<PAGE> 1
As filed with the Securities and Exchange Commission on December 28, 1999
Registration No. 333-79691
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. [X] Post-Effective Amendment No. 1
AIM INVESTMENT FUNDS
(Exact Name of Registrant as Specified in Charter)
11 GREENWAY PLAZA, SUITE 100 HOUSTON, TEXAS 77046-1173
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S AREA TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 626-1919
COPIES TO:
<TABLE>
<S> <C>
Samuel D. Sirko, Esq. Arthur J. Brown, Esq.
A I M Advisors, Inc. R. Darrell Mounts, Esq.
11 Greenway Plaza, Suite 100 Kirkpatrick & Lockhart LLP
Houston, Texas 77046 1800 Massachusetts Avenue, N.W., 2nd Floor
(Name and Address of Agent for Service) Washington, D.C. 20036
</TABLE>
It is proposed that this filing will become effective immediately upon
filing pursuant to Rule 485(b).
<PAGE> 2
AIM INVESTMENT FUNDS
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
o Cover Sheet
o Contents of Registration Statement
o AIM Developing Markets Fund
Part A - Prospectus/Proxy Statement*
Part B - Statement of Additional Information*
o Part C - Other Information
o Signature Page
o Exhibits
* Previously filed in Registrant's Registration Statement on Form N-14,
SEC File No. 333-79691, on May 28, 1999.
<PAGE> 3
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified against any liability which may be incurred in such
capacity, other than insurance provided by any director, officer, affiliated
person or underwriter for their own protection.
Article VIII of the Registrant's Agreement and Declaration of Trust, as
amended, provides for indemnification of certain persons acting on
behalf of the Registrant. Article VIII, Section 8.1 provides that a
Trustee, when acting in such capacity, shall not be personally liable
to any person for any act, omission, or obligation of the Registrant or
any Trustee; provided, however, that nothing contained in the
Registrant's Agreement and Declaration of Trust or in the Delaware
Business Trust Act shall protect any Trustee against any liability to
the Registrant or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of the
office of Trustee.
Article VIII, Section 3 of the Registrant's Bylaws, as amended, also
provides that every person who is, or has been, a Trustee or Officer of
the Registrant is indemnified to the fullest extent permitted by the
Delaware Business Trust Act, the Registrant's Bylaws and other
applicable law.
A I M Advisors, Inc. ("AIM"), the Registrant and other investment
companies managed by AIM and their respective officers, trustees,
directors and employees are insured under a joint Mutual Fund and
Investment Advisory Professional and Directors and Officers Liability
Policy, issued by ICI Mutual Insurance Company, with a $35,000,000
limit of liability.
Section 9 of the Investment Management and Administration Contract
between the Registrant and AIM provides that AIM shall not be liable,
and each series of the Registrant shall indemnify AIM and its
directors, officers and employees, for any costs or liabilities arising
from any error of judgment or mistake of law or any loss suffered by
any series of the Registrant or the Registrant in connection with the
matters to which the Investment Management and Administration Contract
relates except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of AIM in the performance by AIM of its
duties or from reckless disregard by AIM of its obligations and duties
under the Investment Management and Administration Contract.
<PAGE> 4
Section 7 of the Sub-Advisory Contract between AIM and INVESCO Asset
Management Limited ("IAML") (the "Sub-Advisory Contract") provides that
IAML shall not be liable for any costs or liabilities arising from any
error of judgment or any mistake of law or any loss suffered by any
series of the Registrant or the Registrant in connection with the
matters to which the Sub-Advisory Contract relates except a loss
resulting from willful misfeasance, bad faith or gross negligence on
the part of IAML in the performance by IAML of its duties or from
reckless disregard by IAML of its obligations and duties under the
Sub-Advisory Contract.
ITEM 16. EXHIBITS.
Exhibit
Number Description
- ------- -----------
(1) (a) - Agreement and Declaration of Trust of Registrant, dated
May 7, 1998, was filed as an Exhibit to Post-Effective
Amendment No. 55 on August 26, 1998, and is hereby
incorporated by reference.
(b) - First Amendment to Agreement and Declaration of Trust
of Registrant, dated August 12, 1998, was filed as an
Exhibit to Post-Effective Amendment No. 56 on December
26, 1998, and is hereby incorporated by reference.
(c) - Second Amendment to Agreement and Declaration of Trust
of Registrant, dated December 10, 1998, was filed as an
Exhibit to Post-Effective Amendment No. 57 on February
22, 1999, and is hereby incorporated by reference.
(d) - Third Amendment to Agreement and Declaration of Trust
of Registrant, dated February 4, 1999, was filed as an
Exhibit to the Registration Statement on Form N-14 on
May 28, 1999, and is hereby incorporated by reference.
(e) - Fourth Amendment to Agreement and Declaration of Trust
of Registrant, dated February 16, 1999, was filed as an
Exhibit to the Registration Statement on Form N-14 on
May 28, 1999, and is hereby incorporated by reference.
(2) - Amended and Restated Bylaws of Registrant, adopted
effective May 7, 1998, and amended effective December
10, 1998, was filed as an Exhibit to the Registration
Statement on Form N-14 on May 28, 1999, and is hereby
incorporated by reference.
<PAGE> 5
(3) - Voting Trust Agreements - None.
(4) - A copy of the form of Agreement and Plan of
Reorganization and Termination was filed as a part of
the Registration Statement on Form N-14 on May 28,
1999, and is hereby incorporated by reference.
(5) - Provisions of instruments defining the rights of
holders of Registrant's securities are contained in
Articles II, VI, VII, VIII and IX of the Agreement and
Declaration of Trust, as amended, which were filed as
part of Exhibit (a)(1) to Post-Effective Amendment No.
57 on February 22, 1999, and are hereby incorporated by
reference, and Articles IV, V, VI, VII and VIII of the
Amended and Restated Bylaws, which were filed as an
Exhibit to the Registration Statement on Form N-14 on
May 28, 1999, and are hereby incorporated by reference.
(6) (a) - Investment Management and Administration Contract,
dated September 8, 1998, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
(b) - Administration Contract, dated September 8, 1998,
between Registrant and A I M Advisors, Inc. was filed
as an Exhibit to Post-Effective Amendment No. 55 on
August 26, 1998, and is hereby incorporated by
reference.
(c) - Sub-Administration Contract, dated September 8, 1998,
between A I M Advisors, Inc. and INVESCO (NY), Inc.
with respect to Registrant was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
(d) - Sub-Advisory and Sub-Administration Contract, dated
September 8, 1998, between A I M Advisors, Inc. and
INVESCO (NY), Inc. with respect to Registrant was filed
as an Exhibit to Post-Effective Amendment No. 55 on
August 26, 1998, and is hereby incorporated by
reference.
(e) - Investment Management and Administration Contract,
dated May 29, 1998, between Global Investment Portfolio
and A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
(f) - Investment Management and Administration Contract,
dated May 29, 1998, between Global High Income
Portfolio (now known as Emerging Markets Debt
Portfolio) and A I M Advisors, Inc. was filed as an
Exhibit to Post-Effective Amendment No. 55 on August
26, 1998, and is hereby incorporated by reference.
<PAGE> 6
(g) - Sub-Advisory and Sub-Administration Contract, dated May
29, 1998, between A I M Advisors, Inc. and INVESCO
(NY), Inc. with respect to Global Investment Portfolio
was filed as an Exhibit to Post-Effective Amendment No.
57 on February 22, 1999, and is hereby incorporated by
reference.
(h) - Sub-Advisory and Sub-Administration Contract, dated May
29, 1998, between A I M Advisors, Inc. and INVESCO
(NY), Inc. with respect to Global High Income Portfolio
(now known as Emerging Markets Debt Portfolio) was
filed as an Exhibit to Post-Effective Amendment No. 57
on February 22, 1999, and is hereby incorporated by
reference.
(i) - Form of Sub-Advisory Contract between A I M Advisors,
Inc. and INVESCO (NY), Inc. with respect to the
Registrant was filed as an Exhibit to Post-Effective
Amendment No. 57 on February 22, 1999, and is hereby
incorporated by reference.
(j) - Sub-Advisory Contract, dated February 12, 1999, between
A I M Advisors, Inc. and INVESCO Asset Management
Limited with respect to the Registrant is filed
electronically herewith.
(k) - Form of Sub-Advisory Contract between A I M Advisors,
Inc. and INVESCO Asset Management Limited with respect
to Emerging Markets Debt Portfolio was filed as an
Exhibit to Post-Effective Amendment No. 57 on February
22, 1999, and is hereby incorporated by reference.
(7) (a) - (i) Distribution Agreement, dated September 8, 1998,
between Registrant and A I M Distributors, Inc. with
respect to Class A shares was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
- (ii) Master Distribution Agreement, dated March 1,
1999, between Registrant and A I M Distributors, Inc.
with respect to Class A and C shares was filed as an
Exhibit to the Registration Statement on Form N-14 on
May 28, 1999 and is hereby incorporated by reference.
- (iii) Amendment No. 1, dated March 18, 1999, to Master
Distribution Agreement, dated September 8, 1998,
between Registrant and A I M Distributors, Inc. with
respect to Class B shares is filed herewith
electronically.
- (iv) Amendment No. 1, dated March 18, 1999, to Master
Distribution Agreement, dated March 1, 1999, between
Registrant and A I M Distributors, Inc. with respect
to Class A and C shares is filed electronically
herewith.
<PAGE> 7
(b) - Distribution Agreement, dated September 8, 1998,
between Registrant and A I M Distributors, Inc. with
respect to Class B shares was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
(c) - Distribution Agreement, dated September 8, 1998,
between Registrant and A I M Distributors, Inc. with
respect to Advisor Class shares was filed as an Exhibit
to Post-Effective Amendment No. 55 on August 26, 1998,
and is hereby incorporated by reference.
(d) - Form of Selected Dealer Agreement between A I M
Distributors, Inc. and selected dealers was filed as an
Exhibit to Post-Effective Amendment No. 57 on February
22, 1999, and is hereby incorporated by reference.
(e) - Form of Bank Selling Group Agreement between A I M
Distributors, Inc. and banks was filed as an Exhibit to
Post-Effective Amendment No. 57 on February 22, 1999,
and is hereby incorporated by reference.
(8) - Agreements Concerning Officers and Directors/Trustees
Benefits - None.
(9) (a) - Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998, and is hereby incorporated by
reference.
(b) - Notice of Additional Fund, dated August 7, 1989, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998, and is hereby incorporated by
reference.
(c) - Notice of Additional Fund, dated September 23, 1990, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998, and is hereby incorporated by
reference.
(d) - Notice of Additional Fund, dated August 8, 1991, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998 and is hereby incorporated by
reference.
(e) - Notice of Additional Fund, dated January 27, 1992, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust
Company was filed as an Exhibit to Post-Effective
Amendment No. 56 on December 30, 1998, and is hereby
incorporated by reference.
<PAGE> 8
(f) - Notice of Additional Fund, dated May 10, 1992, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998, and is hereby incorporated by
reference.
(g) - Notice of Additional Fund, dated June 1, 1992, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998, and is hereby incorporated by
reference.
(h) - Notice of Additional Fund, dated October 22, 1992, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998, and is hereby incorporated by
reference.
(i) - Notice of Additional Fund, dated May 31, 1994, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998, and is hereby incorporated by
reference.
(j) - Amendment to Custodian Contract, dated August 17, 1994,
was filed as an Exhibit to Post-Effective Amendment No.
56 on December 30, 1998, and is hereby incorporated by
reference.
(k) - Amendment to Custodian Contract, dated June 20, 1995,
was filed as an Exhibit to Post-Effective Amendment No.
56 on December 30, 1998, and is hereby incorporated by
reference.
(l) - Notice of Additional Fund, dated October 24, 1997, to
Custodian Contract, dated April 27, 1988, between
Registrant and State Street Bank and Trust Company was
filed as an Exhibit to Post-Effective Amendment No. 56
on December 30, 1998, and is hereby incorporated by
reference.
(m) - Notice of Registrant's Reorganization, dated September
22, 1998, to Custodian, was filed as an Exhibit to
Post-Effective Amendment No. 56 on December 30, 1998,
and is hereby incorporated by reference.
(n) - Amendment to Custodian Contract, dated January 26,
1989, was filed as an Exhibit to Post-Effective
Amendment No. 57 on February 22, 1999, and is hereby
incorporated by reference.
(10) (a) - Form of Master Distribution Plan, pursuant to Rule
12b-1 with respect to Class A and Class C shares was
filed as an Exhibit to Post-Effective Amendment No.
57 on February 22, 1999, and is hereby incorporated
by reference.
<PAGE> 9
(b) - (i) Distribution Plan, effective as of September 8,
1998, adopted pursuant to Rule 12b-1 with respect to
Class B shares was filed as an Exhibit to
Post-Effective Amendment No. 53 on May 29, 1998, and is
hereby incorporated by reference.
(c) - (i) Form of Shareholder Service Agreement to be used in
connection with Registrant's Master Distribution Plan
was filed as an Exhibit to the Registration Statement
on Form N-14 on May 28, 1999, and is hereby
incorporated by reference.
- (ii) Form of Bank Shareholder Service Agreement to be
used in connection with Registrant's Master
Distribution Plan was filed as an Exhibit to the
Registration Statement on Form N-14 on May 28, 1999,
and is hereby incorporated by reference.
- (iii) Form of Service Agreement for Bank Trust
Department and for Brokers to be used in connection
with Registrant's Master Distribution Plan was filed as
an Exhibit to the Registration Statement on Form N-14
on May 28, 1999, and is hereby incorporated by
reference.
- (iv) Form of Service Agreement for Bank Trust
Departments to be used in connection with Registrant's
Master Distribution Plan was filed as an Exhibit to the
Registration Statement on Form N-14 on May 28, 1999,
and is hereby incorporated by reference.
- (v) Form of Service Agreement for Brokers for Bank
Trust Departments to be used in connection with
Registrant's Master Distribution Plan was filed as an
Exhibit to the Registration Statement on Form N-14 on
May 28, 1999, and is hereby incorporated by reference.
- (vi) Form of Agency Pricing Agreement to be used in
connection with Registrant's Master Distribution Plan
was filed as an Exhibit to the Registration Statement
on Form N-14 on May 28, 1999, and is hereby
incorporated by reference.
(d) - Rule 18f-3 Multiple Class Plan was filed as an Exhibit
to Post-Effective Amendment No. 55 on August 26, 1998,
and is hereby incorporated by reference.
(11) (a) - Opinion and Consent of Kirkpatrick & Lockhart LLP as to
the legality of the securities being registered is
filed electronically herewith.
<PAGE> 10
(b) - Opinion and Consent of Delaware Counsel was filed as an
Exhibit to the Registration Statement on Form N-14 on
May 28, 1999, and is hereby incorporated by reference.
(12) - Opinion and Consent of Kirkpatrick & Lockhart LLP
supporting the tax matters and consequences to
shareholders discussed in the prospectus is filed
herewith electronically.
(13) (a) - (i) Transfer Agency and Service Agreement, dated
September 8, 1998, between Registrant and A I M Fund
Services, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 56 on December 30, 1998,
and is hereby incorporated by reference.
- (ii) Form of Amendment No. 1 to Transfer Agency and
Services Agreement, dated September 8, 1998, between
Registrant and A I M Fund Services, Inc. was filed as
an Exhibit to Post-Effective Amendment No. 57 on
February 22, 1999, and is hereby incorporated by
reference.
(b) - (i) Remote Access and Related Services Agreement, dated
as of December 23, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
- (ii) Amendment No. 1, dated October 4, 1995, to the
Remote Access and Related Services Agreement, dated as
of December 23, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
- (iii) Addendum No. 2, dated October 12, 1995, to the
Remote Access and Related Services Agreement, dated as
of December 23, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
- (iv) Amendment No. 3, dated February 1, 1997, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
- (v) Exhibit 1, effective as of August 4, 1997, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 55 on August 26, 1998, and
is hereby incorporated by reference.
- (vi) Preferred Registration Technology Escrow
Agreement, dated September 10, 1997, was filed as an
Exhibit to Post-Effective Amendment No. 55 on August
26, 1998, and is hereby incorporated by reference.
<PAGE> 11
- (vii) Amendment No. 4, dated June 30, 1998, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 56 on December 30, 1998,
and is hereby incorporated by reference.
- (viii) Amendment No. 5, dated July 1, 1998, to the
Remote Access and Related Services Agreement, dated
December 23, 1994, was filed as an Exhibit to
Post-Effective Amendment No. 56 on December 30, 1998,
and is hereby incorporated by reference.
(c) - Fund Accounting and Pricing Agent Agreement between
Registrant and A I M Advisors, Inc., dated June 1,
1998, was filed as an Exhibit to Post- Effective
Amendment No. 57 on February 22, 1999, and is hereby
incorporated by reference.
(14) - Consent of PricewaterhouseCoopers LLP was filed as an
Exhibit to the Registration Statement on Form N-14 on
May 28, 1999, and is hereby incorporated by reference.
(15) - Omitted Financial Statements - None.
(16) - Powers of Attorney - None.
(17) - Form of Proxy was filed as part of the Registration
Statement on Form N-14 on May 28, 1999, and is hereby
incorporated by reference.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public re-offering of
the securities registered through the use of the prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offering by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new Registration Statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement on Form N-14 to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Houston, and the State of Texas, on the 28th day of December, 1999.
REGISTRANT: AIM INVESTMENT FUNDS
By: /s/ ROBERT H. GRAHAM
-----------------------------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities indicated on the dates indicated.
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SIGNATURES TITLE DATE
---------- ----- ----
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/s/ ROBERT H. GRAHAM Chairman, Trustee & President (Principal December 28, 1999
- ------------------------- Executive Officer)
(Robert H. Graham)
/s/ C. DEREK ANDERSON
- ------------------------- Trustee December 28, 1999
(C. Derek Anderson)
/s/ FRANK S. BAYLEY
- ------------------------- Trustee December 28, 1999
(Frank S. Bayley)
/s/ RUTH H. QUIGLEY
- ------------------------- Trustee December 28, 1999
(Ruth H. Quigley)
/s/ DANA R. SUTTON
- ------------------------- Vice President and Treasurer December 28, 1999
(Dana R. Sutton)
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- -----------
<S> <C> <C> <C>
(6) (j) - Sub-Advisory Contract, dated February 12, 1999,
between A I M Advisors, Inc. and INVESCO Asset
Management Limited with respect to the Registrant.
(7) (a) - (iii) Amendment No. 1, dated March 18, 1999, to
Master Distribution Agreement, dated September 8,
1998, between Registrant and A I M Distributors, Inc.
with respect to Class B shares.
- (iv) Amendment No. 1, dated March 18, 1999, to Master
Distribution Agreement, dated March 1, 1999, between
Registrant and A I M Distributors, Inc. with respect
to Class A and C shares.
(11) (a) - Opinion and Consent of Kirkpatrick & Lockhart LLP as
to the legality of the securities being registered.
(12) - Opinion and Consent of Kirkpatrick & Lockhart LLP
supporting the tax matters and consequences to
shareholders discussed in the prospectus.
</TABLE>
<PAGE> 1
EXHIBIT 6(j)
AIM INVESTMENT FUNDS
AMENDED AND RESTATED
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT LIMITED
Contract made as of February 12, 1999, between A I M Advisors, Inc., a
Delaware corporation ("Adviser"), and INVESCO Asset Management Limited, a
company organized under the laws of England and Wales ("Sub-Adviser").
WHEREAS Adviser has entered into an Investment Management and
Administration Contract with AIM Investment Funds ("Company"), an open-end
management investment company registered under the Investment Company Act of
1940, as amended ("1940 Act"), with respect to AIM Latin American Growth Fund,
AIM Emerging Markets Fund, AIM Global Growth & Income Fund, AIM Global
Government Income Fund and AIM Developing Markets Fund (each a "Fund" and
collectively, the "Funds"), each Fund being a series of the Company's shares of
beneficial interest; and
WHEREAS Adviser previously retained Sub-Adviser as investment
sub-adviser in order to furnish certain advisory services to the Funds, and
Adviser and Sub-Adviser entered into a Sub-Advisory Contract dated as of
December 14, 1998 with respect to the Funds ("Sub-Advisory Contract"); and
WHEREAS Adviser and Sub-Adviser desire to amend and restate the
Sub-Advisory Contract to remove AIM Emerging Markets Fund from the list of
Funds since it ceased operations as of February 12, 1999;
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 in this Contract. 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 Trustees
("Board") and Adviser, the Sub-Adviser will provide a continuous investment
program for each Fund, including investment research and management, with
respect to all securities and investments and cash equivalents of the Fund. The
Sub-Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by each Fund, and the brokers
and dealers through whom trades will be executed.
1
<PAGE> 2
(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 federal 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 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. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Sub-Adviser hereby agrees that all records which it maintains
for the Company are the property of the Company, agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act any records which it
maintains for the Company and which are required to be maintained by Rule 31a-1
under the 1940 Act, and further agrees to surrender promptly to the Company any
records which it maintains for the Company upon request by the Company.
3. Further Duties. In all matters relating to the performance of this
Contract, Sub-Adviser will act in conformity with the Agreement and Declaration
of Trust, 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 thereunder, and all other applicable federal and
state laws and regulations.
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 Trustee,
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. Expenses.
2
<PAGE> 3
(a) During the term of this Contract, each Fund will bear all
expenses, not specifically assumed by Adviser and Sub-Adviser, incurred in its
operations and the offering of its shares.
(b) Expenses borne by each Fund will include but not be limited to the
following: (i) all direct charges relating to the purchase and sale of
portfolio securities, including the cost (including brokerage commissions, if
any) of securities purchased or sold by the Fund and any losses incurred in
connection therewith; (ii) fees payable to and expenses incurred on behalf of
the Fund by Sub-Adviser under this Contract; (iii) investment consulting fees
and related costs; (iv) expenses of organizing the Company and the Fund; (v)
expenses of preparing and filing reports and other documents with governmental
and regulatory agencies; (vi) filing fees and expenses relating to the
registration and qualification of the Fund's shares and the Company under
federal and/or state securities laws and maintaining such registrations and
qualifications; (vii) costs incurred in connection with the issuance, sale or
repurchase of the Fund's shares of beneficial interest; (viii) fees and
salaries payable to the Company's Trustees who are not parties to this Contract
or interested persons of any such party ("Independent Trustees"); (ix) all
expenses incurred in connection with the Independent Trustees' services,
including travel expenses; (x) taxes (including any income or franchise taxes)
and governmental fees; (xi) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (xii) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Company or the Fund for violation of any law; (xiii)
interest charges; (xiv) legal, accounting and auditing expenses, including
legal fees of special counsel for the Independent Trustees; (xv) charges of
custodians, transfer agents, pricing agents and other agents; (xvi) expenses of
disbursing dividends and distributions; (xvii) costs of preparing share
certificates; (xviii) expenses of setting in type, printing and mailing
prospectuses and supplements thereto, statements of additional information,
reports, notices and proxy materials for existing shareholders; (xix) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Company is a party and the expenses
the Company may incur as a result of its legal obligation to provide
indemnification to its officers, Trustees, employees and agents) incurred by
the Company; (xx) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; (xxi) costs of
mailing and tabulating proxies and costs of meetings of shareholders, the Board
and any committees thereof; (xxii) the cost of investment company literature
and other publications provided by the Company to its Trustees and officers;
and (xxiii) costs of mailing, stationery and communications equipment.
(c) The payment or assumption by Sub-Adviser of any expense of the
Company or any Fund that Sub-Adviser is not required by this Contract to pay or
assume shall not obligate Sub-Adviser to pay or assume the same or any similar
expense of the Company or any Fund on any subsequent occasion.
6. Compensation.
3
<PAGE> 4
(a) For the services provided to a Fund under this Contract, Adviser
will pay Sub-Adviser a fee, computed weekly and paid monthly, as set forth in
Appendix A hereto.
(b) For the services provided under this Contract to each Fund as
hereafter may be established, Adviser will pay to Sub-Adviser a fee in an
amount to be agreed upon in a written Appendix to this Contract executed by
Adviser and by Sub-Adviser.
(c) The fee shall be computed weekly and paid monthly to Sub-Adviser
on or before the last business day of the next succeeding calendar month.
(d) 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.
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 Trustee, 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 Trustees, 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 effect for two years from the above written date. 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 Trustees, 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.
4
<PAGE> 5
(c) Notwithstanding the foregoing, with respect to any Fund this
Contract may be terminated at any time, without the payment of any penalty, 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 by
Sub-Adviser at any time, without the payment of any penalty, 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 no amendment of this Contract shall be effective until approved by
vote of a majority of the Fund's outstanding voting securities, when required
by the 1940 Act.
10. Governing Law. This Contract shall be construed in accordance with the
laws of the State of Delaware (without regard to Delaware conflict or choice of
law provisions) and the 1940 Act. To the extent that the applicable laws of the
State of Delaware conflict with the applicable provisions of the 1940 Act, the
latter shall control.
11. 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. As used in this Contract, the terms
"majority of the outstanding voting securities," "interested person,"
"assignment," "broker," "dealer," "investment adviser," "national securities
exchange," "net assets," "prospectus," "sale," "sell" and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Contract is made less restrictive by a rule,
regulation or order of the Securities and Exchange Commission, whether of
special or general application, such provision shall be deemed to incorporate
the effect of such rule, regulation or order.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
A I M ADVISORS, INC.
Attest: /s/ P. MICHELLE GRACE
------------------------- By: /s/ ROBERT H. GRAHAM
---------------------------
Name: Robert H. Graham
Title: President
INVESCO ASSET MANAGEMENT LIMITED
Attest: /s/ GRAEME PROUDFOOT By: /s/ J. LAMBOURNE
------------------------- -----------------------------
Name: J. Lambourne
Title: Director
6
<PAGE> 7
APPENDIX A
TO
AIM INVESTMENT FUNDS
AMENDED AND RESTATED
SUB-ADVISORY CONTRACT
BETWEEN
A I M ADVISORS, INC.
AND
INVESCO ASSET MANAGEMENT LIMITED
AIM LATIN AMERICAN GROWTH FUND, AIM GLOBAL GROWTH & INCOME FUND, AIM
DEVELOPING MARKETS FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $ 500 million................................................ 0.39%
Next $ 500 million................................................ 0.38%
Next $ 500 million................................................ 0.37%
On amounts thereafter.............................................. 0.36%
</TABLE>
AIM GLOBAL GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $ 500 million................................................ 0.29%
Next $ 1 billion.................................................. 0.28%
Next $ 1 billion.................................................. 0.27%
On amounts thereafter.............................................. 0.26%
</TABLE>
7
<PAGE> 1
EXHIBIT 7(a)(iii)
AMENDMENT NO. 1
DISTRIBUTION AGREEMENT
BETWEEN
AIM INVESTMENT FUNDS
AND
AIM DISTRIBUTORS, INC.
(CLASS B SHARES)
The Distribution Agreement (the "Agreement"), dated September 8, 1998, by
and between AIM Investment Funds, a Delaware business trust, and A I M
Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
"SCHEDULE A
TO
DISTRIBUTION AGREEMENT
OF
AIM INVESTMENT FUNDS
CLASS B SHARES
AIM Developing Markets Fund
AIM Emerging Markets Debt Fund
AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
AIM Global Government Income Fund
AIM Global Growth & Income Fund
AIM Global Health Care Fund
AIM Global Infrastructure Fund
AIM Global Resources Fund
AIM Global Telecommunications Fund
AIM Latin American Growth Fund
AIM Strategic Income Fund"
1
<PAGE> 2
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Dated: March 18, 1999
AIM INVESTMENT FUNDS
Attest:
/s/ KATHLEEN J. PFLUEGER /s/ ROBERT H. GRAHAM
- ------------------------------ ------------------------------
Assistant Secretary President
AIM DISTRIBUTORS, INC.
Attest:
/s/ OFELIA M. MAYO /s/ MICHAEL J. CEMO
- ------------------------------ ------------------------------
Assistant Secretary President
2
<PAGE> 1
EXHIBIT 7(a)(iv)
AMENDMENT NO. 1
MASTER DISTRIBUTION PLAN
OF
AIM INVESTMENT FUNDS
(CLASS A AND CLASS C SHARES)
The Master Distribution Plan (the "Plan"), dated as of March 1, 1999,
pursuant to Rule 12b-1 of AIM Investment Funds, a Delaware business trust, is
hereby amended as follows:
Appendix A of the Plan is hereby deleted in its entirety and replaced
with the following:
"APPENDIX A
TO
MASTER DISTRIBUTION PLAN
OF
AIM INVESTMENT FUNDS
(CLASS A AND CLASS C SHARES)
(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 as designated below, a Distribution Fee* determined by applying
the annual rate set forth below as to each Portfolio (or Class A or Class C
thereof) to the average daily net assets of the Portfolio (or Class A or Class C
thereof) for the plan year, computed in a manner used for the determination of
the offering price of shares of the Portfolio (or Class A or Class C thereof).
<TABLE>
<CAPTION>
MAXIMUM
ASSET-BASED SERVICE AGGREGATE
FUND SALES CHARGE FEE ANNUAL FEE
---- ------------ ------- ------------
<S> <C> <C> <C>
Class A Shares
AIM Developing Markets Fund 0.25% 0.25% 0.50%
AIM Emerging Markets Debt Fund 0.10% 0.25% 0.35%
AIM Global Consumer Products
and Services Fund 0.25% 0.25% 0.50%
AIM Global Financial Services Fund 0.25% 0.25% 0.50%
AIM Global Government Income Fund 0.10% 0.25% 0.35%
AIM Global Growth & Income Fund 0.10% 0.25% 0.35%
AIM Global Health Care Fund 0.25% 0.25% 0.50%
AIM Global Infrastructure Fund 0.25% 0.25% 0.50%
AIM Global Resources Fund 0.25% 0.25% 0.50%
AIM Global Telecommunications Fund 0.25% 0.25% 0.50%
AIM Latin American Growth Fund 0.25% 0.25% 0.50%
AIM Strategic Income Fund 0.10% 0.25% 0.35%
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Class C Shares
<S> <C> <C> <C>
AIM Developing Markets Fund 0.75% 0.25% 1.00%
AIM Emerging Markets Debt Fund 0.75% 0.25% 1.00%
AIM Global Consumer Products and
Services Fund 0.75% 0.25% 1.00%
AIM Global Financial Services Fund 0.75% 0.25% 1.00%
AIM Global Government Income Fund 0.75% 0.25% 1.00%
AIM Global Growth & Income Fund 0.75% 0.25% 1.00%
AIM Global Health Care Fund 0.75% 0.25% 1.00%
AIM Global Infrastructure Fund 0.75% 0.25% 1.00%
AIM Global Resources Fund 0.75% 0.25% 1.00%
AIM Global Telecommunications Fund 0.75% 0.25% 1.00%
AIM Latin American Growth Fund 0.75% 0.25% 1.00%
AIM Strategic Income Fund 0.75% 0.25% 1.00%
</TABLE>
- ---------------------
* The Distribution Fee is payable apart from the sales charge, if any, as if
stated in the current prospectus for the applicable Class and the
applicable Portfolio."
All other terms and provisions of the Plan not amended herein shall remain
in full force and effect.
Dated: March 18, 1999
AIM INVESTMENT FUNDS
(on behalf of its Class A and Class C
Shares)
Attest: /s/ OFELIA M. MAYO By: /s/ ROBERT H. GRAHAM
------------------------- --------------------------
Assistant Secretary President
<PAGE> 1
EXHIBIT 11(a)
[KIRKPATRICK & LOCKHART LLP LETTERHEAD]
R. Charles Miller
(202) 778-9372
[email protected]
MAY 28,1999
AIM Eastern Europe Fund
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Ladies and Gentleman:
You have requested our opinion, as counsel to AIM Developing Markets Fund
("Acquiring Fund"), a series of AIM Investment Funds ("Trust"), a Delaware
business trust, as to certain matters regarding the issuance of Shares of the
Trust in connection with the reorganization of AIM Eastern Europe Fund
("Acquired Fund"), a Massachusetts business trust, into Acquiring Fund, as
provided for in the Agreement and Plan of Reorganization and Termination
between the Trust, acting on behalf of Acquiring Fund, and Acquired Fund
("Plan"). The Plan provides for Acquired Fund to transfer all of its assets to
Acquiring Fund in exchange solely for the issuance of Shares and Acquiring
Fund's assumption of the liabilities of Acquired Fund. (As used in this letter,
the term "Shares" means the Class A shares of beneficial interest in Acquiring
Fund to be issued in connection with the Plan.)
As such counsel, we have examined certified or other copies, believed by us
to be genuine, of the Trust's Agreement and Declaration of Trust dated May 7,
1998, as amended ("Agreement"), Amended and Restated Bylaws, and such other
documents relating to its organization and operation as we have deemed relevant
to our opinion, as set forth herein. Our opinion is limited to the laws and
facts in existence on the date hereof, and it is further limited to the laws
(other than the conflict of law rules) of the State of Delaware that in our
experience are normally applicable to the issuance of shares of beneficial
interest by business trusts and to the Securities Act of 1933, as amended
("1933 Act"), the Investment Company Act of 1940, as amended ("1940 Act") and
the rules and regulations of the Securities and Exchange Commission ("SEC")
thereunder. With respect to matters governed by the laws of the State of
Delaware (excluding the securities laws thereof), we have relied solely on the
opinion of Potter Anderson & Corroon LLP, Delaware counsel to the Trust, an
executed copy of which is appended hereto as Exhibit A.
<PAGE> 2
AIM Eastern Europe Fund
May 28, 1999
Page 2
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Trust; and that, when issued and sold in
accordance with the terms contemplated by the Trust's registration statement on
Form N-14 ("Registration Statement"), including receipt by the Trust of full
payment for the Shares and compliance with the 1933 Act and the 1940 Act, the
Shares will have been legally issued, fully paid, and non-assessable.
We hereby consent to this opinion accompanying the Registration
Statement when it is filed with the SEC and to the reference to our firm in the
Registration Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ R. CHARLES MILLER
-------------------------------------
R. Charles Miller
<PAGE> 1
EXHIBIT 12
[KIRKPATRICK & LOCKHART LLP LETTERHEAD]
September 10, 1999
AIM Eastern Europe Fund
AIM Investment Funds
11 Greenway Plaza
Suite 100
Houston, TX 77046
Re: Reorganization to Combine a Massachusetts Business Trust
and a Series of a Delaware Business Trust
Ladies and Gentleman:
AIM Eastern Europe Fund, a Massachusetts business trust ("Target"), and
AIM Investment Funds, a Delaware business trust ("Trust"), on behalf of AIM
Developing Markets Fund, a segregated portfolio of assets ("series") thereof
("Acquiring Fund"), have requested our opinion as to certain federal income tax
consequences of the proposed acquisition of Target by Acquiring Fund pursuant to
an Agreement and Plan of Reorganization and Termination between them dated as of
May 13, 1999 ("Plan").(1) Specifically, each Investment Company has requested
our opinion --
(1) that Acquiring Fund's acquisition of Target's assets in
exchange solely for voting Class A shares of beneficial interest in
Acquiring Fund ("Acquiring Fund Shares") and Acquiring Fund's
assumption of Target's liabilities, followed by Target's distribution
of those shares pro rata to its shareholders of record determined as of
the Effective Time (as herein defined) ("Shareholders") constructively
in exchange for the Shareholders' shares of beneficial interest in
Target ("Target Shares") (such transactions sometimes being referred to
herein collectively as the "Reorganization"), will qualify as a
reorganization within the meaning of section 368(a)(1)(C),(2) and
each Fund will be "a party to a reorganization" within the meaning of
section 368(b);
- -----------------------
(1) Target and Acquiring Fund are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds," and Target and Trust are sometimes
referred to herein individually as an "Investment Company" and collectively as
the "Investment Companies."
<PAGE> 2
AIM Eastern Europe Fund
AIM Investment Funds
September 10, 1999
Page 2
(2) that neither the Funds nor the Shareholders will recognize
gain or loss on the Reorganization; and
(3) regarding the basis and holding period after the
Reorganization of the transferred assets and the Acquiring Fund Shares
issued pursuant thereto.
In rendering this opinion, we have examined (1) the Plan, (2) the
Prospectus/Proxy Statement dated July 1, 1999, that was furnished in connection
with the solicitation of proxies by Target's board of trustees for use at the
annual meeting of Target's shareholders held on August 25, 1999 ("Proxy
Statement"), (3) Acquiring Fund's currently effective prospectus and statement
of additional information, and (4) other documents we have deemed necessary or
appropriate for the purposes hereof. As to various matters of fact material to
this opinion, we have relied, exclusively and without independent verification,
on statements of responsible officers of each Investment Company and the
representations described below and made in the Plan (as contemplated in
paragraph 6.6 thereof) (collectively, "Representations").
FACTS
Target is a Massachusetts business trust. Before January 1, 1997, it
claimed to be classified for federal income tax purposes as an association
taxable as a corporation and will not elect not to be so classified. Target is
registered with the Securities and Exchange Commission ("SEC") as a closed-end
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act").
Trust is a Delaware business trust, and Acquiring Fund is a series
thereof. Section 9.1 of Trust's Agreement and Declaration of Trust ("Trust
Declaration") provides that "[i]t is intended that the Trust, or each [series
thereof] if there is more than one [series], be classified for income tax
purposes as an association taxable as a corporation, and the Trustees shall do
all things that they . . . determine are necessary to achieve that objective,
including (if they so determine) electing such classification on Internal
Revenue Form 8832." Trust is registered with the SEC as an open-end management
investment company under the 1940 Act.
Target has only a single class of shares, which can be purchased and
sold only on the New York Stock Exchange, except for purchases by Target through
periodic repurchase offers pursuant to Rule 23c-3 under the 1940 Act.
Acquiring Fund's shares are divided into four classes, designated Class A,
Class B, Class C, and Advisor Class shares; only Acquiring Fund Shares (i.e.,
Class A shares) are involved in the Reorganization.
- ---------------------
(2) All "section" references are to the Internal Revenue Code of 1986, as
amended ("Code"), unless otherwise noted, and all "Treas. Reg. Section"
references are to the regulations under the Code ("Regulations").
<PAGE> 3
AIM Eastern Europe Fund
AIM Investment Funds
September 10, 1999
Page 3
The Reorganization, together with related acts necessary to consummate
the same ("Closing"), will take place on or about the date hereof. All acts
taking place at the Closing shall be deemed to take place simultaneously as of
the close of business on the date thereof or at such other time as to which the
Investment Companies agree ("Effective Time").
The Funds' investment objectives, policies, and restrictions (which are
described in the Proxy Statement) are similar, the principal difference being
the geographic focus of their investments, with Acquiring Fund having a broader
investment mandate than Target has; and they have the same investment advisor
and sub-advisor. For the reasons, and after consideration of the factors,
described in the Proxy Statement, each Investment Company's board of trustees
approved the Plan, subject to approval of Target's shareholders. In doing so,
each board, including a majority of its members who are not "interested persons"
(as that term is defined in the 1940 Act) of either Investment Company or their
investment advisor, determined that (1) the Reorganization is in its Fund's best
interests, (2) the terms of the Reorganization are fair and reasonable, and (3)
the interests of its Fund's shareholders will not be diluted as a result of the
Reorganization.
The Plan, which specifies that it is intended to be, and is adopted as,
a "plan of reorganization" within the meaning of the Regulations, provides in
relevant part for the following:
1. The acquisition by Acquiring Fund of all assets, including
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 Target's books, and
other property, owned by Target at the Effective Time (collectively
"Assets"), in exchange solely for the following:
(a) the number of full and fractional (rounded to the
third decimal place) Acquiring Fund Shares determined by
dividing the net value of Target (computed as set forth in
paragraph 2.1 of the Plan) by the net asset value ("NAV") of
an Acquiring Fund Share (computed as set forth in paragraph
2.2 of the Plan), and
(b) Acquiring Fund's assumption of all of Target's
liabilities, debts, obligations, and duties of whatever kind
or nature, whether absolute, accrued, contingent, or
otherwise, whether or not arising in the ordinary course of
business, whether or not determinable at the Effective Time,
and whether or not specifically referred to in the Plan
(collectively "Liabilities"),
<PAGE> 4
AIM Eastern Europe Fund
AIM Investment Funds
September 10, 1999
Page 4
2. The constructive distribution of such Acquiring Fund Shares
to the Shareholders,(3) and
3. The subsequent termination of Target.
The distribution described in 2. will be accomplished by Acquiring
Fund's transfer agent opening accounts on Acquiring Fund's share transfer books
in the Shareholders' names and transferring such Acquiring Fund Shares thereto.
Each Shareholder's account will be credited with the respective pro rata number
of full and fractional (rounded to the third decimal place) Acquiring Fund
Shares due that Shareholder. All outstanding Target Shares, including those
represented by certificates, simultaneously will be canceled on Target's share
transfer books.
REPRESENTATIONS
Target has represented and warranted to us as follows:
1. Target is a trust operating under a written declaration of
trust, the beneficial interest in which is divided into transferable
shares, that is duly organized and validly existing under the laws of
the Commonwealth of Massachusetts, and a copy of its Agreement and
Declaration of Trust is on file with the Secretary of the Commonwealth
of Massachusetts. It is duly registered as a closed-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
2. Target qualified for treatment as a regulated investment
company under Subchapter M of the Code ("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
it has no earnings and profits accumulated in any taxable year in which
the provisions of Subchapter M did not apply to it. The Assets will be
invested at all times through the Effective Time in a manner that
ensures compliance with the foregoing;
- ------------------------
(3) The Plan provides that, at the time of the Reorganization, the Target Shares
will in effect be constructively exchanged for Acquiring Fund Shares,
certificates for which will not be issued. Accordingly, Shareholders will not be
required to and will not make physical delivery of their Target Shares, nor will
they receive certificates for Acquiring Fund Shares, pursuant to the
Reorganization. Target Shares nevertheless will be treated as having been
exchanged for Acquiring Fund Shares, and the tax consequences to the
Shareholders will be unaffected by the absence of Acquiring Fund Share
certificates. See discussion at V. under "Analysis," below.
<PAGE> 5
AIM Eastern Europe Fund
AIM Investment Funds
September 10, 1999
Page 5
3. The Liabilities were incurred by Target in the ordinary
course of its business and are associated with the Assets;
4. Target 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);
5. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is
invested in the stock and securities of any one issuer, and not more
than 50% of the value of such assets is invested in the stock and
securities of five or fewer issuers; and
6. Target will be terminated as soon as reasonably practicable
after the Effective Time, but in all events within twelve months
thereafter.
Trust has represented and warranted to us as follows:
1. Trust is a business trust duly organized and validly
existing 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
thereof. It is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force
and effect at the Effective Time. Acquiring Fund is a duly established
and designated series thereof;
2. Acquiring Fund is a "fund" as defined in section 851(g)(2);
it 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; Acquiring Fund intends
to continue to meet all such requirements for the next taxable year;
and it has no earnings and profits accumulated in any taxable year in
which the provisions of Subchapter M did not apply to it;
3. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in
exchange for the Assets in the Reorganization;
4. Acquiring Fund has no plan or intention to issue additional
Acquiring 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 Acquiring Fund have any plan or
intention to redeem or otherwise reacquire any Acquiring Fund Shares
issued to the Shareholders pursuant to the Reorganization, except to
the extent it is required by the 1940 Act to redeem any of its shares
presented for redemption at NAV in the ordinary course of that
business;
<PAGE> 6
AIM Eastern Europe Fund
AIM Investment Funds
September 10, 1999
Page 6
5. Following the Reorganization, Acquiring Fund (a) will
continue Target's "historic business" (within the meaning of Treas.
Reg. Section 1.368-1(d)(2)), (b) use a significant portion of Target's
historic business assets (within the meaning of Treas. Reg. Section
1.368-1(d)(3)) in a business, (c) has no plan or intention to sell or
otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of that business and dispositions necessary to
maintain its status as a RIC, and (d) expects to retain substantially
all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status;
6. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or a business trust or any
"fund" thereof (within the meaning of section 851(g)(2)) following the
Reorganization;
7. Immediately after the Reorganization, (a) not more than 25%
of the value of Acquiring Fund's total assets (excluding cash, cash
items, and U.S. government securities) will be invested in the stock
and securities of any one issuer and (b) not more than 50% of the value
of such assets will be invested in the stock and securities of five or
fewer issuers; and
8. Acquiring Fund does not directly or indirectly own, nor at
the Effective Time will it directly or indirectly own, nor has it at
any time during the past five years directly or indirectly owned, any
shares of Target.
Each Investment Company has represented and warranted to us as follows:
1. The fair market value of the Acquiring Fund Shares received
by each Shareholder will be approximately equal to the fair market
value of its Target Shares constructively surrendered in exchange
therefor;
2. Its management is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (a) any portion
of their Target Shares before the Reorganization to any person related
(within the meaning of Treas. Reg. Section 1.368-1(e)(3)) to either
Fund or (b) any portion of the Acquiring Fund Shares to be received by
them in the Reorganization to any person related (within such meaning)
to Acquiring Fund;
3. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
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4. The fair market value of the Assets on a going concern
basis will equal or exceed the Liabilities to be assumed by Acquiring
Fund and those to which the Assets are subject;
5. There is no intercompany indebtedness between the Funds
that was issued or acquired, or will be settled, at a discount;
6. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the
fair market value of the net assets, and at least 70% of the fair
market value of the gross assets, held by Target immediately before the
Reorganization. For purposes of this representation, any amounts used
by Target to pay its Reorganization expenses and to make redemptions
and distributions immediately before the Reorganization (except (a)
redemptions not made as part of the Reorganization and (b)
distributions made to conform to its policy of distributing all or
substantially all of its income and gains to avoid the obligation to
pay federal income tax and/or the excise tax under section 4982) will
be included as assets thereof held immediately before the
Reorganization;
7. None of the compensation received by any Shareholder who is
an employee of or service provider to Target will be separate
consideration for, or allocable to, any of the Target Shares held by
such Shareholder; none of the Acquiring Fund Shares received by any
such Shareholder will be separate consideration for, or allocable to,
any employment agreement, investment advisory agreement, or other
service agreement; and the consideration paid to any such Shareholder
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar
services;
8. Immediately after the Reorganization, the Shareholders will
not own shares constituting "control" (within the meaning of section
304(c)) of Acquiring Fund; and
9. Neither Fund will be reimbursed for any expenses incurred
by it or on its behalf in connection with the Reorganization unless
those expenses are solely and directly related to the Reorganization
(determined in accordance with the guidelines set forth in Rev. Rul.
73-54, 1973-1 C.B. 187).
OPINION
Based solely on the facts set forth above, and conditioned on the
Representations being true at the time of the Closing and the Reorganization
being consummated in accordance with the Plan, our opinion (as explained more
fully in the next section of this letter) is as follows:
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1. Acquiring Fund's acquisition of the Assets in exchange
solely for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares pro rata
to the Shareholders constructively in exchange for their Target Shares,
will qualify as a reorganization within the meaning of section
368(a)(1)(C), and each Fund will be "a party to a reorganization"
within the meaning of section 368(b);
2. Target will recognize no gain or loss on the transfer of
the Assets to Acquiring Fund in exchange solely for Acquiring Fund
Shares and Acquiring Fund's assumption of the Liabilities or on the
subsequent distribution of those shares to the Shareholders in
constructive exchange for their Target Shares;
3. Acquiring Fund will recognize no gain or loss on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and
its assumption of the Liabilities;
4. Acquiring Fund's basis for the Assets will be the same as
Target's basis therefor immediately before the Reorganization, and
Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring
Fund Shares pursuant to the Reorganization; and
6. A Shareholder's aggregate basis for the Acquiring Fund
Shares to be received by it in the Reorganization will be the same as
the aggregate basis for its Target Shares to be constructively
surrendered in exchange for those Acquiring Fund Shares, and its
holding period for those Acquiring Fund Shares will include its holding
period for those Target Shares, provided the Shareholder held them as
capital assets at the Effective Time.
The foregoing opinion (1) is based on, and is conditioned on the
continued applicability of, the provisions of the Code and the Regulations,
judicial decisions, and rulings and other pronouncements of the Internal Revenue
Service ("Service") in existence on the date hereof and (2) is applicable only
to the extent each Fund is solvent. We express no opinion about the tax
treatment of the transactions described herein if either Fund is insolvent.
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ANALYSIS
I. The Reorganization Will Qualify as a C Reorganization, and Each Fund
Will Be a Party to a Reorganization.
A. Each Fund Is a Separate Corporation.
A reorganization under section 368(a)(1)(C) (a "C Reorganization")
involves the acquisition by one corporation, in exchange solely for all or a
part of its voting stock, of substantially all of the properties of another
corporation. For a transaction to qualify under that section, therefore, both
entities involved therein must be corporations (or associations taxable as
corporations). Each Investment Company, however, is a business trust, not a
corporation, and Acquiring Fund is a separate series of Trust.
Treasury Regulation section 301.7701-4(b) provides that certain
arrangements known as trusts (because legal title is conveyed to trustees for
the benefit of beneficiaries) will not be classified as trusts for purposes of
the Code because they are not simply arrangements to protect or conserve the
property for the beneficiaries. That section of the Regulations states that
these "business or commercial trusts" generally are created by the beneficiaries
simply as devices to carry on profit-making businesses that normally would have
been carried on through business organizations classified as corporations or
partnerships under the Code and concludes that the fact that any organization is
technically cast in the trust form will not change its real character if it "is
more properly classified as a business entity under [Treas. Reg.] Section
301.7701-2."(4) Furthermore, pursuant to Treas. Reg. Section 301.7701-4(c),
"[a]n `investment' trust will not be classified as a trust if there is a power
under the trust agreement to vary the investment of the certificate holders. See
Commissioner v. North American Bond Trust, 122 F.2d 545 (2d Cir. 1941), cert.
denied, 314 U.S. 701 (1942)."
- ------------------------
(4) On December 10, 1996, the Service adopted Regulations for classifying
business organizations (Treas. Reg. Sections 301.7701-1 through -3 and parts of
- -4, the so-called "check-the-box" regulations) to replace the provisions in the
then-existing Regulations that "have become increasingly formalistic. [The
check-the-box Regulations replace] those rules with a much simpler approach that
generally is elective." T.D. 8697, 1997-1 C.B. 215. Treasury Regulation section
301.7701-2(a) provides that "a business entity is any entity recognized for
federal tax purposes . . . that is not properly classified as a trust under
[Treas. Reg.] Section 301.7701-4 or otherwise subject to special treatment under
the . . . Code." Neither Investment Company is subject to any such special
treatment.
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Based on these criteria, neither Investment Company qualifies as a
trust for federal income tax purposes.(5) Each Investment Company is not simply
an arrangement to protect or conserve property for the beneficiaries but is
designed to carry on a profit-making business. Furthermore, while each
Investment Company is an "investment trust," there is a power under its
declaration of trust to vary its shareholders' investment therein. Neither
Investment Company has a fixed pool of assets -- Target and each series of Trust
(including Acquiring Fund) is a managed portfolio of securities, and its
investment advisor has the authority to buy and sell securities for it.
Accordingly, we believe that each Investment Company should not be classified as
a trust, and instead should be classified as a business entity, for federal
income tax purposes.
Treasury Regulation section 301.7701-2(a) provides that "[a] business
entity with two or more members is classified for federal tax purposes as either
a corporation or a partnership." The term "corporation" is defined for those
purposes (in Treas. Reg. Section 301.7701(2)(b)) to include corporations
denominated as such under the federal or state statute pursuant to which they
were organized and certain other entities. Any business entity that is not
classified as a corporation under that section of the Regulations (an "eligible
entity") and has at least two members can elect to be classified as either an
association (and thus a corporation) or a partnership. Treas. Reg. Section
301.7701-3(a).
An eligible entity in existence before January 1, 1997, the effective
date of the check-the-box Regulations, "will have the same classification that
the entity claimed under [the prior Regulations]," unless it elects otherwise.
Treas. Reg. Section 301.7701-3(b)(3)(i). Based on the reasoning stated in the
second preceding paragraph -- and the fact that, under the law that existed
before the check-the-box Regulations, the word "association" had been held to
include a Massachusetts business trust (see Hecht v. Malley, 265 U.S. 144
(1924)) -- Target "claimed" classification under the prior Regulations as an
association taxable as a corporation. Moreover, Target will not elect not to be
so classified. Accordingly, we believe that Target will continue to be
classified as an association (and thus a corporation) for federal income tax
purposes.
Except for existing eligible entities, "unless the entity elects
otherwise, a domestic eligible entity is a partnership if it has two or more
members." Treas. Reg. Section 301.7701-3(b)(1)(i). Thus, unless Acquiring Fund
elects otherwise, it will be classified as a partnership for federal income tax
purposes. Section 9.1 of the Trust Declaration states the intention that "Trust,
or each [series thereof] if there is more than one [series], be classified for
income tax purposes as an association taxable as a corporation" and directs the
trustees to do everything they deem necessary to achieve that objective,
including electing such classification on Internal Revenue Form 8832 (Entity
- ---------------------
(5) Because Acquiring Fund is considered separate from each other series of
Trust for federal income tax purposes (see the discussion in the last paragraph
of I.A. below), the analysis in the accompanying text applies equally to
Acquiring Fund.
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Classification Election). Accordingly, assuming that Trust has implemented (and
continues to implement) that intention, including filing such form if
necessary,(6) we believe that Trust will be classified as a corporation for
federal income tax purposes.
Trust as such, however, is not participating in the Reorganization, but
rather a separate series thereof (Acquiring Fund) is the participant.
Ordinarily, a transaction involving a segregated pool of assets such as
Acquiring Fund could not qualify as a reorganization, because the pool would not
be a separate taxable entity that constitutes a corporation. Under section
851(g), however, Acquiring Fund is treated as a separate corporation for all
purposes of the Code save the definitional requirement of section 851(a) (which
is satisfied by Trust). Accordingly, we believe that Acquiring Fund is a
separate corporation, and its shares are treated as shares of corporate stock,
for purposes of section 368(a)(1)(C).
B. Transfer of "Substantially All" of Target's Properties.
For an acquisition to qualify as a C Reorganization, the acquiring
corporation must acquire "substantially all of the properties" of the transferor
corporation in exchange solely for all or part of the acquiring corporation's
stock. For purposes of issuing private letter rulings, the Service considers the
transfer of at least 90% of the fair market value of the transferor's net
assets, and at least 70% of the fair market value of its gross assets, held
immediately before the reorganization to satisfy the "substantially all"
requirement. Rev. Proc. 77-37, 1977-2 C.B. 568. The Reorganization will involve
such a transfer. Accordingly, we believe that the Reorganization will involve
the transfer to Acquiring Fund of substantially all of Target's properties.
C. Qualifying Consideration.
The acquiring corporation in an acquisition intended to qualify as a C
Reorganization must acquire at least 80% (by fair market value) of the
transferor's property solely for voting stock. Section 368(a)(2)(B)(iii). The
assumption of liabilities by the acquiring corporation or its acquisition of
property subject to liabilities normally are disregarded (section 368(a)(1)(C)),
but the amount of any such liabilities will be treated as money paid for the
transferor's property if the acquiring corporation exchanges any money or
property (other than its voting stock) therefor. Section 368(a)(2)(B). Because
Acquiring Fund will exchange only Acquiring Fund Shares, and no money or other
property, for the Assets, we believe that the Reorganization will satisfy the
solely-for-voting-stock requirement to qualify as a C Reorganization.
- --------------------------
(6) Absent filing such form, Trust could nevertheless achieve the intended
result because if it were classified as a partnership rather than as a
corporation, then it would be a "publicly traded partnership" under section
7704, which is "treated as a corporation" for federal tax purposes.
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D. Distribution by Target.
Section 368(a)(2)(G)(i) provides that a transaction will not qualify
as a C Reorganization unless the corporation whose properties are acquired
distributes the stock it receives and its other property in pursuance of the
plan of reorganization. Under the Plan -- which we believe constitutes a "plan
of reorganization" within the meaning of Treas. Reg. Section 1.368-2(g) --
Target will distribute all the Acquiring Fund Shares it receives to the
Shareholders in constructive exchange for their Target Shares; as soon as is
reasonably practicable thereafter, Target will be terminated. Accordingly, we
believe that the requirements of section 368(a)(2)(G)(i) will be satisfied.
E. Requirements of Continuity.
Treasury Regulation section 1.368-1(b) sets forth two prerequisites to
a valid reorganization: (1) a continuity of the business enterprise through the
issuing corporation -- defined in the Regulation as "the acquiring corporation
(as that term is used in section 368(a))," with an exception not relevant here
- -- under the modified corporate form as described in Treas. Reg. Section
1.368-1(d) ("continuity of business enterprise") and (2) a continuity of
interest as described in Treas. Reg. Section 1.368-1(e) ("continuity of
interest").
1. Continuity of Business Enterprise.
To satisfy the continuity of business enterprise requirement of Treas.
Reg. Section 1.368-1(d)(1), the issuing corporation must either (i) continue the
target corporation's historic business ("business continuity") or (ii) use a
significant portion of the target corporation's historic business assets in a
business ("asset continuity").
While there is no authority that deals directly with the continuity of
business enterprise requirement in the context of a transaction such as the
Reorganization, Rev. Rul. 87-76, 1987-2 C.B. 84, deals with a somewhat similar
situation. In that ruling, P was a RIC that invested exclusively in municipal
bonds. P acquired the assets of T in exchange for P common stock in a
transaction that was intended to qualify as a C Reorganization. Prior to the
exchange, T sold its entire portfolio of corporate stocks and bonds and
purchased a portfolio of municipal bonds. The Service held that this transaction
did not qualify as a reorganization for the following reasons: (1) because T had
sold its historic assets prior to the exchange, there was no asset continuity;
and (2) the failure of P to engage in the business of investing in corporate
stocks and bonds after the exchange caused the transaction to lack business
continuity as well.
The Funds' investment objectives, policies, and restrictions are
similar (the principal difference being the geographic focus of their
investments), and they have the same investment advisor and sub-advisor.
Moreover, after the Reorganization Acquiring Fund, which has a broader
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investment mandate than Target has, will continue Target's historic business
(within the meaning of Treas. Reg. Section 1.368-1(d)(2)). Accordingly, there
will be business continuity.
Acquiring Fund not only will continue Target's historic business, but
it also will use in that business a significant portion of Target's historic
business assets (within the meaning of Treas. Reg. Section 1.368-1(d)(3)).
Accordingly, there will be asset continuity as well.
For all the foregoing reasons, we believe that the Reorganization will
satisfy the continuity of business enterprise requirement.
2. Continuity of Interest.
Treasury Regulation section 1.368-1(e)(1)(i) provides that
"[c]ontinuity of interest requires that in substance a substantial part of the
value of the proprietary interests in the target corporation be preserved in the
reorganization. A proprietary interest in the target corporation is preserved
if, in a potential reorganization, it is exchanged for a proprietary interest in
the issuing corporation . . . ." That section of the Regulations goes on to
provide that "[h]owever, a proprietary interest in the target corporation is not
preserved if, in connection with the potential reorganization, . . . stock of
the issuing corporation furnished in exchange for a proprietary interest in the
target corporation in the potential reorganization is redeemed. All facts and
circumstances must be considered in determining whether, in substance, a
proprietary interest in the target corporation is preserved."
For purposes of issuing private letter rulings, the Service considers
the continuity of interest requirement satisfied if ownership in an acquiring
corporation on the part of a transferor corporation's former shareholders is
equal in value to at least 50% of the value of all the formerly outstanding
shares of the transferor corporation. Rev. Proc. 77-37, supra; but see Rev. Rul.
56-345, 1956-2 C.B. 206 (continuity of interest was held to exist in a
reorganization of two RICs where immediately after the reorganization 26% of the
shares were redeemed to allow investment in a third RIC); see also Reef Corp. v.
Commissioner, 368 F.2d 125 (5th Cir. 1966), cert. denied, 386 U.S. 1018 (1967)
(a redemption of 48% of a transferor corporation's stock was not a sufficient
shift in proprietary interest to disqualify a transaction as a reorganization
under section 368(a)(1)(F) ("F Reorganization"), even though only 52% of the
transferor's shareholders would hold all the transferee's stock); Aetna Casualty
and Surety Co. v. U.S., 568 F.2d 811, 822-23 (2d Cir. 1976) (redemption of a
38.39% minority interest did not prevent a transaction from qualifying as an F
Reorganization); Rev. Rul. 61-156, 1961-2 C.B. 62 (a transaction qualified as an
F Reorganization even though the transferor's shareholders acquired only 45% of
the transferee's stock, while the remaining 55% of that stock was issued to new
shareholders in a public underwriting immediately after the transfer). Although
Acquiring Fund Shares that are disposed of by Shareholders after the
Reorganization will be considered in determining satisfaction of the 50%
standard, the Service has recently issued private letter rulings that excepted
from that determination "shares which are required to be redeemed at the
demand of shareholders by . . . Target or by Acquiring in the ordinary course
of their businesses as open-end investment companies (or series thereof)
pursuant to Section 22(e) of the 1940 Act." Priv. Ltr. Ruls. 9823018 (Mar. 5,
1998) and 9822053 (Mar. 3, 1998).(7)
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No minimum holding period for shares of an acquiring corporation is
imposed under the Code on the acquired corporation's shareholders. Rev. Rul.
66-23, 1966-1 C.B. 67, provides generally that "unrestricted rights of ownership
for a period of time sufficient to warrant the conclusion that such ownership is
definite and substantial" will suffice and that "ordinarily, the Service will
treat five years of unrestricted . . . ownership as a sufficient period" for
continuity of interest purposes. A preconceived plan or arrangement by or among
an acquired corporation's shareholders to dispose of more than 50% of an
acquiring corporation's shares could be problematic. Shareholders with no such
preconceived plan or arrangement, however, are basically free to sell any part
of the shares received by them in the reorganization without fear of breaking
continuity of interest, because the subsequent sale will be treated as an
independent transaction from the reorganization.
There is no plan or intention of Shareholders to redeem, sell, or
otherwise dispose of (1) any portion of their Target Shares before the
Reorganization to any person related (within the meaning of Treas. Reg. Section
1.368-1(e)(3)) to either Fund or (2) any portion of the Acquiring Fund Shares to
be received by them in the Reorganization to any person related (within such
meaning) to Acquiring Fund. Although Acquiring Fund's shares will be offered for
sale to the public on an ongoing basis after the Reorganization, sales of those
shares will arise out of a public offering separate and unrelated to the
Reorganization and not as a result thereof. See Reef Corp. v. Commissioner, 368
F.2d at 134; Rev. Rul. 61-156, supra. Similarly, although Shareholders may
redeem Acquiring Fund Shares pursuant to their rights as shareholders of a
series of an open-end investment company (see Priv. Ltr. Ruls. 9823018 and
9822053, supra, and 8816064 (Jan. 28, 1988)), those redemptions will result from
the exercise of those rights in the course of Acquiring Fund's business as an
open-end series and not from the C Reorganization as such.
Accordingly, we believe that the Reorganization will satisfy the
continuity of interest requirement of Treas. Reg. Section 1.368-1(b).
- --------------------------
(7) Although, under section 6110(j)(3), a private letter ruling may not be cited
as precedent, tax practitioners look to such rulings as generally indicative of
the Service's views on the proper interpretation of the Code and the
Regulations. Cf. Rowan Companies, Inc. v. Commissioner, 452 U.S. 247 (1981).
<PAGE> 15
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F. Business Purpose.
All reorganizations must meet the judicially imposed requirements of
the "business purpose doctrine," which was established in Gregory v. Helvering,
293 U.S. 465 (1935), and is now set forth in Treas. Reg. Sections 1.368-1(b),
- -1(c), and -2(g) (the last of which provides that, to qualify as a
reorganization, a transaction must be "undertaken for reasons germane to the
continuance of the business of a corporation a party to the reorganization").
Under that doctrine, a transaction must have a bona fide business purpose (and
not a purpose to avoid federal income tax) to qualify as a valid reorganization.
The substantial business purposes of the Reorganization are described in the
Proxy Statement. Accordingly, we believe that the Reorganization is being
undertaken for bona fide business purposes (and not a purpose to avoid federal
income tax) and therefore meets the requirements of the business purpose
doctrine.
G. Satisfaction of Section 368(a)(2)(F).
Under section 368(a)(2)(F), if two or more parties to a transaction
described in section 368(a)(1) (with an exception not relevant here) were
"investment companies" immediately before the transaction, then the transaction
shall not be considered a reorganization with respect to any such investment
company and its shareholders. But that section does not apply to a participating
investment company if, among other things, it is a RIC or --
(1) not more than 25% of the value of its total assets is invested in
the stock and securities of any one issuer and
(2) not more than 50% of the value of its total assets is invested in
the stock and securities of five or fewer issuers.
In determining total assets for these purposes, cash and cash items (including
receivables) and U.S. government securities are excluded. Section
368(a)(2)(F)(iv). Each Fund will meet the requirements to qualify for treatment
as a RIC for its respective current taxable year and will satisfy the foregoing
percentage tests. Accordingly, we believe that section 368(a)(2)(F) will not
cause the Reorganization to fail to qualify as a C Reorganization with respect
to either Fund.
For all the foregoing reasons, we believe that the Reorganization will
qualify as a C Reorganization.
H. Each Fund Will Be a Party to a Reorganization.
Section 368(b)(2) provides, in pertinent part, that in the case of a
reorganization involving the acquisition by one corporation of properties of
another -- and Treas. Reg. Section 1.368-2(f) further provides that if one
corporation transfers substantially all its properties to a second corporation
in exchange for all or a part of the latter's voting stock (i.e., a C
Reorganization) -- the term "a party to a reorganization" includes each
corporation. Pursuant to the Reorganization, Target is transferring all its
properties to Acquiring Fund in exchange for Acquiring Fund Shares. Accordingly,
we believe that each Fund will be "a party to a reorganization."
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II. Target Will Recognize No Gain or Loss.
Under sections 361(a) and (c), no gain or loss shall be recognized to a
corporation that is a party to a reorganization if, pursuant to the plan of
reorganization, (1) it exchanges property solely for stock or securities in
another corporate party to the reorganization and (2) distributes that stock or
securities to its shareholders. (Such a distribution is required by section
368(a)(2)(G)(i) for a reorganization to qualify as a C Reorganization.) Section
361(c)(4) provides that sections 311 and 336 (which require recognition of gain
on certain distributions of appreciated property) shall not apply to such a
distribution.
Section 357(a) provides in pertinent part that, except as provided in
section 357(b), if a taxpayer receives property that would be permitted to be
received under section 361 without recognition of gain if it were the sole
consideration and, as part of the consideration, another party to the exchange
assumes a liability of the taxpayer or acquires from the taxpayer property
subject to a liability, then that assumption or acquisition shall not be treated
as money or other property and shall not prevent the exchange from being within
section 361. Section 357(b) applies where the principal purpose of the
assumption or acquisition was a tax avoidance purpose or not a bona fide
business purpose.
As noted above, it is our opinion that the Reorganization will qualify
as a C Reorganization, each Fund will be a party to a reorganization, and the
Plan constitutes a plan of reorganization. Target will exchange the Assets
solely for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities and then will be terminated pursuant to the Plan, distributing those
shares to its shareholders in constructive exchange for their Target Shares. As
also noted above, it is our opinion that the Reorganization is being undertaken
for bona fide business purposes (and not a purpose to avoid federal income tax);
we also do not believe that the principal purpose of Acquiring Fund's assumption
of the Liabilities is avoidance of federal income tax on the proposed
transaction. Accordingly, we believe that Target will recognize no gain or loss
on the Reorganization.(8)
- ----------------
(8) Notwithstanding anything herein to the contrary, we express no opinion as to
the effect of the Reorganization on either Fund or any Shareholder with respect
to any Asset as to which any unrealized gain or loss is required to be
recognized for federal income tax purposes at the end of a taxable year (or on
the termination or transfer thereof) under a mark-to-market system of
accounting.
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III. Acquiring Fund Will Recognize No Gain or Loss.
Section 1032(a) provides that no gain or loss shall be recognized to a
corporation on the receipt by it of money or other property in exchange for its
stock. Acquiring Fund will issue Acquiring Fund Shares to Target in exchange for
the Assets, which consist of money and securities. Accordingly, we believe that
Acquiring Fund will recognize no gain or loss on the Reorganization.
IV. Acquiring Fund's Basis for the Assets Will Be a Carryover Basis, and
Its Holding Period Will Include Target's Holding Period.
Section 362(b) provides, in pertinent part, that the basis of property
acquired by a corporation in connection with a reorganization to which section
368 applies shall be the same as it would be in the hands of the transferor,
increased by the amount of gain recognized to the transferor on the transfer (a
"carryover basis"). As noted above, it is our opinion that the Reorganization
will qualify as such a reorganization and that Target will recognize no gain on
the Reorganization. Accordingly, we believe that Acquiring Fund's basis for the
Assets will be the same as Target's basis therefor immediately before the
Reorganization.
Section 1223(2) provides in general that the period for which a
taxpayer has held acquired property that has a carryover basis shall include the
period for which the property was held by the transferor. As noted above, it is
our opinion that Acquiring Fund's basis for the Assets will be a carryover
basis. Accordingly, we believe that Acquiring Fund's holding period for the
Assets will include Target's holding period therefor.
V. A Shareholder Will Recognize No Gain or Loss.
Under section 354(a)(1), no gain or loss shall be recognized if stock
in a corporation that is a party to a reorganization is exchanged pursuant to a
plan of reorganization solely for stock in that corporation or another corporate
party to the reorganization. Pursuant to the Plan, the Shareholders will receive
solely Acquiring Fund Shares for their Target Shares. As noted above, it is our
opinion that the Reorganization will qualify as a C Reorganization, each Fund
will be a party to a reorganization, and the Plan constitutes a plan of
reorganization. Although section 354(a)(1) requires that the transferor
corporation's shareholders exchange their shares therein for shares of the
acquiring corporation, the courts and the Service have recognized that the Code
does not require taxpayers to perform useless gestures to come within the
statutory provisions. See, e.g., Eastern Color Printing Co., 63 T.C. 27, 36
(1974); Davant v. Commissioner, 366 F.2d 874 (5th Cir. 1966). Therefore,
although Shareholders will not actually surrender Target Share certificates in
exchange for Acquiring Fund Shares, their Target Shares will be canceled on the
issuance of Acquiring Fund Shares to them (all of which will be reflected on
Acquiring Fund's books) and will be treated as having been exchanged therefor.
See Rev. Rul. 81-3, 1981-1 C.B. 125; Rev. Rul. 79-257, 1979-2 C.B. 136.
Accordingly, we believe that a Shareholder will recognize no gain or loss on
the constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization.
<PAGE> 18
AIM Eastern Europe Fund
AIM Investment Funds
September 10, 1999
Page 18
VI. A Shareholder's Basis for Acquiring Fund Shares Will Be a Substituted
Basis, and its Holding Period therefor Will Include its Holding Period
for its Target Shares.
Section 358(a)(1) provides, in pertinent part, that in the case of an
exchange to which section 354 applies, the basis of the property permitted to be
received thereunder without the recognition of gain or loss shall be the same as
the basis of the property exchanged therefor, decreased by, among other things,
the fair market value of any other property and the amount of any money received
in the exchange and increased by the amount of any gain recognized on the
exchange by the shareholder ( a "substituted basis"). As noted above, it is our
opinion that the Reorganization will qualify as a C Reorganization and, under
section 354, a Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares in the
Reorganization. No property will be distributed to the Shareholders other than
Acquiring Fund Shares, and no money will be distributed to them pursuant to the
Reorganization. Accordingly, we believe that a Shareholder's basis for the
Acquiring Fund Shares it receives in the Reorganization will be the same as the
basis for its Target Shares to be constructively surrendered in exchange for
those Acquiring Fund Shares.
Section 1223(1) provides in general that the period for which a
taxpayer has held property received in an exchange that has a substituted basis
shall include the period for which the taxpayer held the property exchanged
therefor if the latter property was a capital asset (as defined in section 1221)
in the taxpayer's hands at the time of the exchange. See Treas. Reg. Section
1.1223-1(a). As noted above, it is our opinion that a Shareholder will have a
substituted basis for the Acquiring Fund Shares it receives in the
Reorganization. Accordingly, we believe that a Shareholder's holding period for
the Acquiring Fund Shares it receives in the Reorganization will include its
holding period for the Target Shares constructively surrendered in exchange
therefor, provided the Shareholder held them as capital assets at the Effective
Time.
We hereby consent to the references to our firm in the part of the
Proxy Statement describing "Proposal No. 1: Reorganization of Eastern Europe
Fund into Developing Markets Fund" in (1) the section entitled "Synopsis" under
the caption "The Reorganization" and (2) the section entitled "Additional
Information about the Reorganization" under the caption "Federal Income Tax
Considerations."
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ THEODORE L. PRESS
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Theodore L. Press
