount, if any, that the distribution or
service fees paid to them by a fund exceed the amount spent by them to
provide the services specified in the plan.
o To omit provisions of the plan that are in effect a distribution
agreement, because these provisions are covered in the separate
distribution agreement between the company and AIM Distributors.
o To conform the various activities and services to be provided by AIM
Distributors under the plan to the activities and services AIM
Distributors provides to the other AIM funds.
o To specify the types of service agreements that AIM Distributors may
enter into with broker-dealers, banks, insurance companies and other
entities.
o To omit references to certain activities that the company and AIM
Distributors are required to perform, when the company and AIM
Distributors are otherwise required by law to perform those
activities.
o To make certain miscellaneous changes to conform the current
distribution plan to AIM Distributors' uniform model distribution plan
used by the other AIM funds.
Except for the above changes, the terms of the current distribution plan
and the proposed distribution plan are substantially similar, except for the
effective dates and the renewal dates.
COMPARATIVE EXPENSE INFORMATION
The amounts that would have been paid had the new plan been in effect
during the last fiscal year would not differ from actual amounts paid under the
current plan.
WHAT FACTORS DID THE DIRECTORS CONSIDER IN APPROVING THE DISTRIBUTION PLAN?
At the request of AIM, the Board discussed the approval of the proposed
distribution plan for the funds' Class A and C shares at meetings held in
person
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<PAGE> 49
on May 9 and 10, 2000. The independent directors also discussed approval of the
proposed distribution plan with independent counsel at those meetings. In
evaluating the proposed distribution plan, the Board requested and received
information from AIM Distributors to assist in its deliberations.
The Board considered the following factors in determining the
reasonableness and fairness of the proposed changes to the current distribution
plan with respect to each fund.
o The qualifications of AIM Distributors to provide distribution
services with respect to the funds' Class A and Class C shares. The
Board reviewed the credentials and experience of the officers and
employees of AIM Distributors who provide distribution services to the
funds, and noted that the persons providing services to the funds
would not change if the new distribution plan is approved by
shareholders.
o The range of distribution services provided by AIM Distributors. The
Board reviewed the services to be provided by AIM Distributors under
the new distribution plan, and noted that AIM Distributors had
represented that no changes in the level or type of services provided
by AIM Distributors would occur if the new distribution plan is
approved by shareholders.
o The profitability of AIM Distributors. The Board reviewed information
concerning the profitability of AIM Distributors' distribution and
other activities and its financial condition. The Board noted that the
new distribution plan would not increase the maximum rate of fees that
may be paid under the plan. The Board also noted that the possibility
exists that expenses incurred by AIM Distributors and for which it is
entitled to be reimbursed under the current plan may be less than the
fee it will receive under the new plan.
o The terms of the proposed distribution plan. The Board reviewed the
terms of the proposed distribution plan, including the changes
discussed above. The Board determined that these changes reflect the
current plans in effect for other funds distributed by AIM
Distributors, and that AIM Distributors may be more productive for the
funds if it can operate pursuant to substantially similar plans.
After considering the above factors, the Board concluded that it is in the
best interests of the funds and their shareholders to approve the new
distribution plan.
The Board reached its conclusion after careful discussion and analysis. The
Board believes that it has carefully and thoroughly examined the pertinent
issues and alternatives. In recommending that you approve the proposed
distribution plan, the independent directors have considered what they believe
to be in your best interest. In so doing, they were advised by independent
counsel, retained by
46
<PAGE> 50
the independent directors and paid for by the company, as to the nature of the
matters to be considered and the standards to be used in reaching their
decision.
WHEN WILL PROPOSAL 5 BE IMPLEMENTED?
If approved, the new distribution plan will become effective on September
11, 2000 and will expire, unless renewed, on or before June 30, 2001. If the new
distribution plan is approved with respect to a fund, the current distribution
plan for the Class A and Class C shares of that fund will be terminated on
September 11, 2000. If holders of Class A or Class C shares of a fund do not
approve the new distribution plan, the current distribution plan will continue
in effect for such Class of shares of such fund. If holders of Class B shares
of a fund do not approve the new distribution plan, the company will establish
a new class of shares into which such Class B shares can be converted with a
distribution plan identical to the current distribution plan in effect for the
Class A shares of such fund.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 5?
---------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
---------------------------------------------------------
PROPOSALS 6(a) THROUGH 6(m): CHANGES TO THE FUNDAMENTAL
INVESTMENT RESTRICTIONS OF ALL FUNDS
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve changing your fund's investment
restrictions. The Board is asking you to vote on these changes because the
investment restrictions described below are fundamental and shareholders must
approve any change.
Pursuant to the 1940 Act, each fund has adopted certain fundamental
restrictions covering certain types of investment practices, which may be
changed only with shareholder approval. Restrictions that a fund has not
specifically designated as being fundamental are considered to be
"non-fundamental" and may be changed by the Board without shareholder approval.
In addition to investment restrictions, the funds operate pursuant to investment
objectives and policies. These objectives and policies govern the investment
activities of the funds and further limit their ability to invest in certain
types of securities or engage in certain types of transactions.
The Board is proposing that you approve changes to your fund's fundamental
investment restrictions. The changes will conform these restrictions to a set of
uniform model restrictions under which most AIM funds will operate. The Board
approved the changes to your fund's fundamental investment restrictions at
meetings held on May 9 and 10, 2000. The current fundamental investment
restrictions for each fund are in Appendix K.
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<PAGE> 51
WHAT ARE THE REASONS FOR THE PROPOSED CHANGES TO THE FUNDAMENTAL RESTRICTIONS?
Several of the funds' current fundamental restrictions reflect regulatory,
business or industry conditions, practices or requirements that are no longer
applicable. For example, the National Securities Markets Improvement Act of 1996
(NSMIA) preempted certain state laws, under which the funds previously were
regulated and which required the adoption of certain restrictions. In addition,
other fundamental restrictions reflect federal regulatory requirements that
remain in effect but are not required to be stated as fundamental, or in some
cases even as non-fundamental, restrictions. Also, as new AIM funds have been
created or acquired during recent years, substantially similar fundamental
restrictions often have been phrased in slightly different ways, sometimes
resulting in minor but unintended differences in effect or potentially giving
rise to unintended differences in interpretation.
Accordingly, the Board has approved changes to the funds' fundamental
restrictions in order to simplify, modernize and make more uniform those
restrictions that are required to be fundamental.
The Board expects that you will benefit from these changes in a number of
ways. The proposed uniform restrictions will provide the funds with as much
investment flexibility as is possible under the 1940 Act. The Board believes
that eliminating the disparities among the funds' fundamental restrictions will
enhance management's ability to manage efficiently and effectively the funds'
assets in changing regulatory and investment environments. In addition, by
reducing to a minimum those restrictions that can be changed only by shareholder
vote, each fund will be able to avoid the costs and delays associated with a
shareholder meeting if the Board decides to make future changes to a fund's
investment policies.
WHAT ARE THE PROPOSED CHANGES TO THE FUNDAMENTAL RESTRICTIONS?
Each proposed change to the funds' fundamental investment restrictions is
discussed below. The proposed fundamental investment restrictions will provide
the funds with the ability to operate under new interpretations of the 1940 Act
or pursuant to exemptive relief from the SEC without receiving prior shareholder
approval of operating under such interpretations or exemptions. Even though the
funds will have this flexibility, if the proposed fundamental restrictions are
approved, several new non-fundamental investment restrictions (which function as
internal operating guidelines) will become effective. AIM must follow these
non-fundamental investment restrictions in managing the funds. Of course, if
circumstances change, the Board may change or eliminate any non-fundamental
investment restriction in the future without shareholder approval.
With respect to each fund and each fundamental or non-fundamental
restriction, if a percentage restriction is adhered to at the time of an
investment
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<PAGE> 52
or transaction, a later increase or decrease in percentage resulting from a
change in the values of the fund's portfolio securities or the amount of its
total assets will not be considered a violation of the restriction.
PROPOSAL 6(a): CHANGE TO FUNDAMENTAL RESTRICTION
ON ISSUER DIVERSIFICATION
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(a) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(a), the existing fundamental restriction on
issuer diversification for each of the funds would be changed to read as
follows:
"The fund is a 'diversified company' as defined in the 1940 Act. The fund
will not purchase the securities of any issuer if, as a result, the fund
would fail to be a diversified company within the meaning of the 1940 Act,
and the rules and regulations promulgated thereunder, as such statute,
rules and regulations are amended from time to time or are interpreted from
time to time by the SEC staff (collectively, the 1940 Act laws and
interpretations) or except to the extent that the fund may be permitted to
do so by exemptive order or similar relief (collectively, with the 1940 Act
laws and interpretations, the 1940 Act laws, interpretations and
exemptions). In complying with this restriction, however, the fund may
purchase securities of other investment companies to the extent permitted
by the 1940 Act laws, interpretations and exemptions."
DISCUSSION:
The proposed changes will permit the funds to take advantage of the 1940
Act laws, interpretations and exemptions in effect from time to time relating to
issuer diversification. The Board does not expect this change to have a material
impact on the funds' operations.
If you approve the proposed change, the following non-fundamental
investment restriction will become effective for each fund:
"In complying with the fundamental restriction regarding issuer
diversification, the fund will not, with respect to 75% of its total
assets, purchase the securities of any issuer (other than securities issued
or guaranteed by the U.S. Government or any of its agencies or
instrumentalities), if, as a result, (i) more than 5% of the fund's total
assets would be invested in the securities of that issuer or (ii) the fund
would hold more than 10% of the outstanding voting securities of that
issuer. The fund may (i) purchase securities of other investment companies
as permitted by
49
<PAGE> 53
Section 12(d)(1) of the 1940 Act and (ii) invest its assets in securities
of other money market funds and lend money to other investment companies or
their series portfolios that have AIM or an affiliate of AIM as an
investment advisor (an AIM Advised Fund), subject to the terms and
conditions of any exemptive orders issued by the SEC."
PROPOSAL 6(b): CHANGE TO FUNDAMENTAL RESTRICTION ON
BORROWING MONEY AND ISSUING SENIOR SECURITIES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(b) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(b), the existing fundamental restriction on
issuing senior securities and borrowing money for each of the funds would be
changed to read as follows:
"The fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act laws, interpretations and exemptions."
DISCUSSION:
The 1940 Act establishes limits on the ability of the funds to borrow money
or issue "senior securities," a term that is defined, generally, to refer to
obligations that have a priority over the company's shares of common stock with
respect to the distribution of its assets or the payment of dividends.
Currently, the fundamental restriction for the funds is more limiting than
required by the 1940 Act.
The proposed changes would make the funds' restriction on borrowing money
or issuing senior securities no more limiting than required by the 1940 Act. The
Board believes that changing the funds' fundamental restriction in this manner
will provide flexibility for future contingencies. However, the Board does not
expect this change to have a material impact on the funds' operations.
If you approve the proposed change, the following non-fundamental
investment restriction will become effective for each fund:
"In complying with the fundamental restriction regarding borrowing money
and issuing senior securities, the fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). The fund may borrow from banks,
broker/dealers or an AIM Advised Fund. The fund may not borrow for
leveraging, but may borrow for temporary or emergency purposes, in
anticipation of or in response to adverse market conditions, or for cash
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<PAGE> 54
management purposes. The fund may not purchase additional securities when
any borrowings from banks exceed 5% of the fund's total assets."
PROPOSAL 6(c): CHANGE TO FUNDAMENTAL RESTRICTION ON
UNDERWRITING SECURITIES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(c) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(c), the existing fundamental restriction on
underwriting securities for each of the funds would be changed to read as
follows:
"The fund may not underwrite the securities of other issuers. This
restriction does not prevent the fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the fund may be considered to be an
underwriter under the Securities Act of 1933."
DISCUSSION:
The proposed changes to this fundamental restriction would expand the types
of transactions in which a fund may engage, even if it may be considered to be
an underwriter. The Board does not expect this change to have a material impact
on the funds' operations.
PROPOSAL 6(d): CHANGE TO FUNDAMENTAL RESTRICTION ON
INDUSTRY CONCENTRATION
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(d) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(d), the existing fundamental restriction on
industry concentration for each fund other than Real Estate would be changed to
read as follows:
"The fund will not make investments that will result in the concentration
(as that term may be defined or interpreted by the 1940 Act laws,
interpretations and exemptions) of its investments in the securities of
issuers primarily engaged in the same industry. This restriction does not
limit the fund's investments in (i) obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities or (ii) tax-exempt
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<PAGE> 55
obligations issued by governments or political subdivisions of government.
In complying with this restriction, the fund will not consider a
bank-issued guaranty or financial guaranty insurance as a separate
security."
Upon the approval of Proposal 6(d) by shareholders of Real Estate, the
existing fundamental restriction on industry concentration for Real Estate would
be changed to read as follows:
"The fund will concentrate (as that term may be defined or interpreted by
the 1940 Act laws, interpretations and exemptions) its investments in the
securities of domestic and foreign real estate and real-estate related
companies."
DISCUSSION:
For Flex and International Value, the proposed changes to their fundamental
restriction on industry concentration would clarify that for industry
concentration purposes, they will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security. The proposed changes will
also permit Flex and International Value to take advantage of laws,
interpretations and exemptions in effect from time to time relating to industry
concentration.
If shareholders of Flex and International Value approve the proposed
change, the following non-fundamental investment restriction will become
effective for Flex and International Value:
"In complying with the fundamental restriction regarding industry
concentration, the fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the same
industry."
The proposed addition of the fundamental restriction on industry
concentration for Real Estate will make explicit the group of industries in
which Real Estate will concentrate its investments.
If you approve the proposed change, the following non-fundamental
investment restriction will also become effective for Real Estate:
"For purposes of Real Estate's fundamental restriction regarding industry
concentration, real estate and real-estate related companies shall consist
of companies (i) at least 50% of the assets, gross income or net profits of
which are attributable to ownership, construction, management, or sale of
residential, commercial or industrial real estate, including listed equity
REITs which own properties, and listed mortgage REITs which make short-term
construction and development mortgage loans or which invest in long-term
mortgages or mortgage pools, or (ii) the products and services of which are
related to the real estate industry, such as manufacturers and distributors
of building supplies and financial institutions which issue or service
mortgages."
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PROPOSAL 6(e): CHANGE TO FUNDAMENTAL RESTRICTION
ON PURCHASING OR SELLING REAL ESTATE
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(e) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(e), the existing fundamental restriction on
real estate investments for each of the funds would be changed to read as
follows:
"The fund may not purchase real estate or sell real estate unless acquired
as a result of ownership of securities or other instruments. This
restriction does not prevent the fund from investing in issuers that
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein."
DISCUSSION:
The proposed changes to this fundamental restriction would clarify the
types of real estate related securities that are permissible investments for
each fund. In addition, the proposed restriction includes an exception that
permits each fund to hold real estate acquired as a result of ownership of
securities or other instruments. The Board does not expect this change to have a
material impact on the funds' operations.
PROPOSAL 6(f): CHANGE TO FUNDAMENTAL RESTRICTION
ON PURCHASING OR SELLING COMMODITIES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(f) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(f), the existing fundamental restriction on
investing in commodities for each of the funds would be changed to read as
follows:
"The fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the fund from engaging in
transactions involving futures contracts and options thereon or investing
in securities that are secured by physical commodities."
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DISCUSSION:
The proposed changes to this fundamental restriction are intended to ensure
that the funds will have the maximum flexibility to enter into hedging and other
transactions utilizing financial contracts and derivative products when doing so
is permitted by the funds' other investment policies. Furthermore, the proposed
restriction would allow the funds to respond to the rapid and continuing
development of derivative products. The proposed restriction broadens the
exception to the prohibition on buying and selling physical commodities to cover
all financial derivative instruments.
PROPOSAL 6(g): CHANGE TO FUNDAMENTAL RESTRICTION ON MAKING
LOANS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(g) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(g), the existing fundamental restriction on
making loans for each of the funds would be changed to read as follows:
"The fund may not make personal loans or loans of its assets to persons who
control or are under common control with the fund, except to the extent
permitted by 1940 Act laws, interpretations and exemptions. This
restriction does not prevent the fund from, among other things, purchasing
debt obligations, entering into repurchase agreements, loaning its assets
to broker-dealers or institutional investors, or investing in loans,
including assignments and participation interests."
DISCUSSION:
The proposed fundamental restriction more completely describes various
types of debt instruments available in the financial markets that the funds may
purchase that do not constitute the making of a loan, and broadens the potential
circumstances under which the funds could make loans.
If you approve the proposed restriction, the following non-fundamental
investment restriction will become effective for each fund:
"In complying with the fundamental restriction with regard to making loans,
the fund may lend up to 33 1/3% of its total assets and may lend money to
another AIM fund, on such terms and conditions as the SEC may require in an
exemptive order."
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PROPOSAL 6(h): APPROVAL OF A NEW FUNDAMENTAL INVESTMENT
RESTRICTION ON INVESTING ALL OF EACH FUND'S ASSETS
IN AN OPEN-END FUND
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(h) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(h), the current fundamental investment
restriction on investing in an open-end fund would be eliminated and the
following fundamental restriction on investing in an open-end fund would be
added for each of the funds:
"The fund may, notwithstanding any other fundamental investment policy or
limitation, invest all of its assets in the securities of a single open-end
management investment company with substantially the same fundamental
investment objectives, policies and restrictions as the fund."
DISCUSSION:
The Board has approved, subject to shareholder approval, the adoption of a
new fundamental investment restriction that would permit each of the funds to
invest all of its assets in another open-end fund. At present the Board has not
considered any specific proposal to authorize a fund to invest all of its assets
in this fashion. The Board will authorize investing a fund's assets in another
open-end fund only if the Board first determines that is in the best interests
of such fund and its shareholders.
The purpose of this proposal is to enhance the flexibility of each fund and
permit it to take advantage of potential efficiencies in the future available
through investment in another open-end fund. This structure allows several funds
with different distribution pricing structures, but the same investment
objective, policies and limitations, to combine their investments in a pooled
fund instead of managing them separately. This could lower the costs of
obtaining portfolio execution, custodial, investment advisory and other services
for the fund and could assist in portfolio management to the extent the cash
flows of each investment vehicle offset each other or provide for less volatile
asset changes. Of course, such benefits may not occur.
At present, the fundamental investment restrictions of each fund may
prevent it from investing all of its assets in another registered investment
company and would require a vote of fund shareholders before such a structure
could be adopted. To avoid the costs associated with a subsequent shareholder
meeting, the Board recommends that you vote to permit all of the assets of your
fund to be invested in an open-end fund, without a further vote of shareholders,
but only if the Board subsequently determines that such action is in the best
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interests of your fund and its shareholders. If you approve this proposal, the
fundamental restrictions of your fund would be modified to permit such
investment.
A fund's methods of operation and shareholder services would not be
materially affected by its investment in an open-end fund, except that the
assets of the fund might be managed as part of a larger pool. If a fund invested
all of its assets in an open-end fund, it would hold only investment securities
issued by the open-end fund, and the open-end fund would invest directly in
individual securities of other issuers. The fund otherwise would continue its
normal operations. The Board would retain the right to withdraw the fund's
investments from the open-end fund, and the fund then would resume investing
directly in individual securities of other issuers as it does currently.
AIM may benefit from the use of this structure if, as a result, overall
assets under management are increased (since management fees are based on
assets). Also, AIM's expense of providing investment and other services to the
funds may be reduced.
Also, the current fundamental investment restriction provides that no
advisory fee shall be paid to AIM with respect to any of the funds' assets that
are invested in any other investment company for which AIM serves as investment
advisor or sub-advisor. The new fundamental investment restriction would omit
this provision and, by doing so, would permit AIM to collect advisory fees with
respect to assets of the funds that are invested in funds that have AIM as an
investment advisor. AIM may invest the funds' assets in affiliated money market
funds for cash management purposes. Investments of the funds' assets in
affiliated money market funds will be governed by the terms of an exemptive
order that AIM has obtained from the SEC permitting such investments. This
exemptive order requires the Board to determine the appropriate level of fees
for AIM to receive with respect to the funds' assets that are invested in
affiliated money market funds.
If you approve the proposed restriction, each fund will have the ability to
invest all of its assets in another open-end investment company. Because the
funds do not currently intend to do so, the following non-fundamental investment
restriction will become effective for each fund:
"Notwithstanding the fundamental restriction with regard to investing all
assets in an open-end fund, the fund may not invest all of its assets in
the securities of a single open-end management investment company with the
same fundamental investment objectives, policies and restrictions as the
fund."
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PROPOSAL 6(i): ELIMINATION OF FUNDAMENTAL RESTRICTION
ON MARGIN TRANSACTIONS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(i) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(i), the existing fundamental restriction on
engaging in margin transactions for each of the funds would be eliminated.
DISCUSSION:
The funds are not required to have a fundamental restriction on margin
transactions. In order to maximize the funds' flexibility in this area, the
Board believes that the funds' restriction on margin transactions should be
deleted. Although the funds would have greater flexibility to engage in margin
transactions, if shareholders approve Proposal 6(i), none of the funds presently
intends to purchase any security on margin, except they may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of portfolio securities. The payment by the funds of initial or variation margin
in connection with futures or related options transactions will not be
considered the purchase of a security on margin. Accordingly, the Board does not
expect this change to have a material impact on the funds' operations.
PROPOSAL 6(j): ELIMINATION OF FUNDAMENTAL RESTRICTION
ON SHORT SALES OF SECURITIES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(j) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(j), the existing fundamental restriction on
short sales of securities for each of the funds would be eliminated.
DISCUSSION:
The funds' current fundamental restriction on short sales of securities
prohibits all short sales, regardless of whether they are "against the box,"
which means that a fund contemporaneously owns or has the right to acquire at no
additional cost securities identical to, or convertible into or exchangeable
for, those securities sold short. The SEC considers short sales of securities by
a fund that are not against the box to be "senior securities." As such, they
would be covered under the fundamental restriction on issuing senior securities
that
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shareholders are being asked to vote on in Proposal 6(b). Therefore, the Board
believes that the fundamental restriction on short sales of securities that are
not against the box is unnecessary and should be eliminated for each of the
funds.
As discussed above, however, the funds' current fundamental restriction on
short sales prohibits all short sales, regardless of whether they are against
the box. To maximize the funds' flexibility in this area and to allow the funds
to engage in short sales against the box, the Board believes that the funds'
fundamental restriction on selling securities short should be eliminated.
If shareholders approve Proposal 6(j), none of the funds will make short
sales of securities or maintain a short position unless at all times when a
short position is open, the fund owns an equal amount of such securities or
securities convertible into or exchangeable for, without payment of any further
consideration, securities of the same
issue as, and equal in amount to, the securities sold short. In no event may
more than 10% of a fund's total assets be deposited or pledged as collateral for
such sales at any one time. The Board does not expect this change to have a
material impact on the funds' operations.
PROPOSAL 6(k): ELIMINATION OF FUNDAMENTAL RESTRICTION
ON MORTGAGING, PLEDGING, HYPOTHECATING OR OTHERWISE
TRANSFERRING ASSETS AS SECURITY FOR INDEBTEDNESS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(k) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(k), the existing fundamental restriction on
mortgaging, pledging, hypothecating or otherwise transferring assets as security
for indebtedness for each of the funds would be eliminated.
DISCUSSION:
The funds are not required to have a fundamental restriction on the
mortgaging, pledging, hypothecating or otherwise transferring assets as security
for indebtedness. In order to maximize the funds' flexibility in this area, the
Board believes that this restriction should be eliminated. The Board does not
expect this change to have a material impact on the funds' operations.
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PROPOSAL 6(l): ELIMINATION OF FUNDAMENTAL RESTRICTION
ON INVESTING FOR THE PURPOSE OF CONTROL
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(l) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(l), the existing fundamental restriction on
investing for the purpose of control for each of the funds would be eliminated.
DISCUSSION:
The Board proposes to eliminate this fundamental restriction, which
prohibits each of the funds from investing in companies for the purpose of
exercising control or management. Elimination of this restriction would clarify
each fund's ability to exercise freely its rights as a shareholder of the
companies in which it invests. No fund, however, currently intends to become
involved in directing or administering the day-to-day operations of any company.
AIM believes that it should be able to communicate freely each fund's views
as a shareholder on important matters of policy to a company's management, its
board of directors and its shareholders, when AIM or the Board believes that
such action or policy may affect significantly the value of its investment. The
activities that each fund might engage in, either individually or with others,
include seeking changes in a company's direction, seeking the sale of a company
or a portion of its assets, or participating in a takeover effort or in
opposition to a takeover effort. AIM believes that each fund currently may
engage in such activities without necessarily violating this fundamental
restriction. Nevertheless, the existence of the investment restriction might
give rise to a claim that such activities did in fact constitute investing for
control or management.
PROPOSAL 6(m): ELIMINATION OF FUNDAMENTAL RESTRICTION
ON PURCHASING RESTRICTED AND ILLIQUID SECURITIES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6(m) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 6(m), the existing fundamental restriction on
investing in restricted and illiquid securities for each of the funds would be
eliminated.
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DISCUSSION:
The funds are not required to have a fundamental restriction on purchasing
restricted or illiquid securities. In order to maximize the funds' flexibility
in this area, the Board believes that this restriction should be eliminated. The
Board does not expect this change to have a material impact on the funds'
operations. If this restriction is eliminated, the funds will remain subject to
SEC requirements, which prohibit each of them from investing more than 15% of
its net assets in illiquid securities.
WHEN WILL PROPOSALS 6(a) THROUGH 6(m) BE IMPLEMENTED?
If you approve each of the above Proposals, the new fundamental
restrictions will replace the fundamental investment restrictions for the
specified funds. Accordingly, the proposed fundamental restrictions will become
the only fundamental investment restrictions under which the funds will operate.
If approved, the above restrictions may not be changed with respect to your fund
without the approval of the holders of a majority of your fund's outstanding
voting securities (as defined in the 1940 Act). The Board anticipates that these
proposals, if approved, will be implemented on September 11, 2000.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSALS 6(a) THROUGH 6(m)?
---------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS
6(a) THROUGH 6(m).
---------------------------------------------------------
PROPOSAL 7: CHANGING THE INVESTMENT OBJECTIVES OF THE FUNDS
AND MAKING THEM NON-FUNDAMENTAL
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 7 applies to shareholders of all funds.
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve changing your fund's investment
objective by making it non-fundamental and by eliminating from the investment
objective the manner in which your fund proposes to achieve its objective. The
Board is asking you to vote on these changes because the investment objective of
your fund presently is fundamental and shareholders must approve any change.
The current investment objective of your fund is in Appendix L. By making
this objective non-fundamental, the Board may change it as it deems appropriate,
without seeking a shareholder vote.
The current investment objectives of Flex and Real Estate state that these
funds will invest without regard to federal income tax considerations. The
current
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investment objective of International Value states that this fund will invest
without regard to U.S. or foreign tax considerations. The Board believes that
the investment objectives of the funds should omit the statement that the funds
will invest without regard to tax considerations. If the funds invest without
regard to tax considerations, shareholders of the funds may realize significant
taxable gains.
This change will permit the Board to operate the funds on a tax-managed
basis, resulting in little capital gain to shareholders, if the Board so
chooses, without seeking a shareholder vote. Other than the proposed changes
discussed above, the Board does not anticipate making changes to the investment
objective of your fund at the present time.
WHAT IS THE PROPOSED CHANGE?
If shareholders approve this proposal, the investment objective of each
fund will read as follows:
"The fund's investment objective is to achieve high total return."
The Board expects that you will benefit from these proposed changes because
it will have the ability to respond more quickly to new developments and
changing trends in the marketplace. This should make your fund more competitive
among its peers.
WHEN WILL PROPOSAL 7 BE IMPLEMENTED?
The Board anticipates that Proposal 7, if approved, will be implemented on
September 11, 2000.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 7?
--------------------------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
--------------------------------------------------------------------------------
PROPOSAL 8: RATIFICATION OF SELECTION OF
KPMG LLP AS INDEPENDENT ACCOUNTANTS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 8 applies to shareholders of all funds.
WHAT AM I BEING ASKED TO APPROVE?
The Board has selected KPMG LLP as independent accountants for each fund
for its fiscal year ending July 31, 2000. As each fund's independent
accountants, KPMG LLP will examine and verify the accounts and securities of
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that fund and report on them to the Board and to that fund's shareholders. The
Board's selection will be submitted for your ratification at the meeting.
WHY HAS THE BOARD SELECTED KPMG LLP AS THE INDEPENDENT ACCOUNTANTS?
KPMG was selected primarily on the basis of its expertise as auditors of
investment companies, its independence from AIM and its affiliates, the quality
of its audit services, and the competitiveness of the fees charged for these
services. KPMG LLP also serves as independent accountants of some of the other
AIM funds.
WILL A REPRESENTATIVE FROM KPMG LLP BE AVAILABLE FOR QUESTIONS?
The Board expects that a representative of KPMG LLP will be present at the
meeting. The representative will have an opportunity to make a statement should
he or she desire to do so and will be available to respond to shareholders'
questions.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 8?
--------------------------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS,
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
--------------------------------------------------------------------------------
GENERAL INFORMATION
WHO ARE THE EXECUTIVE OFFICERS OF THE COMPANY?
Information about the executive officers of the company is in Appendix M.
WHAT IS THE SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN HOLDERS?
Information about the ownership of each class of each fund's shares by the
directors and the executive officers of the company and by 5% holders of each
class is in Appendix N.
WHO ARE THE INVESTMENT ADVISOR, SUB-ADVISORS, ADMINISTRATOR AND PRINCIPAL
UNDERWRITER OF THE FUNDS?
A I M Advisors, Inc. serves as the investment advisor and administrator for
the funds. INVESCO, Inc. serves as the sub-advisor for Flex and Real Estate.
INVESCO Global Asset Management (N.A.), Inc. serves as the sub-advisor for
International Value.
A I M Distributors, Inc. serves as the principal underwriter for each of
the Class A, Class B and Class C shares of the funds.
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The principal address for A I M Advisors, Inc. and A I M Distributors, Inc.
is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The principal
address for INVESCO, Inc. is 1315 Peachtree Street, N.E., Atlanta, Georgia
30309. The principal address for INVESCO Global Asset Management (N.A.), Inc. is
1315 Peachtree Street, N.E., Atlanta, Georgia 30309.
HAS THE COMPANY HIRED A PROXY SOLICITOR?
The company has engaged the services of Shareholder Communications
Corporation (SCC) to assist it in soliciting proxies for the meeting. The
company estimates that the aggregate cost of SCC's services will be
approximately $22,360. The company will bear the cost of soliciting proxies. The
company expects to solicit proxies principally by mail, but either the company
or SCC may also solicit proxies by telephone, facsimile, the Internet or
personal interview. The company may also reimburse firms and others for their
expenses in forwarding solicitation materials to the beneficial owners of shares
of the funds.
HOW CAN I SUBMIT A PROPOSAL?
As a general matter, the funds do not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of a fund, you should send such proposal to the company at the
address set forth on the first page of this proxy statement. To be considered
for presentation at a shareholders' meeting, the company must receive proposals
a reasonable time before proxy materials are prepared relating to that meeting.
Your proposal also must comply with applicable law.
OTHER MATTERS
The Board does not know of any matters to be presented at the meeting other
than those set forth in this proxy statement. If any other business should come
before the meeting, the persons named in the accompanying proxy will vote
thereon in accordance with their best judgment.
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APPENDIX A
SHARES OF AIM ADVISOR FUNDS, INC.
OUTSTANDING ON JUNE 23, 2000
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING ON
NAME OF FUND (CLASS) JUNE 23, 2000
-------------------- -------------
<S> <C>
AIM Advisor Flex Fund
Class A.................................................................... 1,655,434.994
Class B.................................................................... 407,541.663
Class C.................................................................... 21,566,752.692
AIM Advisor International Value Fund
Class A.................................................................... 1,764,733.750
Class B.................................................................... 305,002.916
Class C.................................................................... 4,884,488.165
AIM Advisor Real Estate Fund
Class A.................................................................... 1,673,669.242
Class B.................................................................... 973,251.920
Class C.................................................................... 1,585,546.244
</TABLE>
A-1
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APPENDIX B
AIM ADVISOR FUNDS, INC.
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of May 10,
2000, is entered into by and between AIM Advisor Funds, Inc., a Maryland
corporation (the "Company"), acting on its own behalf and on behalf of each of
its series portfolios, all of which are identified on Schedule A to this
Agreement, and AIM Advisor Funds, a Delaware business trust (the "Trust"),
acting on its own behalf and on behalf of each of its series portfolios, all of
which are identified on Schedule A to this Agreement.
BACKGROUND
The Company is organized as a series management investment company and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. The Company currently publicly offers shares of common
stock representing interests in three separate series portfolios. Each of these
series portfolios is listed on Schedule A and is referred to in this Agreement
as a "Current Fund."
The Board of Directors of the Company has designated multiple classes of
common stock that represent interests in each Current Fund. Each of these
classes is listed on Schedule B and is referred to in this Agreement as a
"Current Fund Class."
The Company desires to change its form and place of organization by
reorganizing as the Trust. In anticipation of such reorganization (the
"Reorganization"), the Board of Trustees of the Trust has established three
series portfolios corresponding to the Current Funds (each a "New Fund"), and
has designated multiple classes of shares of beneficial interest in each New
Fund corresponding to the Current Fund Classes (each a "New Fund Class").
Schedule A lists the New Funds and Schedule B lists the New Fund Classes.
The Reorganization will occur through the transfer of all of the assets of
each Current Fund to the corresponding New Fund. In consideration of its receipt
of these assets, each New Fund will assume all of the liabilities of the
corresponding Current Fund, and will issue to the Current Fund shares of
beneficial interest in the New Fund ("New Fund Shares"). New Fund Shares
received by the Current Fund will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the Current Fund immediately prior to
the Reorganization (the "Current Fund Shares"). The Current Fund will then
distribute the New Fund Shares it has received to its shareholders.
The Reorganization is subject to, and shall be effected in accordance with,
the terms of this Agreement. This Agreement is intended to be and is adopted by
the Company, on its own behalf and on behalf of the Current Funds, and by the
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Trust, on its own behalf and on behalf of the New Funds, as a Plan of
Reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
Any capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the preamble or background to this Agreement. In addition,
the following terms shall have the following meanings:
1.1 "Assets" shall mean all assets including, without limitation, all cash,
cash equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on a Current Fund's books, and other property owned by a Current
Fund at the Effective Time.
1.2 "Closing" shall mean the consummation of the transfer of assets,
assumption of liabilities and issuance of shares described in Sections 2.1 and
2.2 of this Agreement, together with the related acts necessary to consummate
the Reorganization, to occur on the date set forth in Section 3.1.
1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "Current Fund" shall mean each of the Company's three series
portfolios.
1.5 "Current Fund Class" shall mean each class of common stock of the
Company representing an interest in a Current Fund.
1.6 "Current Fund Shares" shall mean the shares of the Current Funds
outstanding immediately prior to the Reorganization.
1.7 "Effective Time" shall have the meaning set forth in Section 3.1.
1.8 "Liabilities" shall mean all liabilities of a Current Fund including,
without limitation, all debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
determinable at the Effective Time, and whether or not specifically referred to
herein.
1.9 "New Fund" shall mean each of the series portfolios of the Trust, one
of which shall correspond to one of the Current Funds as shown on Schedule A.
1.10 "New Fund Class" shall mean each class representing an interest in a
New Fund, one of which shall correspond to one of the Current Fund Classes as
shown on Schedule B.
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<PAGE> 70
1.11 "New Fund Shares" shall mean those shares of beneficial interest in a
New Fund, issued to a Current Fund in consideration of the New Fund's receipt of
the Current Fund's Assets.
1.12 "Registration Statement" shall have the meaning set forth in Section
5.4.
1.13 "RIC" shall mean a regulated investment company under Subchapter M of
the Code.
1.14 "SEC" shall mean the Securities and Exchange Commission.
1.15 "Shareholder(s)" shall mean a Current Fund's shareholder(s) of record,
determined as of the Effective Time.
1.16 "Shareholders' Meeting" shall have the meaning set forth in Section
5.1.
1.17 "Transfer Agent" shall have the meaning set forth in Section 2.2.
1.18 "1940 Act" shall mean the Investment Company Act of 1940, as amended.
2. PLAN OF REORGANIZATION.
2.1 The Company agrees, on behalf of each Current Fund, to assign, sell
convey, transfer and deliver all of the Assets of each Current Fund to its
corresponding New Fund. The Trust, on behalf of the each New Fund agrees in
exchange therefor:
(a) to issue and deliver to the Current Fund the number of full and
fractional (rounded to the third decimal place) New Fund Shares for each
New Fund Class designated in Schedule B equal to the number of full and
fractional Current Fund Shares for each corresponding Current Fund Class
designated in Schedule B; and
(b) to assume all of the Current Fund's Liabilities.
Such transactions shall take place at the Closing.
2.2 At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Shares issued pursuant to paragraph 5.2 shall be
redeemed by each New Fund for $1.00 and (b) each Current Fund shall distribute
the New Fund Shares received by it pursuant to paragraph 2.1 to the Current
Fund's Shareholders in exchange for such Shareholders' Current Fund Shares. Such
distribution shall be accomplished through opening accounts, by the transfer
agent for the Trust (the "Transfer Agent"), on each New Fund's share transfer
books in the Shareholders' names and transferring New Fund Shares to such
accounts. Each Shareholder's account shall be credited with the respective pro
rata number of full and fractional (rounded to the third decimal place) New Fund
Shares of each New Fund Class due that Shareholder. All
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outstanding Current Fund Shares, including those represented by certificates,
shall simultaneously be canceled on each Current Fund's share transfer books.
The Trust shall not issue certificates representing the New Fund Shares in
connection with the Reorganization. However, certificates representing Current
Fund Shares shall represent New Fund Shares after the Reorganization.
2.3 As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to paragraph 2.2, the Company shall dissolve its existence as
corporation under Maryland law.
2.4 Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder of the Current Fund Shares exchanged
therefor shall be paid by the person to whom such New Fund Shares are to be
issued, as a condition of such transfer.
2.5 Any reporting responsibility of the Company or each Current Fund to a
public authority is, and shall remain its responsibility up to and including the
date on which it is terminated.
3. CLOSING.
3.1 The Closing shall occur at the principal office of the Company on
September 11, 2000, or on such other date and at such other place upon which the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Company's and the Trust's close of business on
the date of the Closing or at such other time as the parties may agree (the
"Effective Time").
3.2 The Company or its fund accounting agent shall deliver to the Trust at
the Closing a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities, transferred by the Current Funds to
the New Funds, as reflected on the New Funds' books immediately following the
Closing, does or will conform to such information on the Current Funds' books
immediately before the Closing. The Company shall cause the custodian for each
Current Fund to deliver at the Closing a certificate of an authorized officer of
the custodian stating that (a) the Assets held by the custodian will be
transferred to each corresponding New Fund at the Effective Time and (b) all
necessary taxes in conjunction with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made.
3.3 The Company shall deliver to the Trust at the Closing a list of the
names and addresses of each Shareholder of each Current Fund and the number of
outstanding Current Fund Shares of the Current Fund Class owned by each
Shareholder, all as of the Effective Time, certified by the Company's Secretary
or Assistant Secretary. The Trust shall cause the Transfer Agent to deliver at
the Closing a certificate as to the opening on each New Fund's share transfer
books
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of accounts in the Shareholders' names. The Trust shall issue and deliver a
confirmation to the Company evidencing the New Fund Shares to be credited to
each corresponding Current Fund at the Effective Time or provide evidence
satisfactory to the Company that such shares have been credited to each Current
Fund's account on such books. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, stock certificates, receipts, or
other documents as the other party or its counsel may reasonably request.
3.4 The Company and the Trust shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Company represents and warrants on its own behalf and on behalf of
each Current Fund as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its Charter
is on file with the Maryland Department of Assessments and Taxation;
(b) The Company is duly registered as an open-end series management
investment company under the 1940 Act, and such registration is in full
force and effect;
(c) Each Current Fund is a duly established and designated series of
the Company;
(d) At the Closing, each Current Fund will have good and marketable
title to its Assets and full right, power, and authority to sell, assign,
transfer, and deliver its Assets free of any liens or other encumbrances;
and upon delivery and payment for the Assets, the corresponding New Fund
will acquire good and marketable title to the Assets;
(e) The New Fund Shares are not being acquired for the purpose of
making any distribution thereof, other than in accordance with the terms
hereof;
(f) Each Current Fund is a "fund" as defined in Section 851(g)(2) of
the Code; each Current Fund qualified for treatment as a RIC for each past
taxable year since it commenced operations and will continue to meet all
the requirements for such qualification for its current taxable year (and
the Assets will be invested at all times through the Effective Time in a
manner that ensures compliance with the foregoing); each Current Fund has
no earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it; and each Current Fund has
made all
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distributions for each such past taxable year that are necessary to avoid
the imposition of federal excise tax or has paid or provided for the
payment of any excise tax imposed for any such year;
(g) There is no plan or intention of the Shareholders who individually
own 5% or more of any Current Fund Shares and, to the best of the Company's
knowledge, there is no plan or intention of the remaining Shareholders to
redeem or otherwise dispose of any New Fund Shares to be received by them
in the Reorganization. The Company does not anticipate dispositions of
those shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of redemptions of shares of the Current Fund as a
series of an open-end investment company. Consequently, the Company is not
aware of any plan that would cause the percentage of Shareholder interests,
if any, that will be disposed of as a result of or at the time of the
Reorganization will be one percent (1%) or more of the shares of the
Current Fund outstanding as of the Effective Time;
(h) The Liabilities were incurred by the Current Funds in the ordinary
course of their business and are associated with the Assets;
(i) The Company is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of Section 368(a)(3)(A) of the Code;
(j) As of the Effective Time, no Current Fund will have outstanding
any warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire Current Fund Shares except for
the right of investors to acquire its shares at net asset value in the
normal course of its business as an open-end diversified management
investment company operating under the 1940 Act;
(k) At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by the Company's
shareholders; and
(l) Throughout the five-year period ending on the date of the Closing,
each Current Fund will have conducted its historic business within the
meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code
in a substantially unchanged manner;
(m) The fair market value of the Assets of each Current Fund
transferred to the corresponding New Fund will equal or exceed the sum of
the Liabilities assumed by the New Fund plus the amount of Liabilities, if
any, to which the transferred Assets are subject.
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4.2 The Trust represents and warrants on its own behalf, and on behalf of
each New Fund, as follows:
(a) The Trust is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware, and its
Certificate of Trust has been duly filed in the office of the Secretary of
State of Delaware;
(b) At the Effective Time, the Trust will succeed to the Company's
registration statement filed under the 1940 Act with the SEC and thus will
become duly registered as an open-end management investment company under
the 1940 Act;
(c) At the Effective Time, each New Fund will be a duly established
and designated series of the Trust;
(d) No New Fund has commenced operations and nor will it commence
operations until after the Closing;
(e) Prior to the Effective Time, there will be no issued and
outstanding shares in any New Fund or any other securities issued by the
Trust on behalf of any New Fund, except as provided in paragraph 5.2;
(f) No consideration other than New Fund Shares (and the New Fund's
assumption of the Liabilities) will be issued in exchange for the Assets in
the Reorganization;
(g) The New Fund Shares to be issued and delivered to the
corresponding Current Fund hereunder will, at the Effective Time, have been
duly authorized and, when issued and delivered as provided herein, will be
duly and validly issued and outstanding shares of the New Fund, fully paid
and non-assessable;
(h) Each New Fund will be a "fund" as defined in section 851(g)(2) of
the Code and will meet all the requirements to qualify for treatment as a
RIC for its taxable year in which the Reorganization occurs;
(i) The Trust, on behalf of the New Funds, has no plan or intention to
issue additional New Fund Shares following the Reorganization except for
shares issued in the ordinary course of its business as a series of an
open-end investment company; nor does the Trust, on behalf of the New
Funds, have any plan or intention to redeem or otherwise reacquire any New
Fund Shares issued pursuant to the Reorganization, other than in the
ordinary course of its business or to the extent necessary to comply with
its legal obligation under Section 22(e) of the 1940 Act;
(j) Each New Fund will actively continue the corresponding Current
Fund's business in substantially the same manner that the Current Fund
conducted that business immediately before the Reorganization; and no New
Fund has any plan or intention to sell or otherwise dispose of any of the
Assets, except for dispositions made in the ordinary course of its business
or
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dispositions necessary to maintain its qualification as a RIC, although in
the ordinary course of its business the New Fund will continuously review
its investment portfolio (as each Current Fund did before the
Reorganization) to determine whether to retain or dispose of particular
stocks or securities, including those included in the Assets;
(k) There is no plan or intention for any of the New Funds to be
dissolved or merged into another corporation or business trust or "fund"
thereof (within the meaning of section 851(g)(2) of the Code) following the
Reorganization; and
4.3 Each of the Company and the Trust, on its own behalf and on behalf of
each Current Fund or each New Fund, as appropriate, represents and warrants as
follows:
(a) The fair market value of the New Fund Shares of each New Fund
received by each Shareholder will be approximately equal to the fair market
value of the Current Fund Shares of the corresponding Current Fund
surrendered in exchange therefor;
(b) Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares of each New Fund and will own
such shares solely by reason of their ownership of the Current Fund Shares
of the corresponding Current Fund immediately before the Reorganization;
(c) The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
(d) There is no intercompany indebtedness between a Current Fund and a
New Fund that was issued or acquired, or will be settled, at a discount;
and
(e) Immediately following consummation of the Reorganization, each New
Fund will hold the same assets, except for assets distributed to
shareholders in the course of its business as a RIC and assets used to pay
expenses incurred in connection with the Reorganization, and be subject to
the same liabilities that the corresponding Current Fund held or was
subject to immediately prior to the Reorganization. Assets used to pay (i)
expenses, (ii) all redemptions (other than redemptions at the usual rate
and frequency of the Current Fund as a series of an open-end investment
company), and (iii) distributions (other than regular, normal
distributions), made by a Current Fund after the date of this Agreement
will, in the aggregate, constitute less than one percent (1%) of its net
assets.
5. COVENANTS
5.1 As soon as practicable after the date of this Agreement, the Company
shall call a meeting of its Shareholders (the "Shareholders Meeting") to
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consider and act on this Agreement. The Board of Directors of the Company shall
recommend that Shareholders approve this Agreement and the transactions
contemplated by this Agreement. Approval by Shareholders of this Agreement will
authorize the Company, and the Company hereby agrees, to vote on the matters
referred to in Sections 5.2 and 5.3.
5.2 The Trust's trustees shall authorize the issuance of, and each New Fund
shall issue, prior to the Closing, one New Fund Share in each New Fund Class of
each New Fund to the Company in consideration of the payment of $1.00 per share
for the purpose of enabling the Company to elect the Company's directors as the
Trust's trustees (to serve without limit in time, except as they may resign or
be removed by action of the Trust's trustees or shareholders), to ratify the
selection of the Trust's independent accountants, and to vote on the matters
referred to in Section 5.3;
5.3 Immediately prior to the Closing, the Trust (on its own behalf of and
with respect to each New Fund or each New Fund Class, as appropriate) shall
enter into a Master Investment Advisory Agreement, one or more Master Sub-
Advisory Agreements, a Master Administrative Services Agreement, Master
Distribution Agreements, a Custodian Agreement and a Transfer Agency and
Servicing Agreement; shall adopt plans of distribution pursuant to Rule 12b-1 of
the 1940 Act, a multiple class plan pursuant to Rule 18f-3 of the 1940 Act and
shall enter into or adopt, as appropriate, such other agreements and plans as
are necessary for each New Fund's operation as a series of an open-end
investment company. Each such agreement and plan shall have been approved by the
Trust's trustees and, to the extent required by law, by such of those trustees
who are not "interested persons" of the Trust (as defined in the 1940 Act) and
by the Company as the sole shareholder of each New Fund.
5.4 The Company or the Trust, as appropriate, shall file with the SEC one
or more post-effective amendments to the Company's Registration Statement on
Form N-1A under the Securities Act of 1933, as amended, and the 1940 Act, as
amended (the "Registration Statement"), (i) which contain such amendments to
such Registration Statement as are determined by the Company to be necessary and
appropriate to effect the Reorganization and (ii) pursuant to which the Trust
adopts such Registration Statement, as so amended, as its own, and shall use its
best efforts to have such post-effective amendment or amendments to the
Registration Statement become effective as of the Closing.
6. CONDITIONS PRECEDENT.
The obligations of the Company, on its own behalf and on behalf of each
Current Fund, and the Trust, on its own behalf and on behalf of each New Fund,
will be subject to (a) performance by the other party of all its obligations to
be performed hereunder at or before the Effective Time, (b) all representations
and warranties of the other party contained herein being true and correct in all
material respects as of the date hereof and, except as they may be affected by
the
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transactions contemplated hereby, as of the Effective Time, with the same force
and effect as if made on and as of the Effective Time, and (c) the further
conditions that, at or before the Effective Time:
6.1 The Shareholders of the Company shall have approved this Agreement and
the transactions contemplated by this Agreement in accordance with applicable
law.
6.2 All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either the Company or the Trust to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain such consults, orders,
and permits would not involve a risk of a material adverse effect on the assets
or properties of either a Current Fund or a New Fund, provided that either the
Company or the Trust may for itself waive any of such conditions;
6.3 Each of the Company and the Trust shall have received an opinion from
Ballard Spahr Andrews & Ingersoll, LLP as to the federal income tax consequences
mentioned below. In rendering such opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters of representation
that the Company and the Trust shall use their best efforts to deliver to such
counsel) and the certificates delivered pursuant to Section 3.4. Such opinion
shall be substantially to the effect that, based on the facts and assumptions
stated therein and conditioned on consummation of the Reorganization in
accordance with this Agreement, for federal income tax purposes:
(a) The Reorganization will constitute a reorganization within the
meaning of section 368(a) of the Code, and each Current Fund and each New
Fund will be "a party to a reorganization" within the meaning of section
368(b) of the Code;
(b) No gain or loss will be recognized to a Current Fund on the
transfer of the Assets to the corresponding New Fund in exchange solely for
New Fund Shares and the New Fund's assumption of the Liabilities or on the
subsequent distribution of New Fund Shares to the Shareholders, in
constructive exchange for their Current Fund Shares, in liquidation of the
Current Fund;
(c) No gain or loss will be recognized to a New Fund on its receipt of
the Assets in exchange for New Fund Shares and its assumption of the
Liabilities;
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(d) Each New Fund's basis for the Assets will be the same as the basis
thereof in the corresponding Current Fund's hands immediately before the
Reorganization, and the New Fund's holding period for the Assets will
include the Current Fund's holding period therefor;
(e) A Shareholder will recognize no gain or loss on the constructive
exchange of Current Fund Shares solely for New Fund Shares pursuant to the
Reorganization; and
(f) A Shareholder's basis for the New Fund Shares of each New Fund to
be received in the Reorganization will be the same as the basis for the
Current Fund Shares of the corresponding Current Fund to be constructively
surrendered in exchange for such New Fund Shares, and a Shareholder's
holding period for such New Fund Shares will include its holding period for
the Current Fund Shares constructively surrendered, provided that the New
Fund Shares are held as capital assets by the Shareholder at the Effective
Time.
6.4 No stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the SEC (and not withdrawn or terminated).
At any time prior to the Closing, any of the foregoing conditions (except
those set forth in Section 6.1) may be waived by the directors/trustees of
either the Company or the Trust if, in their judgment, such waiver will not have
a material adverse effect on the interests of the Current Fund's shareholders.
7. EXPENSES.
Except as otherwise provided in Section 4.3(c), all expenses incurred in
connection with the transactions contemplated by this Agreement (regardless of
whether they are consummated) will be borne by the parties as they mutually
agree.
8. ENTIRE AGREEMENT.
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties.
9. AMENDMENT.
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding its approval by the Company's Shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
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10. TERMINATION.
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by the Company's Shareholders:
10.1 By either the Company or the Trust (a) in the event of the other
party's material breach of any representation, warranty, or covenant contained
herein to be performed at or prior to the Effective Time, (b) if a condition to
its obligations has not been met and it reasonably appears that such condition
will not or cannot be met, or (c) if the Closing has not occurred on or before
September 11, 2000; or
10.2 By the parties' mutual agreement.
Except as otherwise provided in Section 7, in the event of termination
under Sections 10.1(c) or 10.2, there shall be no liability for damages on the
part of either the Company or the Trust or any Current Fund or corresponding New
Fund, to the other.
11. MISCELLANEOUS.
11.1 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3 The execution and delivery of this Agreement have been authorized by
the Trust's trustees, and this Agreement has been executed and delivered by
authorized officers of the Trust acting as such; neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them or any shareholder of the Trust personally, but shall bind only the
assets and property of the New Funds, as provided in the Trust's Agreement and
Declaration of Trust.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
Attest: AIM ADVISOR FUNDS, INC.,
on behalf of each of its series listed
in Schedule A to this Agreement
/s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
------------------------------------ ---------------------------------
Title: President
---------------------------------
Attest: AIM ADVISOR FUNDS,
on behalf of each of its series listed
in Schedule A to this Agreement
/s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
------------------------------------ ---------------------------------
Title: President
---------------------------------
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SCHEDULE A
SERIES OF AIM ADVISOR FUNDS, INC. CORRESPONDING SERIES OF AIM ADVISOR FUNDS
(EACH A "CURRENT FUND") (EACH A "NEW FUND")
--------------------------------- -----------------------------------------
AIM Advisor Flex Fund AIM Advisor Flex Fund
AIM Advisor International Value AIM Advisor International Value
Fund Fund
AIM Advisor Real Estate Fund AIM Advisor Real Estate Fund
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SCHEDULE B
CLASSES OF EACH CURRENT FUND CORRESPONDING CLASSES OF EACH NEW FUND
---------------------------- --------------------------------------
AIM Advisor Flex Fund AIM Advisor Flex Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Advisor International Value AIM Advisor International Value Fund
Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Advisor Real Estate Fund AIM Advisor Real Estate Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
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APPENDIX C
AIM ADVISOR FUNDS, INC.
FORM OF MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this ____ day of _______, ____ by and between AIM
Advisor Funds, Inc. a Maryland corporation (the "Company") with respect to its
series of shares shown on the Schedule A attached hereto, as the same may be
amended from time to time, and A I M Advisors, Inc., a Delaware corporation (the
"Advisor").
RECITALS
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Company's Charter (the "Charter") authorizes the Board of
Directors of the Company (the "Board of Directors") to create separate series of
shares of common stock of the Company, and as of the date of this Agreement, the
Board of Directors has created three separate series portfolios (such portfolios
and any other portfolios hereafter added to the Company being referred to
collectively herein as the "Funds"); and
WHEREAS, the Company and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for the
Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Board of Directors. The Advisor shall give the
Company and the Funds the benefit of its best judgment, efforts and facilities
in rendering its services as investment advisor.
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2. Investment Analysis and Implementation. In carrying out its obligations
under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Funds,
and whether concerning the individual issuers whose securities are included
in the assets of the Funds or the activities in which such issuers engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Funds' assets;
(c) determine which issuers and securities shall be represented in the
Funds' investment portfolios and regularly report thereon to the Board of
Directors;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Board of Directors; and
(e) take, on behalf of the Company and the Funds, all actions which
appear to the Company and the Funds necessary to carry into effect such
purchase and sale programs and supervisory functions as aforesaid,
including but not limited to the placing of orders for the purchase and
sale of securities for the Funds.
3. Securities Lending Duties and Fees. The Advisor agrees to provide the
following services in connection with the securities lending activities of each
Fund: (a) oversee participation in the securities lending program to ensure
compliance with all applicable regulatory and investment guidelines; (b) assist
the securities lending agent or principal (the "Agent") in determining which
specific securities are available for loan; (c) monitor the Agent to ensure that
securities loans are effected in accordance with the Advisor's instructions and
with procedures adopted by the Board of Directors; (d) prepare appropriate
periodic reports for, and seek appropriate approvals from, the Board of
Directors with respect to securities lending activities; (e) respond to Agent
inquiries; and (f) perform such other duties as necessary.
As compensation for such services provided by the Advisor in connection
with securities lending activities of each Fund, a lending Fund shall pay the
Advisor a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities.
4. Delegation of Responsibilities. The Advisor is authorized to delegate
any or all of its rights, duties and obligations under this Agreement to one or
more sub-advisors, and may enter into agreements with sub-advisors, and may
replace any such sub-advisors from time to time in its discretion, in accordance
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with the 1940 Act, the Advisers Act, and rules and regulations thereunder, as
such statutes, rules and regulations are amended from time to time or are
interpreted from time to time by the staff of the Securities and Exchange
Commission ("SEC"), and if applicable, exemptive orders or similar relief
granted by the SEC and upon receipt of approval of such sub-advisors by the
Board of Directors and by shareholders (unless any such approval is not required
by such statutes, rules, regulations, interpretations, orders or similar
relief).
5. Independent Contractors. The Advisor and any sub-advisors shall for all
purposes herein be deemed to be independent contractors and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Company in any way or otherwise be deemed to be an agent of the
Company.
6. Control by Board of Directors. Any investment program undertaken by the
Advisor pursuant to this Agreement, as well as any other activities undertaken
by the Advisor on behalf of the Funds, shall at all times be subject to any
directives of the Board of Directors.
7. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act and
any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Company, as
the same may be amended from time to time under the Securities Act of 1933
and the 1940 Act;
(c) the provisions of the Charter, as the same may be amended from
time to time;
(d) the provisions of the by-laws of the Company, as the same may be
amended from time to time; and
(e) any other applicable provisions of state, federal or foreign law.
8. Broker-Dealer Relationships. The Advisor is responsible for decisions to
buy and sell securities for the Funds, broker-dealer selection, and negotiation
of brokerage commission rates.
(a) The Advisor's primary consideration in effecting a security
transaction will be to obtain the best execution.
(b) In selecting a broker-dealer to execute each particular
transaction, the Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial
condition of the broker-dealer; the size of and the difficulty in executing
the order; and the value of the expected contribution of the broker-dealer
to the investment performance of the Funds on a continuing basis.
Accordingly, the price to the Funds
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in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified by
other aspects of the fund execution services offered.
(c) Subject to such policies as the Board of Directors may
from time to time determine, the Advisor shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement
or otherwise solely by reason of its having caused the Funds to pay a
broker or dealer that provides brokerage and research services to the
Advisor an amount of commission for effecting a fund investment
transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the
Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Advisor's overall responsibilities
with respect to a particular Fund, other Funds of the Company, and to
other clients of the Advisor as to which the Advisor exercises
investment discretion. The Advisor is further authorized to allocate
the orders placed by it on behalf of the Funds to such brokers and
dealers who also provide research or statistical material, or other
services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor
shall determine and the Advisor will report on said allocations
regularly to the Board of Directors indicating the brokers to whom such
allocations have been made and the basis therefor.
(d) With respect to one or more Funds, to the extent the
Advisor does not delegate trading responsibility to one or more
sub-advisors, in making decisions regarding broker-dealer
relationships, the Advisor may take into consideration the
recommendations of any sub-advisor appointed to provide investment
research or advisory services in connection with the Funds, and may
take into consideration any research services provided to such
sub-advisor by broker-dealers.
(e) Subject to the other provisions of this Section 8, the
1940 Act, the Securities Exchange Act of 1934, and rules and
regulations thereunder, as such statutes, rules and regulations are
amended from time to time or are interpreted from time to time by the
staff of the SEC, any exemptive orders issued by the SEC, and any other
applicable provisions of law, the Advisor may select brokers or dealers
with which it or the Funds are affiliated.
9. Compensation. The compensation that each Fund shall pay the Advisor
is set forth in Schedule B attached hereto.
10. Expenses of the Funds. All of the ordinary business expenses
incurred in the operations of the Funds and the offering of their shares shall
be borne by the Funds unless specifically provided otherwise in this Agreement.
These expenses borne by the Funds include but are not limited to brokerage
commis-
C-4
<PAGE> 87
sions, taxes, legal, accounting, auditing, or governmental fees, the cost of
preparing share certificates, custodian, transfer and shareholder service agent
costs, expenses of issue, sale, redemption and repurchase of shares, expenses of
registering and qualifying shares for sale, expenses relating to trustees and
shareholder meetings, the cost of preparing and distributing reports and notices
to shareholders, the fees and other expenses incurred by the Company on behalf
of the Funds in connection with membership in investment company organizations
and the cost of printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders.
11. Services to Other Companies or Accounts. The Company understands
that the Advisor now acts, will continue to act and may act in the future as
investment manager or advisor to fiduciary and other managed accounts, and as
investment manager or advisor to other investment companies, including any
offshore entities, or accounts, and the Company has no objection to the Advisor
so acting, provided that whenever the Company and one or more other investment
companies or accounts managed or advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each company and account.
The Company recognizes that in some cases this procedure may adversely affect
the size of the positions obtainable and the prices realized for the Funds.
12. Non-Exclusivity. The Company understands that the persons employed
by the Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of the Advisor
or any affiliate of the Advisor to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature. The Company
further understands and agrees that officers or directors of the Advisor may
serve as officers or Directors of the Company, and that officers or directors of
the Company may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
13. Effective Date, Term and Approval. This Agreement shall become
effective with respect to a Fund, if approved by the shareholders of such Fund,
on the Effective Date for such Fund, as set forth in Schedule A attached hereto.
If so approved, this Agreement shall thereafter continue in force and effect
until June 30, 2001, and may be continued from year to year thereafter, provided
that the continuation of the Agreement is specifically approved at least
annually:
(a) (i) by the Board of Directors or (ii) by the vote of "a
majority of the outstanding voting securities" of such Fund (as defined
in Section 2(a)(42) of the 1940 Act); and
C-5
<PAGE> 88
(b) by the affirmative vote of a majority of the directors who
are not parties to this Agreement or "interested persons" (as defined
in the 1940 Act) of a party to this Agreement (other than as directors
of the Company), by votes cast in person at a meeting specifically
called for such purpose.
14. Termination. This Agreement may be terminated as to the Company or
as to any one or more of the Funds at any time, without the payment of any
penalty, by vote of the Board of Directors or by vote of a majority of the
outstanding voting securities of the applicable Fund, or by the Advisor, on
sixty (60) days' written notice to the other party. The notice provided for
herein may be waived by the party entitled to receipt thereof. This Agreement
shall automatically terminate in the event of its assignment, the term
"assignment" for purposes of this paragraph having the meaning defined in
Section 2(a)(4) of the 1940 Act.
15. Amendment. No amendment of this Agreement shall be effective unless
it is in writing and signed by the party against which enforcement of the
amendment is sought.
16. Liability of Advisor and Fund. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Company or to
the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security. Any
liability of the Advisor to one Fund shall not automatically impart liability on
the part of the Advisor to any other Fund. No Fund shall be liable for the
obligations of any other Fund.
17. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company and that of the Advisor shall be 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
18. Questions of Interpretation. Any question of interpretation of any
term or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act or the Advisers Act shall be resolved
by reference to such term or provision of the 1940 Act or the Advisers Act and
to interpretations thereof, if any, by the United States Courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the SEC issued pursuant to said Acts. In addition, where the effect of
a requirement of the 1940 Act or the Advisers Act reflected in any provision of
the Agreement is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
Subject to the
C-6
<PAGE> 89
foregoing, this Agreement shall be governed by and construed in accordance with
the laws (without reference to conflicts of law provisions) of the State of
Texas.
19. License Agreement. The Company shall have the non-exclusive right
to use the name "AIM" to designate any current or future series of shares only
so long as A I M Advisors, Inc. serves as investment manager or advisor to the
Company with respect to such series of shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
AIM ADVISOR FUNDS, INC.
(a Maryland corporation)
Attest:
By:
------------------------------- -----------------------------------------
Assistant Secretary President
(SEAL)
Attest: A I M ADVISORS, INC.
By:
------------------------------- -----------------------------------------
Assistant Secretary President
(SEAL)
C-7
<PAGE> 90
SCHEDULE A
FUNDS AND EFFECTIVE DATES
<TABLE>
<CAPTION>
NAME OF FUND EFFECTIVE DATE OF ADVISORY AGREEMENT
------------ ------------------------------------
<S> <C>
AIM Advisor Flex Fund September 11, 2000
AIM Advisor International Value Fund September 11, 2000
AIM Advisor Real Estate Fund September 11, 2000
</TABLE>
C-8
<PAGE> 91
SCHEDULE B
COMPENSATION TO THE ADVISOR
The Company shall pay the Advisor, out of the assets of a Fund, as full
compensation for all services rendered, an advisory fee for such Fund set forth
below. Such fee shall be calculated by applying the following annual rates to
the average daily net assets of such Fund for the calendar year computed in the
manner used for the determination of the net asset value of shares of such Fund.
<TABLE>
<CAPTION>
AIM ADVISOR FLEX FUND
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
All Assets........................................................................................... 0.75%
AIM ADVISOR INTERNATIONAL VALUE FUND
NET ASSETS ANNUAL RATE
---------- -----------
All Assets........................................................................................... 1.00%
AIM ADVISOR REAL ESTATE FUND
NET ASSETS ANNUAL RATE
---------- -----------
All Assets........................................................................................... 0.90%
</TABLE>
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<PAGE> 92
APPENDIX D
AIM ADVISOR FUNDS, INC.
FORMS OF MASTER SUB-ADVISORY AGREEMENTS
MASTER INTERGROUP SUB-ADVISORY
CONTRACT FOR MUTUAL FUNDS
This contract is made as of _____________, between A I M Advisors, Inc.
hereinafter "Adviser," 11 Greenway Plaza, Suite 100, Houston, Texas 77046, and
INVESCO, Inc. "Sub-Adviser," 1315 Peachtree Street, N.E., Atlanta, Georgia
30309.
WHEREAS:
A) Adviser has entered into an investment advisory agreement with
A I M Advisor Funds, Inc. (hereinafter "Company"), an open-end
management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), with respect
to the funds set forth in Exhibit A attached hereto (each a
"Fund");
B) Sub-Adviser represents that it is licensed under the
Investment Advisers Act of 1940 ("Advisers Act") as an
investment adviser and engages in the business of acting as an
investment adviser;
C) Adviser is authorized to delegate certain, any or all of its
rights, duties and obligations under investment advisory
agreements to sub-advisers, including sub-advisers that are
affiliated with Adviser.
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser as Sub-Adviser of
each Fund for the period and on the terms set forth herein. Sub-Adviser accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
(a) Subject to the supervision of the Company's Board of Directors
("Board") and Adviser, the Sub-Adviser will provide a continuous investment
program for each Fund, including investment research and management, with
respect to all or a portion of the securities and investments and cash
equivalents of the Fund (the "Sub-Advised Assets"), such Sub-Advised Assets to
be determined by the Adviser. The Sub-Adviser will determine from time to time
what securities and other investments will be purchased, retained or sold with
respect to the Sub-Advised Assets of each Fund, and the brokers and dealers
through whom trades will be executed.
D-1
<PAGE> 93
(b) The Sub-Adviser agrees that, in placing orders with brokers and
dealers, it will attempt to obtain the best net result in terms of price and
execution. Consistent with this obligation, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who sell shares of the Funds or provide the Funds, Adviser's other
clients, or Sub-Adviser's other clients with research, analysis, advice and
similar services. The Sub-Adviser may pay to brokers and dealers, in return for
such research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to the Sub-Adviser determining in good faith
that such commission or spread is reasonable in terms either of the particular
transaction or of the overall responsibility of the Adviser and the Sub-Adviser
to the Funds and their other clients and that the total commissions or spreads
paid by each Fund will be reasonable in relation to the benefits to the Fund
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the applicable securities laws and the rules and regulations
thereunder and any exemptive orders currently in effect. Whenever the
Sub-Adviser simultaneously places orders to purchase or sell the same security
on behalf of a Fund and one or more other accounts advised by the Sub-Adviser,
such orders will be allocated as to price and amount among all such accounts in
a manner believed to be equitable to each account.
(c) The Sub-Adviser will maintain all required books and records with
respect to the securities transactions of the Funds, and will furnish the Board
and Adviser with such periodic and special reports as the Board or Adviser
reasonably may request. Sub-Adviser hereby agrees that all records which it
maintains for the Adviser are the property of the Adviser, and agrees to
preserve for the periods prescribed by applicable law any records which it
maintains for the Adviser and which are required to be maintained, and further
agrees to surrender promptly to the Adviser any records which it maintains for
the Adviser upon request by the Adviser.
3. Further Duties. In all matters relating to the performance of this
Contract, Sub-Adviser will act in conformity with the Articles of Incorporation,
By-Laws and Registration Statement of the Company and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules, regulations, exemptive orders and no-action positions thereunder, and
all other applicable laws and regulations. Sub-Adviser shall maintain compliance
procedures for the Funds that it and the Adviser reasonably believe are adequate
to ensure compliance with the 1940 Act and the investment objective(s) and
policies as stated in the prospectuses and statements of additional information.
4. Services Not Exclusive. The services furnished by Sub-Adviser
hereunder are not to be deemed exclusive and Sub-Adviser shall be free to
furnish
D-2
<PAGE> 94
similar services to others so long as its services under this Contract are not
impaired thereby. Nothing in this Contract shall limit or restrict the right of
any director, officer or employee of Sub-Adviser, who may also be a Director,
officer or employee of the Company, to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature.
5. Compensation.
(a) For the services provided to a Fund under this Contract, Adviser
will pay Sub-Adviser a fee, computed daily and paid monthly, at the rate of 40%
of the Adviser's compensation on the Sub-Advised Assets per year, on or before
the last business day of the next succeeding calendar month.
(b) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Fee Waivers and Expense Limitations. If, for any fiscal year of the
Company, the amount of the advisory fee which the Fund would otherwise be
obligated to pay to the Adviser is reduced because of contractual or voluntary
fee waivers or expense limitations by the Adviser, the fee payable hereunder to
the Sub-Adviser shall be reduced proportionately; and to the extent that the
Adviser reimburses the Fund as a result of such expense limitations, the
Sub-Adviser shall reimburse the Adviser that proportion of such reimbursement
payments which the sub-advisory fee hereunder bears to the advisory fee under
this Contract.
7. Limitation of Liability of Sub-Adviser and Indemnification.
Sub-Adviser shall not be liable for any costs or liabilities arising from any
error of judgment or mistake of law or any loss suffered by the Fund or the
Company in connection with the matters to which this Contract relates except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of Sub-Adviser in the performance by Sub-Adviser of its duties or from
reckless disregard by Sub-Adviser of its obligations and duties under this
Contract. Any person, even though also an officer, partner, employee, or agent
of Sub-Adviser, who may be or become a Director, officer, employee or agent of
the Company, shall be deemed, when rendering services to a Fund or the Company
or acting with respect to any business of a Fund or the Company to be rendering
such service to or acting solely for the Fund or the Company and not as an
officer, partner, employee, or agent or one under the control or direction of
Sub-Adviser even though paid by it.
8. Duration and Termination.
D-3
<PAGE> 95
(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract shall not take effect with respect to any
Fund unless it has first been approved (i) by a vote of a majority of the
independent Directors who are not parties to this Contract or "interested
persons" (as defined in the 1940 Act) of a party to this Contract, other than as
Board members ("Independent Directors"), cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of that
Fund's outstanding voting securities, when required by the 1940 Act.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in force and effect until June 30, 2001. Thereafter, if not terminated,
with respect to each Fund, this Contract shall continue automatically for
successive periods not to exceed twelve months each, provided that such
continuance is specifically approved at least annually (i) by a vote of a
majority of the Independent Directors, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Board or by vote of a
majority of the outstanding voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this
Contract may be terminated at any time, without the payment of any penalty, (i)
by vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to Sub-Adviser; or (ii) by
the Adviser on sixty days' written notice to Sub-Adviser; or (iii) by the
Sub-Adviser on sixty days' written notice to the Company. Termination of this
Contract with respect to one Fund shall not affect the continued effectiveness
of this Contract with respect to any other Fund. This Contract will
automatically terminate in the event of its assignment.
9. Amendment. No provision of this Contract may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and, when required by the 1940 Act, no amendment of this
Contract shall be effective until approved by vote of a majority of the Fund's
outstanding voting securities.
10. Notices. Any notices under this Contract shall be writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company and the Adviser shall be 11 Greenway Plaza,
Suite 100, Houston, Texas 77046. Until further notice to the other party, it is
agreed that the address of the Sub-Advisor shall be 1315 Peachtree Street, N.E.,
Atlanta, Georgia 30309.
D-4
<PAGE> 96
11. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Texas and the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
12. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. Any question of
interpretation of any term or provision of this Contract having a counterpart in
or otherwise derived from a term or provision of the 1940 Act or the Advisers
Act shall be resolved by reference to such term or provision of the 1940 Act or
the Advisers Act and to interpretations thereof, if any, by the United States
Courts or in the absence of any controlling decision of any such court, by
rules, regulations or orders of the SEC issued pursuant to said Acts. In
addition, where the effect of a requirement of the 1940 Act or the Advisers Act
reflected in any provision of the Contract is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
A I M Advisors, Inc. INVESCO, Inc.
ADVISER SUB-ADVISER
By: By:
----------------------------- ---------------------------
Name: Name:
--------------------------- -------------------------
Its: Its:
---------------------------- --------------------------
D-5
<PAGE> 97
EXHIBIT A
TO
MASTER INTERGROUP SUB-ADVISORY CONTRACT
FOR MUTUAL FUNDS
<TABLE>
<CAPTION>
SERIES ANNUAL FEE RATE*
------ ----------------
<S> <C>
AIM Advisor Flex Fund 0.40%
AIM Advisor Real Estate Fund 0.40%
</TABLE>
* Of the Advisor's compensation on the Sub-Advised Assets.
D-6
<PAGE> 98
MASTER INTERGROUP SUB-ADVISORY CONTRACT
FOR MUTUAL FUNDS
This contract is made as of ___________, between A I M Advisors, Inc.
hereinafter "Adviser," 11 Greenway Plaza, Suite 100, Houston, Texas 77046, and
INVESCO Global Asset Management (N.A.), Inc. "Sub-Adviser," 1315 Peachtree
Street, N.E., Atlanta, Georgia 30309.
WHEREAS:
A) Adviser has entered into an investment advisory agreement with
A I M Advisor Funds, Inc. (hereinafter "Company"), an open-end
management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), with respect
to the funds set forth in Exhibit A attached hereto (each a
"Fund");
B) Sub-Adviser represents that it is licensed under the
Investment Advisers Act of 1940 ("Advisers Act") as an
investment adviser and engages in the business of acting as an
investment adviser;
C) Adviser is authorized to delegate certain, any or all of its
rights, duties and obligations under investment advisory
agreements to sub-advisers, including sub-advisers that are
affiliated with Adviser.
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser as Sub-Adviser of
each Fund for the period and on the terms set forth herein. Sub-Adviser accepts
such appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
(a) Subject to the supervision of the Company's Board of Directors
("Board") and Adviser, the Sub-Adviser will provide a continuous investment
program for each Fund, including investment research and management, with
respect to all or a portion of the securities and investments and cash
equivalents of the Fund (the "Sub-Advised Assets"), such Sub-Advised Assets to
be determined by the Adviser. The Sub-Adviser will determine from time to time
what securities and other investments will be purchased, retained or sold with
respect to the Sub-Advised Assets of each Fund, and the brokers and dealers
through whom trades will be executed.
(b) The Sub-Adviser agrees that, in placing orders with brokers and
dealers, it will attempt to obtain the best net result in terms of price and
execution. Consistent with this obligation, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who sell shares of the Funds or provide the Funds, Adviser's other
D-7
<PAGE> 99
clients, or Sub-Adviser's other clients with research, analysis, advice and
similar services. The Sub-Adviser may pay to brokers and dealers, in return for
such research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to the Sub-Adviser determining in good faith
that such commission or spread is reasonable in terms either of the particular
transaction or of the overall responsibility of the Adviser and the Sub-Adviser
to the Funds and their other clients and that the total commissions or spreads
paid by each Fund will be reasonable in relation to the benefits to the Fund
over the long term. In no instance will portfolio securities be purchased from
or sold to the Sub-Adviser, or any affiliated person thereof, except in
accordance with the applicable securities laws and the rules and regulations
thereunder and any exemptive orders currently in effect. Whenever the
Sub-Adviser simultaneously places orders to purchase or sell the same security
on behalf of a Fund and one or more other accounts advised by the Sub-Adviser,
such orders will be allocated as to price and amount among all such accounts in
a manner believed to be equitable to each account.
(c) The Sub-Adviser will maintain all required books and records with
respect to the securities transactions of the Funds, and will furnish the Board
and Adviser with such periodic and special reports as the Board or Adviser
reasonably may request. Sub-Adviser hereby agrees that all records which it
maintains for the Adviser are the property of the Adviser, and agrees to
preserve for the periods prescribed by applicable law any records which it
maintains for the Adviser and which are required to be maintained, and further
agrees to surrender promptly to the Adviser any records which it maintains for
the Adviser upon request by the Adviser.
3. Further Duties. In all matters relating to the performance of this
Contract, Sub-Adviser will act in conformity with the Articles of Incorporation,
By-Laws and Registration Statement of the Company and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules, regulations, exemptive orders and no-action positions thereunder, and
all other applicable laws and regulations. Sub-Adviser shall maintain compliance
procedures for the Funds that it and the Adviser reasonably believe are adequate
to ensure compliance with the 1940 Act and the investment objective(s) and
policies as stated in the prospectuses and statements of additional information.
4. Services Not Exclusive. The services furnished by Sub-Adviser
hereunder are not to be deemed exclusive and Sub-Adviser shall be free to
furnish similar services to others so long as its services under this Contract
are not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of Sub-Adviser, who may also be a
Director, officer or employee of the Company, to engage in any other business or
to devote his or
D-8
<PAGE> 100
her time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature.
5. Compensation.
(a) For the services provided to a Fund under this Contract, Adviser
will pay Sub-Adviser a fee, computed daily and paid monthly, at the rate of 40%
of the Adviser's compensation on the Sub-Advised Assets per year, on or before
the last business day of the next succeeding calendar month.
(b) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
6. Fee Waivers and Expense Limitations. If, for any fiscal year of the
Company, the amount of the advisory fee which the Fund would otherwise be
obligated to pay to the Adviser is reduced because of contractual or voluntary
fee waivers or expense limitations by the Adviser, the fee payable hereunder to
the Sub-Adviser shall be reduced proportionately; and to the extent that the
Adviser reimburses the Fund as a result of such expense limitations, the
Sub-Adviser shall reimburse the Adviser that proportion of such reimbursement
payments which the sub-advisory fee hereunder bears to the advisory fee under
this Contract.
7. Limitation of Liability of Sub-Adviser and Indemnification.
Sub-Adviser shall not be liable for any costs or liabilities arising from any
error of judgment or mistake of law or any loss suffered by the Fund or the
Company in connection with the matters to which this Contract relates except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of Sub-Adviser in the performance by Sub-Adviser of its duties or from
reckless disregard by Sub-Adviser of its obligations and duties under this
Contract. Any person, even though also an officer, partner, employee, or agent
of Sub-Adviser, who may be or become a Director, officer, employee or agent of
the Company, shall be deemed, when rendering services to a Fund or the Company
or acting with respect to any business of a Fund or the Company to be rendering
such service to or acting solely for the Fund or the Company and not as an
officer, partner, employee, or agent or one under the control or direction of
Sub-Adviser even though paid by it.
8. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract shall not take effect with respect to any
Fund unless it has first been approved (i) by a vote of a majority of the
independent Directors who are not parties to this Contract or "interested
D-9
<PAGE> 101
persons" (as defined in the 1940 Act) of a party to this Contract, other than as
Board members ("Independent Directors"), cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of that
Fund's outstanding voting securities, when required by the 1940 Act.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in force and effect until June 30, 2001. Thereafter, if not terminated,
with respect to each Fund, this Contract shall continue automatically for
successive periods not to exceed twelve months each, provided that such
continuance is specifically approved at least annually (i) by a vote of a
majority of the Independent Directors, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by the Board or by vote of a
majority of the outstanding voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this
Contract may be terminated at any time, without the payment of any penalty, (i)
by vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to Sub-Adviser; or (ii) by
the Adviser on sixty days' written notice to Sub-Adviser; or (iii) by the
Sub-Adviser on sixty days' written notice to the Company. Termination of this
Contract with respect to one Fund shall not affect the continued effectiveness
of this Contract with respect to any other Fund. This Contract will
automatically terminate in the event of its assignment.
9. Amendment. No provision of this Contract may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and, when required by the 1940 Act, no amendment of this
Contract shall be effective until approved by vote of a majority of the Fund's
outstanding voting securities.
10. Notices. Any notices under this Contract shall be writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company and the Adviser shall be 11 Greenway Plaza,
Suite 100, Houston, Texas 77046. Until further notice to the other party, it is
agreed that the address of the Sub-Advisor shall be 1315 Peachtree Street, N.E.,
Atlanta, Georgia 30309.
11. Governing Law. This Contract shall be construed in accordance with
the laws of the State of Texas and the 1940 Act. To the extent that the
applicable laws of the State of Texas conflict with the applicable provisions of
the 1940 Act, the latter shall control.
D-10
<PAGE> 102
12. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. Any question of
interpretation of any term or provision of this Contract having a counterpart in
or otherwise derived from a term or provision of the 1940 Act or the Advisers
Act shall be resolved by reference to such term or provision of the 1940 Act or
the Advisers Act and to interpretations thereof, if any, by the United States
Courts or in the absence of any controlling decision of any such court, by
rules, regulations or orders of the SEC issued pursuant to said Acts. In
addition, where the effect of a requirement of the 1940 Act or the Advisers Act
reflected in any provision of the Contract is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
A I M Advisors, Inc. INVESCO Global Asset
Management (N.A.), Inc.
ADVISER SUB-ADVISER
By: By:
-------------------------- ------------------------------
Name: Name:
-------------------------- ------------------------------
Its: Its:
-------------------------- ------------------------------
D-11
<PAGE> 103
EXHIBIT A
TO
MASTER INTERGROUP SUB-ADVISORY CONTRACT
<TABLE>
<CAPTION>
SERIES ANNUAL FEE RATE*
------ ----------------
<S> <C>
AIM Advisor International Value Fund 0.40%
</TABLE>
* Of the Advisor's compensation on the Sub-Advised Assets.
D-12
<PAGE> 104
APPENDIX E
AIM ADVISOR FUNDS, INC.
FORM OF MASTER DISTRIBUTION PLAN
CLASS A AND CLASS C SHARES
SECTION 1. AIM Advisor Funds, Inc., a Maryland corporation (the "Fund"),
on behalf of the series of shares of common stock set forth in Schedule A to
this plan (the "Portfolios"), may act as a distributor of the Class A Shares and
Class C Shares, of such Portfolios as described in Schedule A to this plan (the
"Shares") of which the Fund is the issuer, pursuant to Rule12b-1 under the
Investment Company Act of 1940 (the "1940 Act"), according to the terms of this
Distribution Plan (the "Plan").
SECTION 2. The Fund may incur as a distributor of the Shares, expenses
at the rates set forth in Schedule A per annum of the average daily net assets
of the Fund attributable to the Shares, subject to any applicable limitations
imposed from time to time by applicable rules of the National Association of
Securities Dealers, Inc.
SECTION 3. Amounts set forth in Schedule A may be expended when and if
authorized in advance by the Fund's Board of Directors. Such amounts may be used
to finance any activity which is primarily intended to result in the sale of the
Shares, including, but not limited to, expenses of organizing and conducting
sales seminars, advertising programs, finders fees, printing of prospectuses and
statements of additional information (and supplements thereto) and reports for
other than existing shareholders, preparation and distribution of advertising
material and sales literature, supplemental payments to dealers and other
institutions as asset-based sales charges. Amounts set forth in Schedule A may
also be used to finance payments of service fees under a shareholder service
arrangement to be established by A I M Distributors, Inc. ("Distributors") as
the Fund's distributor in accordance with Section 4, and the costs of
administering the Plan. To the extent that amounts paid hereunder are not used
specifically to reimburse Distributors for any such expense, such amounts may be
treated as compensation for Distributors' distribution-related services. All
amounts expended pursuant to the Plan shall be paid to Distributors and are the
legal obligation of the Fund and not of Distributors. That portion of the
amounts paid under the Plan that is not paid to Distributors, or paid or
advanced by Distributors to dealers or other institutions, for providing
personal continuing shareholder service as a service fee pursuant to Section 4
shall be deemed an asset-based sales charge. No provision of this Plan shall be
interpreted to prohibit any payments by the Fund during periods when the Fund
has suspended or otherwise limited sales.
SECTION 4.
(a) Amounts expended by the Fund under the Plan shall
be used in part for the implementation by Distributors of
shareholder service arrangements. The maximum service fee paid
to any service provider shall be
E-1
<PAGE> 105
twenty-five one-hundredths of one percent (0.25%), or such
lower rate for the Portfolio as is specified on Schedule A,
per annum of the average daily net assets of the Fund
attributable to the Shares owned by the customers of such
service provider.
(b) Pursuant to this program, Distributors may enter
into agreements substantially in the form attached hereto as
Exhibit A ("Service Agreements") with such broker-dealers
("Dealers") as may be selected from time to time by
Distributors for the provision of distribution-related
personal shareholder services in connection with the sale of
Shares to the Dealers' clients and customers ("Customers") to
Customers who may from time to time directly or beneficially
own Shares. The distribution-related personal continuing
shareholder services to be rendered by Dealers under the
Service Agreements may include, but shall not be limited to,
the following: (I) distributing sales literature; (ii)
answering routine Customer inquiries concerning the Fund and
the Shares; (iii) assisting Customers in changing dividend
options, account designations and addresses, and in enrolling
into any of several retirement plans offered in connection
with the purchase of Shares; (iv) assisting in the
establishment and maintenance of customer accounts and
records, and in the processing of purchase and redemption
transactions; (v) investing dividends and capital gains
distributions automatically in Shares; and (vi) providing such
other information and services as the Fund or the Customer may
reasonably request.
(c) Distributors may also enter into Bank Shareholder
Service Agreements substantially in the form attached hereto
as Exhibit B ("Bank Agreements") with selected banks acting in
an agency capacity for their customers ("Banks"). Banks acting
in such capacity will provide some or all of the shareholder
services to their customers as set forth in the Bank
Agreements from time to time.
(d) Distributors may also enter into Variable Group
Annuity Contractholder Service Agreements substantially in the
form attached hereto as Exhibit C ("Variable Contract
Agreements") with selected insurance companies ("Companies")
offering variable annuity contracts to employers as funding
vehicles for retirement plans qualified under Section 401(a)
of the Internal Revenue Code, where amounts contributed under
such plans are invested pursuant to such variable annuity
contracts in Shares of the Fund. The Companies receiving
payments under such Variable Contract Agreements will provide
specialized services to contractholders and plan participants,
as set forth in the Variable Contract Agreements from time to
time.
(e) Distributors may also enter into Agency Pricing
Agreements substantially in the form attached hereto as
Exhibit D ("Pricing Agreements") with selected retirement plan
service providers acting in an agency capacity for their
customers ("Retirement Plan Providers"). Retirement
E-2
<PAGE> 106
Plan Providers acting in such capacity will provide some or
all of the shareholders services to their customers as set
forth in the Pricing Agreements from time to time.
(f) Distributors may also enter into Shareholder
Service Agreements substantially in the form attached hereto
as Exhibit E ("Bank Trust Department Agreements and Brokers
for Bank Trust Department Agreements") with selected bank
trust departments and brokers for bank trust departments. Such
bank trust departments and brokers for bank trust departments
will provide some or all of the shareholder services to their
customers as set forth in the Bank Trust Department Agreements
and Brokers for Bank Trust Department Agreements.
(g) Distributors, as agent of the Funds may also
enter into a Shareholder Service Agreement with Distributors,
acting as principal substantially in the form attached hereto
as Exhibit F. Distributors, acting as principal will provide
some or all of the shareholder services to Fund shareholders
for which Distributors is the broker of record, as set forth
in such Agreement.
SECTION 5. Any amendment to this Plan that requires the approval of the
shareholders of a Class pursuant to Rule 12b-1 under the 1940 Act shall become
effective as to such Class upon the approval of such amendment by a "majority of
the outstanding voting securities" (as defined in the 1940 Act) of such Class,
provided that the Board of Directors of the Fund has approved such amendment in
accordance with the provisions of Section 6 of this Plan.
SECTION 6. This Plan, any amendment to this Plan and any agreements
related to this Plan shall become effective immediately upon the receipt by the
Fund of both (a) the affirmative vote of a majority of the Board of Directors of
the Fund, and (b) the affirmative of a majority of those directors of the Fund
who are not "interested persons" of the Fund (as defined in the 1940 Act) and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Dis-interested Directors"), cast in person at
a meeting called for the purpose of voting on this Plan or such agreements.
Notwithstanding the foregoing, no such amendment that requires the approval of
the shareholders of a Class of a Fund shall become effective as to such Class
until such amendment has been approved by the shareholders of such Class in
accordance with the provisions of Section 5 of this Plan.
SECTION 7. Unless sooner terminated pursuant to Section 9, this Plan
shall continue in effect until June 30, 2001 and thereafter shall continue in
effect so long as such continuance is specifically approved, at least annually,
in the manner provided for approval of this Plan in Section 6.
SECTION 8. Distributors shall provide to the Fund's Board of Directors
and the Board of Directors shall review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
E-3
<PAGE> 107
SECTION 9. This Plan may be terminated at any time by vote of a majority
of the Dis-interested Directors, or by vote of a majority of the outstanding
voting securities of the Shares. If this Plan is terminated, the obligation of
the Fund to make payments pursuant to this Plan will also cease and the Fund
will not be required to make any payments beyond the termination date even with
respect to expenses incurred prior to the termination date.
SECTION 10. Any agreement related to this Plan shall be made in writing,
and shall provide:
(a) that such agreement may be terminated at any
time, without payment of any penalty, by vote of a majority of
the Dis-interested Directors or by a vote of the outstanding
voting securities of the Fund attributable to the Shares, on
not more than sixty (60) days' written notice to any other
party to the agreement; and
(b) that such agreement shall terminate automatically
in the event of its assignment.
SECTION 11. This Plan may not be amended to increase materially the
amount of distribution expenses provided for in Section 2 hereof unless such
amendment is approved in the manner provided in Section 5 hereof, and no
material amendment to the Plan shall be made unless approved in the manner
provided for in Section 6 hereof.
AIM ADVISOR FUNDS, INC.
(on behalf of its Class A Shares and
Class C Shares)
Attest: By:
----------------------------- --------------------------------
Assistant Secretary President
Effective as of September ___, 2000.
E-4
<PAGE> 108
SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM ADVISOR FUNDS, INC.
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services
rendered and all facilities furnished under the Distribution Plan for each
Portfolio (or Class thereof) designated below, a Distribution Fee* determined by
applying the annual rate set forth below as to each Portfolio (or Class thereof)
to the average daily net assets of the Portfolio (or Class thereof) for the plan
year, computed in a manner used for the determination of the offering price of
shares of the Portfolio.
<TABLE>
<CAPTION>
MINIMUM
ASSET
PORTFOLIO BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS A SHARES CHARGE FEE FEE
-------------- ------ --- ---
<S> <C> <C> <C>
AIM Advisor Flex Fund 0.10% 0.25% 0.35%
AIM Advisor International Value Fund 0.10% 0.25% 0.35%
AIM Advisor Real Estate Fund 0.10% 0.25% 0.35%
</TABLE>
<TABLE>
<CAPTION>
MAXIMUM
ASSET
BASED MAXIMUM MAXIMUM
SALES SERVICE AGGREGATE
CLASS C SHARES CHARGE FEE FEE
-------------- ------ --- ---
<S> <C> <C> <C>
AIM Advisor Flex Fund 0.75% 0.25% 1.00%
AIM Advisor International Value Fund 0.75% 0.25% 1.00%
AIM Advisor Real Estate Fund 0.75% 0.25% 1.00%
</TABLE>
-----------------
* The Distribution Fee is payable apart from the sales charge, if any, as
stated in the current prospectus for the applicable Portfolio (or Class
thereof).
E-5
<PAGE> 109
APPENDIX F
DATES OF ADVISORY AGREEMENTS
<TABLE>
<CAPTION>
Date of Current Date Last Submitted Date AIM Became
Name of Fund Advisory Agreement to a Vote of Shareholders Investment Advisor
------------ ------------------ ------------------------- ------------------
<S> <C> <C> <C>
AIM Advisor Flex Fund August 4, 1997 July 9, 1997 August 4, 1997
AIM Advisor International Value August 4, 1997 July 9, 1997 August 4, 1997
Fund
AIM Advisor Real Estate Fund August 4, 1997 July 9, 1997 August 4, 1997
</TABLE>
DATES OF SUB-ADVISORY AGREEMENTS
<TABLE>
<CAPTION>
Date INVESCO, Inc.* (for Flex
and Real Estate) or INVESCO
Global Asset Management
(N.A.), Inc.** (for
Date of Current Date Last Submitted International Value)
Name of Fund Sub-Advisory Agreement to a Vote of Shareholders Became Sub-Advisor
------------ ---------------------- ------------------------- ------------------
<S> <C> <C> <C>
AIM Advisor Flex Fund August 4, 1997 July 9, 1997 August 4, 1997
AIM Advisor International Value August 4, 1997 July 9, 1997 August 4, 1997
Fund
AIM Advisor Real Estate Fund August 4, 1997 July 9, 1997 August 4, 1997
</TABLE>
----------
*Prior to January 1, 2000, INVESCO Realty Advisors, Inc., an
affiliate of INVESCO, Inc., served as the sub-advisor for Real Estate.
**Prior to June 19, 2000, INVESCO Global Asset Management, Limited, an affiliate
of INVESCO Global Asset Management (N.A.), Inc., served as the sub-advisor for
International Value.
F-1
<PAGE> 110
APPENDIX G
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS
OF A I M ADVISORS, INC.
The following table provides information with respect to the principal
executive officer and the directors of A I M Advisors, Inc., all of whose
business address is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH AIM PRINCIPAL OCCUPATION
---------------- ----------------- --------------------
<S> <C> <C>
Charles T. Bauer Director and Chairman See director table under Proposal 1
Gary T. Crum Director and Senior See Appendix M
Vice President
Robert H. Graham Director and President See director table under Proposal 1
Dawn M. Hawley Director, Senior Vice Senior Vice President, Chief
President and Treasurer Financial Officer and Treasurer,
A I M Management Group Inc.; and
Vice President and Treasurer, A I M
Capital Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc., and Fund
Management Company
Carol F. Relihan Director, Senior Vice See Appendix M
President, General
Counsel and Secretary
</TABLE>
G-1
<PAGE> 111
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS
OF INVESCO, INC.
The following table provides information with respect to the principal
executive officer and the directors of INVESCO, Inc., all of whose business
address is 1315 Peachtree Street, N.E., Atlanta, Georgia 30309.
<TABLE>
<CAPTION>
POSITION WITH
NAME AND ADDRESS INVESCO, INC. PRINCIPAL OCCUPATION
---------------- ------------- --------------------
<S> <C> <C>
Luis A. Aguilar Director and Executive General Counsel, INVESCO, Inc.
Vice President, Secretary
and General Counsel
A.D. Frazier Jr. Director, Chief Executive Chief Executive Officer,
Officer, President and INVESCO, Inc.
Chairman
David A. Hartley Director, Chief Financial Chief Financial Officer,
Officer and Treasurer INVESCO, Inc.
</TABLE>
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS
OF INVESCO GLOBAL ASSET MANAGEMENT (N.A.), INC.
The following table provides information with respect to the principal
executive officer and the directors of INVESCO Global Asset Management (N.A.),
Inc., all of whose business address is 1315 Peachtree Street, N.E., Atlanta,
Georgia 30309.
<TABLE>
<CAPTION>
POSITION WITH
INVESCO GLOBAL ASSET
NAME AND ADDRESS MANAGEMENT (N.A.), INC. PRINCIPAL OCCUPATION
---------------- ----------------------- --------------------
<S> <C> <C>
Luis A. Aguilar Director, Vice President, General Counsel, INVESCO, Inc.
Secretary and General
A. D. Frazier, Jr. Director and Chairman Chief Executive Officer,
INVESCO Inc.
David A. Hartley Director, Chief Chief Financial Officer,
Financial Officer and Treasurer INVESCO, Inc.
</TABLE>
G-2
<PAGE> 112
APPENDIX H
ADVISORY AGREEMENT FEE SCHEDULE
<TABLE>
<CAPTION>
Aggregate Net Fees
Total Net Assets for Paid to AIM for the Fee Waivers for the
Annual Rate the Most Recently Most Recently Most Recently
(based on average Completed Fiscal Completed Fiscal Completed Fiscal
Name of Fund daily net assets) Period or Year Period or Year Period or Year
------------ ----------------- -------------------- ------------------- --------------
<S> <C> <C> <C> <C>
AIM Advisor Flex Fund 0.75% $751,452,500 $5,635,894 -0-
AIM Advisor International 1.00% 130,702,680 1,307,027 -0-
Value Fund
AIM Advisor Real Estate 0.90% 52,633,544 454,797 $11,553
Fund
</TABLE>
SUB-ADVISORY AGREEMENT FEE SCHEDULE
<TABLE>
<CAPTION>
Aggregate Net Fees
Paid by AIM to the
Total Net Assets for Sub-Advisor for the Fee Waivers for the
Annual Rate the Most Recently Most Recently Most Recently
(based on average Completed Fiscal Completed Fiscal Completed Fiscal
Name of Fund daily net assets) Period or Year Period or Year Period or Year
------------ ----------------- -------------------- ------------------- --------------
<S> <C> <C> <C> <C>
AIM Advisor Flex Fund 0.20% $751,452,500 $1,502,905 -0-
AIM Advisor International 0.35% of the first $50 130,702,680 401,757 -0-
Value Fund million; 0.30% over
$50 million up to
$100 million; 0.25%
of the excess over
$100 million
AIM Advisor Real Estate 0.35% of the first 52,633,544 176,865 $7,352
Fund $100 million; 0.25%
of the excess over
$100 million
</TABLE>
H-1
<PAGE> 113
APPENDIX I
FEES PAID TO AIM AND AFFILIATES
IN MOST RECENT FISCAL YEAR
The following chart sets forth the fees paid during the fiscal period or
year ended December 31, 1999 by the Company to A I M Advisors, Inc. (AIM) for
administrative services, and to affiliates of AIM. The administrative and other
services currently provided by AIM and its affiliates will continue to be
provided after the investment advisory contract with AIM is approved.
<TABLE>
<CAPTION>
AIM A I M A I M FUND
(ADMINISTRATIVE SERVICES) DISTRIBUTORS, INC.** SERVICES, INC.
---------------------------- -------------------- --------------
JAN. 1, 1999 JULY 1, 1999
THROUGH THROUGH
JUNE 30, 1999* DEC. 31, 1999
-------------- -------------
<S> <C> <C> <C> <C>
AIM ADVISOR FUNDS, INC.
AIM Advisor Flex Fund $443,754 $64,957 $7,172,910 $212,716
AIM Advisor International Value Fund 151,347 25,721 1,104,106 90,357
AIM Advisor Real Estate Fund 114,556 25,205 384,549 59,569
</TABLE>
---------------
* The current administrative services agreement became effective on July 1,
1999. Prior to that date, AIM provided operating services, including
certain administrative services, to the funds pursuant to a prior operating
services agreement between AIM and the funds.
** Net amount received from Rule 12b-1 fees. Excludes amounts reallowed to
brokers, dealers, agents and other service providers.
I-1
<PAGE> 114
APPENDIX J
ADVISORY FEE SCHEDULES FOR OTHER AIM FUNDS
The following table provides information with respect to the annual
advisory fee rates paid to AIM by certain funds that have a similar investment
objective as Flex, International Value and Real Estate, all of which have
similar investment objectives.
<TABLE>
<CAPTION>
FEE WAIVERS,
EXPENSE LIMITATIONS
AND/OR EXPENSE
ANNUAL RATE TOTAL NET ASSETS FOR REIMBURSEMENTS FOR THE
(BASED ON AVERAGE THE MOST RECENTLY MOST RECENTLY COMPLETED
NAME OF FUND DAILY NET ASSETS) COMPLETED FISCAL YEAR FISCAL YEAR
------------ ----------------- --------------------- -----------
<S> <C> <C> <C>
AIM Advisor Flex Fund 0.75% of total net assets $ 751,452,500 Waived 0.35% of operating services
fee on average net assets in excess
of $50 million
AIM Advisor 1.00% of total net assets 130,702,680 Waived 0.35% of operating services
International Value Fund fee on average net assets in excess
of $50 million
AIM Advisor Real Estate 0.90% of total net assets 52,633,544 Waived 0.35% of operating services
Fund fee on average net assets in excess
of $50 million
AIM Balanced Fund 0.75% of the first $150 2,649,841,691 N/A
million; 0.50% of the
excess over $150 million
AIM V.I. Balanced Fund 0.75% of the first $150 23,037,647 Expense limitation - 1.21%
million; 0.50% of the
excess over $150 million
</TABLE>
J-1
<PAGE> 115
ADVISORY FEE SCHEDULES FOR OTHER FUNDS
ADVISED BY INVESCO
The following table provides information with respect to the annual
advisory fee rates paid to INVESCO by certain funds that have a similar
investment objective as Flex and Real Estate, both of which have similar
investment objectives.
<TABLE>
<S> <C>
INVESCO Capital Management Division* 0.75% of the first $10 million
0.50% of the next $10 million and
0.25% on amounts thereafter
INVESCO Realty Advisors Division** 0.75% of the first $10 million
(for secured real estate) 0.70% of the next $20 million
0.65% of the next $20 million
and 0.60% on amounts over $50 million
</TABLE>
* All fees are negotiable beyond the minimum of $50,000. Shown herein in a
representative example of the fee schedule.
** Fees are negotiated with each client and include fees for both investment
advisory services and non-investment advisory services.
ADVISORY FEE SCHEDULES FOR OTHER FUNDS
ADVISED BY IGAM
The following table provides information with respect to the annual
advisory fee rates paid to IGAM by certain funds that have a similar investment
objective as International Value.
<TABLE>
<S> <C>
Non-U.S. Equities* 0.80% of the first $25 million
0.60% of the next $25 million
and 0.40% on amounts thereafter
Emerging Market Equity* 1.00% of the first $15 million
0.75% of the next $35 million
and 0.50% on amounts over $50 million
Asian Growth Trends* 0.80% of the first $25 million
0.60% of the next $25 million
and 0.40% on amounts thereafter
Global Fixed Income* 0.50% of the first $10 million
0.40% of the next $15 million
0.30% of the next $25 million
and 0.20% on amounts thereafter
</TABLE>
* When an account is less than the $10 million minimum, the fee computed is the
greater of $50,000 or 75 basis points.
J-2
<PAGE> 116
APPENDIX K
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
The funds may not:
(1) Invest in the securities of issuers conducting their principal business
activity in the same industry, if immediately after such investment the value of
a fund's investments in such industry would exceed 25% of the value of such
fund's total assets; provided, however, that this limitation does not apply to a
fund's investments in obligations issued or guaranteed by the U.S. government,
its agencies, authorities or instrumentalities.
(2) For Real Estate and International Value, with respect to 75% of the
fund's assets, invest in the securities of any one issuer, other than
obligations of, or guaranteed by, the U.S. government, its agencies, authorities
or 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 such fund. For Flex, with respect to 100% of the fund's
assets, invest in the securities of any one issuer, other than obligations of,
or guaranteed by, the U.S. government, its agencies, authorities or
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 such fund.
(3) Underwrite securities of other issuers, except insofar as it may
technically be deemed an "underwriter" under the Securities Act of 1933, as
amended, in connection with the disposition of a fund's portfolio securities.
(4) Invest in companies for the purpose of exercising control or
management.
(5) Issue any class of senior securities or borrow money, except borrowings
from banks for temporary or emergency purposes not in excess of 5% of the value
of a fund's total assets at the time the borrowing is made.
(6) Mortgage, pledge, hypothecate or in any manner transfer as security for
indebtedness any securities owned or held except to an extent not greater than
5% of the value of a fund's total assets.
(7) Make short sales of securities or maintain a short position. All funds
may, however, purchase or sell options on futures and write, purchase and sell
puts and calls.
(8) Purchase securities on margin, except that a fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities.
K-1
<PAGE> 117
(9) Purchase or sell real estate or interests in real estate. A fund may
invest in securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which invest in real estate
or interests therein.
(10) Purchase or sell commodities or commodity contracts except for
purchases and sales of options and futures, and options or futures on underlying
financial instruments.
(11) Make loans to other persons, provided that a fund may purchase debt
obligations consistent with its investment objectives and policies and may lend
limited amounts (not to exceed 10% of total assets) of its portfolio securities
to broker-dealers or other institutional investors.
(12) Purchase securities of other investment companies except (a) in
connection with a merger, consolidation, acquisition or reorganization; or (b)
by purchase in the open market of securities of other investment companies
involving only customary brokers' commissions and only if immediately thereafter
(i) no more than 3% of the voting securities of any one investment company are
owned by the fund, (ii) no more than 5% of the value of the total assets of a
fund would be invested in any one investment company, and (iii) no more than 10%
of the value of the total assets of a fund would be invested in the securities
of such investment companies. A portion of a fund's cash may be invested from
time to time in investment companies to which the Advisor or sub-advisor serves
as investment advisor; provided that no management or distribution fee will be
charged by the Advisor or sub-advisor with respect to any such assets so
invested and provided further that at no time will more than 3% of the fund's
assets be so invested. Should a fund purchase securities of other investment
companies, shareholders may incur additional management, advisory and
distribution fees.
(13) Invest in securities for which there are legal or contractual
restrictions on resale, if more than 2% of the value of a fund's total assets
would be invested in such securities, or invest in securities for which there is
no readily available market, if more than 5% of the value of a fund's total
assets would be invested in such securities. In determining securities subject
to this 5% restriction, the funds will include repurchase agreements maturing in
more than seven days.
K-2
<PAGE> 118
APPENDIX L
CURRENT INVESTMENT OBJECTIVES
AIM ADVISOR FLEX FUND
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.
AIM ADVISOR INTERNATIONAL VALUE FUND
The fund's investment objective is to achieve a high total return on
investment through growth of capital and current income, without regard to U.S.
or foreign tax considerations.
AIM ADVISOR REAL ESTATE FUND
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.
L-1
<PAGE> 119
APPENDIX M
EXECUTIVE OFFICERS OF AIM ADVISOR FUNDS, INC.
The following table provides information with respect to the executive
officers of the company. Each executive officer is elected by the Board and
serves until his or her successor is chosen and qualified or until his or her
resignation or removal by the Board. The business address of all officers of the
company is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION PRINCIPAL OCCUPATION(s)
WITH THE COMPANY OFFICER SINCE DURING PAST 5 YEARS
------------------------ -------------- ----------------------
<S> <C> <C>
Charles T. Bauer (81), August 4, 1997 See director table under Proposal 1
Chairman
Robert H. Graham (53), August 4, 1997 See director table under Proposal 1
President
Gary T. Crum (52), August 4, 1997 Director and President, A I M Capital
Senior Vice President Management, Inc.; Director and Executive
Vice President, A I M Management Group
Inc.; Director and Senior Vice
President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and
AMVESCAP PLC
Carol F. Relihan (45), August 4, 1997 Director, Senior Vice President, General
Senior Vice President and Secretary Counsel and Secretary, A I M Advisors, Inc.;
Senior Vice President, General Counsel and
Secretary, A I M Management Group, Inc.; Senior
Vice President, General Counsel and Secretary,
A I M Management Group Inc.; Director, Vice
President and General Counsel, Fund Management
Company; Vice President and General Counsel,
A I M Fund Services, Inc; and Vice President,
A I M Capital Management, Inc. and A I M
Distributors, Inc.
Robert G. Alley (51), August 4, 1997 Senior Vice President, A I M Capital
Vice President Management, Inc.; and Vice President,
A I M Advisors, Inc.
Stuart W. Coco (45), August 4, 1997 Senior Vice President, A I M Capital
Vice President Management Inc.; and Vice President, A I M
Advisors, Inc.
Melville B. Cox (56), August 4, 1997 Vice President and Chief Compliance
Vice President Officer, A I M Advisors, Inc., A I M
Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services,
Inc. and Fund Management Company
Dana R. Sutton (41), August 4, 1997 Vice President and Fund Controller, A I M
Vice President and Treasurer Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company
Karen Dunn Kelley (40), August 4, 1997 Senior Vice President, A I M Capital
Vice President Management, Inc.; and Vice President,
A I M Advisors, Inc.
Edgar M. Larsen (60), March 12, 1999 Vice President, A I M Capital Management,
Vice President Inc.
</TABLE>
M-1
<PAGE> 120
APPENDIX N
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
As of June 23, 2000, none of the directors or executive officers of the
company owned shares of any fund of the company except Carol F. Relihan,
Senior Vice President and Secretary of the company, owned less than 1% of
the Class A shares of Real Estate. The directors and officers, as a group,
held less than 1% of the shares of any fund as of June 23, 2000.
SECURITY OWNERSHIP OF CERTAIN RECORD OWNERS
To the best knowledge of the company, the names and addresses of the record
holders of 5% or more of the outstanding shares of each class of each fund as of
June 23, 2000, and the amount of the outstanding shares owned of record or
beneficially by such holders, are set forth below.
<TABLE>
<CAPTION>
PERCENT OF
CLASS PERCENT OF CLASS
NAME AND ADDRESS SHARES OWNED OWNED OF SHARES OWNED OWNED
FUND (CLASS) OF RECORD OWNER OF RECORD RECORD BENEFICIALLY BENEFICIALLY
------------ --------------- --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
AIM Advisor Flex Fund
Class A Shares Donaldson Lufkin Jenrette 220,021.469 13.29% -0-* -0-*
Securities Corp., Inc.
P.O. Box 2052
Jersey City, NJ 07303-9998
Cypress Enterprises 145,696.719 8.80% -0-* -0-*
A Partnership
730 S. Tonti St.
New Orleans, LA 70119-7551
Class B Shares Merrill Lynch Pierce Fenner Smith 45,215.731 11.09% -0-* -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr., East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
N-1
<PAGE> 121
<TABLE>
<CAPTION>
PERCENT OF
CLASS PERCENT OF CLASS
NAME AND ADDRESS SHARES OWNED OWNED OF SHARES OWNED OWNED
FUND (CLASS) OF RECORD OWNER OF RECORD RECORD BENEFICIALLY BENEFICIALLY
------------ --------------- --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Class C Shares Merrill Lynch Pierce Fenner Smith 2,438,011.057 11.30% -0- -0-
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr., East, 2nd Floor
Jacksonville, FL 32246
AIM Advisor
International Value
Fund
Class A Shares Merrill Lynch Pierce Fenner Smith 397,087.511 22.50%** -0-* -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr., East, 2nd Floor
Jacksonville, FL 32246
Commerce Bank FBO -0- -0- 140,057.946 7.94%
Baker University Endowment
(Mutual Funds)
8th and Grove
Baldwin City, KS 66006
Morgan Keegan Company, Inc -0- -0- 127,876.411 7.25%
FBO Mulvihill Family Trust
DTD 10/1/73, Williard
Thompson Trust
c/o Bessemer Trust Company
100 Woodbridge Center Drive
Woodbridge, NJ 07095
Salomon Smith Barney Inc. 104,534.461 5.92% -0-* -0-*
00165249542
388 Greenwich Street
New York, NY 10013
</TABLE>
N-2
<PAGE> 122
<TABLE>
<CAPTION>
PERCENT OF
CLASS PERCENT OF CLASS
NAME AND ADDRESS SHARES OWNED OWNED OF SHARES OWNED OWNED
FUND (CLASS) OF RECORD OWNER OF RECORD RECORD BENEFICIALLY BENEFICIALLY
------------ --------------- --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Morgan Keegan Company, Inc. -0- -0- 89,901.321 5.09%
FBO The W.W. Williams
Company Employee Pension Trust
INVESCO/Vanguard
Attn: Bill Williams
Columbus, OH 43212-3824
Class B Shares Merrill Lynch Pierce Fenner Smith 100,483.280 32.95%** -0-* -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 2,895,305.908 59.28%** -0-* -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr., East, 2nd Floor
Jacksonville, FL 32246
AIM Advisor Real
Estate Fund
Class B Shares Merrill Lynch Pierce Fenner Smith 126,724.287 13.02% -0-* -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 105,267.510 6.64% -0-* -0-*
FBO The Sole Benefit of Customers
Attn: Fund Administration
4800 Deer Lake Dr., East, 2nd Floor
Jacksonville, FL 32246
</TABLE>
N-3
<PAGE> 123
* The company has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
** A shareholder who holds 25% or more of the outstanding shares of a fund may
be presumed to be in "control" of such fund as defined in the 1940 Act.
N-4
<PAGE> 124
EVERY SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE SIGN, DATE AND
RETURN YOUR PROXY TODAY!
PROXY CARD PROXY SOLICITED BY THE BOARD OF DIRECTORS OF PROXY CARD
AIM ADVISOR FLEX FUND
(a portfolio of AIM Advisor Funds, Inc.)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 1, 2000
The undersigned hereby appoints Robert H. Graham, Gary T. Crum and Lewis F.
Pennock, and each of them separately, proxies with the power of substitution to
each, and hereby authorizes them to represent and to vote, as designated below,
at the Special Meeting of Shareholders on September 1, 2000, at 3:00 p.m.,
Central time, and at any adjournment thereof, all of the shares of the fund
which the undersigned would be entitled to vote if personally present. IF THIS
PROXY IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE
VOTED "FOR" EACH DIRECTOR AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
CONTROL NUMBER:
---------------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint
owners should sign. When signing as
executor, administrator, attorney,
trustee or guardian or as custodian for
a minor, please give full title as such.
If a corporation, please sign in full
corporate name and indicate the signer's
office. If a partner, sign in the
partnership name.
---------------------------------------
Signature
---------------------------------------
Signature (if held jointly)
---------------------------------------
Dated 10527_02
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" EACH PROPOSAL. TO VOTE, FILL IN BOX COMPLETELY.
EXAMPLE: [X]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WITHHOLD
FOR AUTHORITY FOR ALL
1. To elect ten individuals to the Board of Directors of AIM Advisor Funds, ALL FOR ALL NOMINEES EXCEPT
Inc., each of whom will serve until his or her successor is elected and
qualified:
01 Charles T. Bauer 04 Edward K. Dunn, Jr. 07 Robert H. Graham 10 Louis S. Sklar [ ] [ ] [ ]
02 Bruce L. Crockett 05 Jack M. Fields 08 Prema Mathai-Davis
03 Owen Daly II 06 Carl Frischling 09 Lewis F. Pennock
TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "FOR ALL EXCEPT"
BOX AND WRITE THE NOMINEE NUMBER(S) ON THE LINE PROVIDED. _____________________________
FOR AGAINST ABSTAIN
2. To approve an Agreement and Plan of Reorganization which provides for the [ ] [ ] [ ]
reorganization of AIM Advisor Funds, Inc. as a Delaware business trust.
3. To approve a new Master Investment Advisory Agreement with A I M Advisors, Inc. [ ] [ ] [ ]
4. To approve a new Master Sub-Advisory Agreement between A I M Advisors, Inc. and [ ] [ ] [ ]
INVESCO, Inc..
5. To approve a new Master Distribution Plan (Class A and Class C Shares) for the [ ] [ ] [ ]
Class A and Class C shares of the fund.
6. To approve changing the fund's fundamental investment restrictions.
a) Change to Fundamental Restriction on Issuer Diversification.
b) Change to Fundamental Restrictions on Borrowing Money and Issuing Senior Securities. [ ] [ ] [ ]
c) Change to Fundamental Restriction on Underwriting Securities. [ ] [ ] [ ]
d) Change to Fundamental Restriction on Industry Concentration. [ ] [ ] [ ]
e) Change to Fundamental Restriction on Purchasing or Selling Real Estate. [ ] [ ] [ ]
f) Change to Fundamental Restriction on Purchasing or Selling Commodities. [ ] [ ] [ ]
g) Change to Fundamental Restriction on Making Loans. [ ] [ ] [ ]
h) Approval of a New Fundamental Investment Restriction on Investing All of the [ ] [ ] [ ]
Fund's Assets in an Open-End Fund.
i) Elimination of Fundamental Restriction on Margin Transactions. [ ] [ ] [ ]
j) Elimination of Fundamental Restriction on Short Sales of Securities. [ ] [ ] [ ]
k) Elimination of Fundamental Restriction on Mortgaging, Pledging, Hypothecating [ ] [ ] [ ]
or Otherwise Transferring Assets as Security for Indebtedness.
l) Elimination of Fundamental Restriction on Investing for the Purpose of Control. [ ] [ ] [ ]
m) Elimination of Fundamental Restriction on Purchasing Restricted and Illiquid [ ] [ ] [ ]
Securities.
7. To approve changing the investment objective of the fund and making it [ ] [ ] [ ]
non-fundamental.
8. To ratify the selection of KPMG LLP as independent accountants for the fiscal [ ] [ ] [ ]
year ending in 2000.
9. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE [ ] [ ] [ ]
THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
<PAGE> 125
EVERY SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE SIGN, DATE AND
RETURN YOUR PROXY TODAY!
PROXY CARD PROXY SOLICITED BY THE BOARD OF DIRECTORS OF PROXY CARD
AIM ADVISOR INTERNATIONAL VALUE FUND
(a portfolio of AIM Advisor Funds, Inc.)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 1, 2000
The undersigned hereby appoints Robert H. Graham, Gary T. Crum and Lewis F.
Pennock, and each of them separately, proxies with the power of substitution to
each, and hereby authorizes them to represent and to vote, as designated below,
at the Special Meeting of Shareholders on September 1, 2000, at 3:00 p.m.,
Central time, and at any adjournment thereof, all of the shares of the fund
which the undersigned would be entitled to vote if personally present. IF THIS
PROXY IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE
VOTED "FOR" EACH DIRECTOR AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
CONTROL NUMBER:
---------------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint
owners should sign. When signing as
executor, administrator, attorney,
trustee or guardian or as custodian for
a minor, please give full title as such.
If a corporation, please sign in full
corporate name and indicate the signer's
office. If a partner, sign in the
partnership name.
---------------------------------------
Signature
---------------------------------------
Signature (if held jointly)
---------------------------------------
Dated 10527_02
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" EACH PROPOSAL. TO VOTE, FILL IN BOX COMPLETELY.
EXAMPLE: [X]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WITHHOLD
FOR AUTHORITY FOR ALL
1. To elect ten individuals to the Board of Directors of AIM Advisor Funds, ALL FOR ALL NOMINEES EXCEPT
Inc., each of whom will serve until his or her successor is elected and
qualified:
01 Charles T. Bauer 04 Edward K. Dunn, Jr. 07 Robert H. Graham 10 Louis S. Sklar [ ] [ ] [ ]
02 Bruce L. Crockett 05 Jack M. Fields 08 Prema Mathai-Davis
03 Owen Daly II 06 Carl Frischling 09 Lewis F. Pennock
TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "FOR ALL EXCEPT"
BOX AND WRITE THE NOMINEE NUMBER(S) ON THE LINE PROVIDED. _____________________________
FOR AGAINST ABSTAIN
2. To approve an Agreement and Plan of Reorganization which provides for the [ ] [ ] [ ]
reorganization of AIM Advisor Funds, Inc. as a Delaware business trust.
3. To approve a new Master Investment Advisory Agreement with A I M Advisors, Inc. [ ] [ ] [ ]
4. To approve a new Master Sub-Advisory Agreement between A I M Advisors, Inc. and [ ] [ ] [ ]
INVESCO, Inc..
5. To approve a new Master Distribution Plan (Class A and Class C Shares) for the [ ] [ ] [ ]
Class A and Class C shares of the fund.
6. To approve changing the fund's fundamental investment restrictions.
a) Change to Fundamental Restriction on Issuer Diversification.
b) Change to Fundamental Restrictions on Borrowing Money and Issuing Senior Securities. [ ] [ ] [ ]
c) Change to Fundamental Restriction on Underwriting Securities. [ ] [ ] [ ]
d) Change to Fundamental Restriction on Industry Concentration. [ ] [ ] [ ]
e) Change to Fundamental Restriction on Purchasing or Selling Real Estate. [ ] [ ] [ ]
f) Change to Fundamental Restriction on Purchasing or Selling Commodities. [ ] [ ] [ ]
g) Change to Fundamental Restriction on Making Loans. [ ] [ ] [ ]
h) Approval of a New Fundamental Investment Restriction on Investing All of the [ ] [ ] [ ]
Fund's Assets in an Open-End Fund.
i) Elimination of Fundamental Restriction on Margin Transactions. [ ] [ ] [ ]
j) Elimination of Fundamental Restriction on Short Sales of Securities. [ ] [ ] [ ]
k) Elimination of Fundamental Restriction on Mortgaging, Pledging, Hypothecating [ ] [ ] [ ]
or Otherwise Transferring Assets as Security for Indebtedness.
l) Elimination of Fundamental Restriction on Investing for the Purpose of Control. [ ] [ ] [ ]
m) Elimination of Fundamental Restriction on Purchasing Restricted and Illiquid [ ] [ ] [ ]
Securities.
7. To approve changing the investment objective of the fund and making it [ ] [ ] [ ]
non-fundamental.
8. To ratify the selection of KPMG LLP as independent accountants for the fiscal [ ] [ ] [ ]
year ending in 2000.
9. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE [ ] [ ] [ ]
THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
<PAGE> 126
EVERY SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE SIGN, DATE AND
RETURN YOUR PROXY TODAY!
PROXY CARD PROXY SOLICITED BY THE BOARD OF DIRECTORS OF PROXY CARD
AIM ADVISOR REAL ESTATE FUND
(a portfolio of AIM Advisor Funds, Inc.)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 1, 2000
The undersigned hereby appoints Robert H. Graham, Gary T. Crum and Lewis F.
Pennock, and each of them separately, proxies with the power of substitution to
each, and hereby authorizes them to represent and to vote, as designated below,
at the Special Meeting of Shareholders on September 1, 2000, at 3:00 p.m.,
Central time, and at any adjournment thereof, all of the shares of the fund
which the undersigned would be entitled to vote if personally present. IF THIS
PROXY IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE
VOTED "FOR" EACH DIRECTOR AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
CONTROL NUMBER:
---------------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint
owners should sign. When signing as
executor, administrator, attorney,
trustee or guardian or as custodian for
a minor, please give full title as such.
If a corporation, please sign in full
corporate name and indicate the signer's
office. If a partner, sign in the
partnership name.
---------------------------------------
Signature
---------------------------------------
Signature (if held jointly)
---------------------------------------
Dated 10527_02
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" EACH PROPOSAL. TO VOTE, FILL IN BOX COMPLETELY.
EXAMPLE: [X]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
WITHHOLD
FOR AUTHORITY FOR ALL
1. To elect ten individuals to the Board of Directors of AIM Advisor Funds, ALL FOR ALL NOMINEES EXCEPT
Inc., each of whom will serve until his or her successor is elected and
qualified:
01 Charles T. Bauer 04 Edward K. Dunn, Jr. 07 Robert H. Graham 10 Louis S. Sklar [ ] [ ] [ ]
02 Bruce L. Crockett 05 Jack M. Fields 08 Prema Mathai-Davis
03 Owen Daly II 06 Carl Frischling 09 Lewis F. Pennock
TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE "FOR ALL EXCEPT"
BOX AND WRITE THE NOMINEE NUMBER(S) ON THE LINE PROVIDED. _____________________________
FOR AGAINST ABSTAIN
2. To approve an Agreement and Plan of Reorganization which provides for the [ ] [ ] [ ]
reorganization of AIM Advisor Funds, Inc. as a Delaware business trust.
3. To approve a new Master Investment Advisory Agreement with A I M Advisors, Inc. [ ] [ ] [ ]
4. To approve a new Master Sub-Advisory Agreement between A I M Advisors, Inc. and [ ] [ ] [ ]
INVESCO, Inc..
5. To approve a new Master Distribution Plan (Class A and Class C Shares) for the [ ] [ ] [ ]
Class A and Class C shares of the fund.
6. To approve changing the fund's fundamental investment restrictions.
a) Change to Fundamental Restriction on Issuer Diversification.
b) Change to Fundamental Restrictions on Borrowing Money and Issuing Senior Securities. [ ] [ ] [ ]
c) Change to Fundamental Restriction on Underwriting Securities. [ ] [ ] [ ]
d) Change to Fundamental Restriction on Industry Concentration. [ ] [ ] [ ]
e) Change to Fundamental Restriction on Purchasing or Selling Real Estate. [ ] [ ] [ ]
f) Change to Fundamental Restriction on Purchasing or Selling Commodities. [ ] [ ] [ ]
g) Change to Fundamental Restriction on Making Loans. [ ] [ ] [ ]
h) Approval of a New Fundamental Investment Restriction on Investing All of the [ ] [ ] [ ]
Fund's Assets in an Open-End Fund.
i) Elimination of Fundamental Restriction on Margin Transactions. [ ] [ ] [ ]
j) Elimination of Fundamental Restriction on Short Sales of Securities. [ ] [ ] [ ]
k) Elimination of Fundamental Restriction on Mortgaging, Pledging, Hypothecating [ ] [ ] [ ]
or Otherwise Transferring Assets as Security for Indebtedness.
l) Elimination of Fundamental Restriction on Investing for the Purpose of Control. [ ] [ ] [ ]
m) Elimination of Fundamental Restriction on Purchasing Restricted and Illiquid [ ] [ ] [ ]
Securities.
7. To approve changing the investment objective of the fund and making it [ ] [ ] [ ]
non-fundamental.
8. To ratify the selection of KPMG LLP as independent accountants for the fiscal [ ] [ ] [ ]
year ending in 2000.
9. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE [ ] [ ] [ ]
THE MEETING OR ANY ADJOURNMENT THEREOF.
</TABLE>
