<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __ )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
AIM TAX-EXEMPT FUNDS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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AIM TAX-EXEMPT FUNDS, INC.
AIM HIGH INCOME MUNICIPAL FUND
AIM TAX-EXEMPT CASH FUND
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM TAX-FREE INTERMEDIATE FUND
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 2000
TO THE SHAREHOLDERS:
AIM Tax-Exempt Funds, Inc. (the company) is holding a special meeting of
shareholders on Wednesday, May 3, 2000 at 3:00 p.m., Central time. The place of
the meeting is the company's offices at 11 Greenway Plaza, Suite 100, Houston,
Texas 77046-1173.
The company, a Maryland corporation, consists of the following series
portfolios: AIM High Income Municipal Fund, AIM Tax-Exempt Cash Fund, AIM
Tax-Exempt Bond Fund of Connecticut and AIM Tax-Free Intermediate Fund. This
proxy statement relates to all of these series portfolios (together, the funds).
The purposes of the meeting are as follows:
(1) To elect ten directors, each of whom will serve until his or her successor
is elected and qualified.
(2) To approve an Agreement and Plan of Reorganization which provides for the
reorganization of the company as a Delaware business trust.
(3) To approve a new Master Investment Advisory Agreement with A I M Advisors,
Inc.
(4) To approve changing the fundamental investment restrictions of all funds.
(5) To approve changing the investment objectives of AIM High Income Municipal
Fund and AIM Tax-Exempt Cash Fund so that they are non-fundamental.
(6) To approve changing the investment objectives of AIM Tax-Exempt Bond Fund of
Connecticut and AIM Tax-Free Intermediate Fund and making them
non-fundamental.
(7) To ratify the selection of KPMG LLP as independent accountants for each of
the funds for the fiscal year ending in 2000.
(8) To transact such other business as may properly come before the meeting.
<PAGE> 3
You may vote at the meeting if you are the record owner of shares of the
funds as of the close of business on February 18, 2000. If you attend the
meeting, you may vote your shares in person. If you expect to attend the meeting
in person, please notify the company by calling 1-800-952-3502. If you do not
expect to attend the meeting, please fill in, date, sign and return the proxy
card in the enclosed envelope which requires no postage if mailed in the United
States.
It is important that you return your signed proxy card promptly so that a
quorum may be assured. If we do not hear from you after a reasonable amount of
time, you may receive a telephone call from our proxy solicitor, Shareholder
Communications Corporation, reminding you to vote your shares.
Thank you for your cooperation and continued support.
By order of the Board,
Carol F. Relihan
Secretary
March 9, 2000
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AIM TAX-EXEMPT FUNDS, INC.
AIM HIGH INCOME MUNICIPAL FUND
AIM TAX-EXEMPT CASH FUND
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
AIM TAX-FREE INTERMEDIATE FUND
11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
Toll Free: (800) 454-0327
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PROXY STATEMENT
DATED MARCH 9, 2000
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SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 3, 2000
WHO IS ASKING FOR MY VOTE?
The Board of Directors (the Board) of AIM Tax-Exempt Funds, Inc. (the
company) is sending you this proxy statement and the enclosed proxy card (or
cards) on behalf of the four separate series portfolios of the company listed
above (together, the funds). The Board is soliciting your proxy to vote at the
2000 special meeting of shareholders of the company (the meeting).
WHEN AND WHERE WILL THE MEETING BE HELD?
The meeting will be held at the company's offices, 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173, at 3:00 p.m., Central time, on Wednesday, May 3,
2000. If you expect to attend the meeting in person, please notify the company
by calling 1-800-952-3502.
WHAT PROPOSALS APPLY TO MY FUND?
The following table summarizes each proposal to be presented at the meeting
and the funds whose shareholders the Board is soliciting with respect to each
proposal:
<TABLE>
<CAPTION>
PROPOSAL AFFECTED FUNDS
-------- --------------
<S> <C> <C>
1. Electing directors All funds
2. Approving an Agreement and Plan of All funds
Reorganization, under which the company
will reorganize as a Delaware business
trust
3. Approving a new advisory agreement with All funds
A I M Advisors, Inc.
4. Changing the funds' fundamental All funds
investment restrictions
</TABLE>
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<TABLE>
<CAPTION>
PROPOSAL AFFECTED FUNDS
-------- --------------
<S> <C> <C>
5. Changing the investment objectives of AIM High Income Municipal Fund
the funds so that they are (High Income Municipal)
non-fundamental and AIM Tax-Exempt Cash Fund
(Tax-Exempt Cash)
6. Changing the investment objectives of AIM Tax-Exempt Bond Fund of Connecticut
the funds and making them (Tax-Exempt Bond) and
non-fundamental AIM Tax-Free Intermediate Fund
(Tax-Free Intermediate)
7. Ratifying the Board's selection of All funds
independent accountants
8. Considering other matters All funds
</TABLE>
WHO IS ELIGIBLE TO VOTE?
The Board is sending this proxy statement, the attached notice of meeting
and the enclosed proxy card on or about March 9, 2000 to all shareholders
entitled to vote. Shareholders who owned shares of common stock of any class of
a fund at the close of business on February 18, 2000 (the record date) are
entitled to vote. The number of shares outstanding on the record date for each
class of each fund is in Appendix A. Each share of common stock of a fund that
you own entitles you to one vote on each proposal set forth in the table above
that applies to that fund (a fractional share has a fractional vote).
WHAT ARE THE DIFFERENT WAYS I CAN VOTE?
Voting by Proxy
Whether you plan to attend the meeting or not, the Board urges you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the meeting and vote.
The Board has named Robert H. Graham and Gary T. Crum as proxies. If you
properly fill in your proxy card and send it to the company in time to vote,
your proxy will vote your shares as you have directed. If you sign the proxy
card but do not make specific choices, your proxy will vote your shares with
respect to Proposals 1 through 7 as recommended by the Board.
If any other matter is presented, your proxy will vote in accordance with
his or her best judgment. At the time this proxy statement was printed, the
Board knew of no matters that needed to be acted on at the meeting other than
those discussed in this proxy statement.
If you appoint a proxy, you may revoke it at any time before it is
exercised. You can do this by sending in another proxy with a later date or by
notifying the company's secretary in writing before the meeting that you have
revoked your proxy.
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Voting in Person
If you do attend the meeting and wish to vote in person, you will be given
a ballot when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring a letter from the nominee
indicating that you are the beneficial owner of the shares on the record date
and authorizing you to vote.
Voting by Telephone
You may vote by telephone if you are contacted by Shareholder
Communications Corporation.
Voting on the Internet
You may also vote your shares on the Internet at the funds' website at
http://www.aimfunds.com by following instructions that appear on the enclosed
proxy insert.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
The Board recommends that shareholders vote FOR each of the proposals
described in this proxy statement.
WHAT IS THE QUORUM REQUIREMENT?
A quorum of shareholders is necessary to hold a valid meeting. The presence
in person or by proxy of shareholders entitled to cast thirty percent (30%) of
all votes entitled to be cast at the meeting shall constitute a quorum at all
meetings of the shareholders, except with respect to any matter which by law or
the Charter of the company requires the separate approval of one or more classes
or series of the capital stock of the company, in which case the holders of
one-third of the shares of each such class or series (or of such classes or
series voting together as a single class) entitled to vote on the matter shall
constitute a quorum.
Under rules applicable to broker-dealers, if your broker holds your shares
in its name, the broker will be entitled to vote your shares on Proposals 1 and
7 (election of directors and ratification of selection of accountants) even if
it has not received instructions from you. Your broker will not be entitled to
vote on Proposals 2, 3, 4, 5, 6 or 8 (approving an Agreement and Plan of
Reorganization for your fund's company, approving a new advisory agreement for
your fund, changing your fund's investment restrictions, making the investment
objectives of High Income Municipal and Tax-Exempt Cash non-fundamental,
changing the investment objectives of Tax-Exempt Bond and Tax-Free Intermediate
and making them non-fundamental and considering other matters) unless it has
received instructions from you. If your broker does not vote your shares on
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Proposals 2, 3, 4, 5, 6 or 8 because it has not received instructions from you,
these shares will be considered broker non-votes.
Broker non-votes and abstentions with respect to any proposal will count as
present for establishing a quorum.
WHAT IS THE VOTE NECESSARY TO APPROVE EACH PROPOSAL?
The affirmative vote of a plurality of votes cast is necessary to elect the
directors, meaning that the nominees receiving the most votes will be elected
(Proposal 1). In an uncontested election of directors, the plurality requirement
is not a factor.
The affirmative vote of a majority of the outstanding shares of the company
entitled to vote at the meeting is required to approve the Agreement and Plan of
Reorganization to reorganize the company as a Delaware business trust (Proposal
2). Broker non-votes and abstentions will not count as votes cast and will have
the effect of votes against Proposal 2.
The affirmative vote of a majority of the outstanding voting securities of
each fund, as defined in the Investment Company Act of 1940, as amended (the
1940 Act), is required to:
- approve the funds' new advisory agreement (Proposal 3);
- approve new fundamental investment restrictions for the funds (Proposal
4);
- change the investment objectives of High Income Municipal and Tax-Exempt
Cash so that they are non-fundamental (Proposal 5); and
- change the investment objectives of Tax-Exempt Bond and Tax-Free
Intermediate and make them non-fundamental (Proposal 6).
The 1940 Act defines a majority of the outstanding voting securities of a
fund (a 1940 Act majority) as the lesser of (a) the vote of holders of 67% or
more of the voting securities of the fund present in person or by proxy, if the
holders of more than 50% of the outstanding voting securities of the fund are
present in person or by proxy, or (b) the vote of the holders of more than 50%
of the outstanding voting securities of the fund. Broker non-votes and
abstentions will not count as votes cast and will have the effect of votes
against Proposals 3 through 6.
The affirmative vote of a majority of votes cast is necessary to ratify the
selection of KPMG LLP as your fund's independent accountants (Proposal 7). For
Proposal 7, abstentions will not count as votes cast and will have no effect on
the outcome of the vote.
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CAN THE MEETING BE ADJOURNED?
The proxies may propose to adjourn the meeting to permit further
solicitation of proxies or for other purposes. Any such adjournment will require
the affirmative vote of a majority of the votes cast.
HOW CAN I OBTAIN MORE INFORMATION ABOUT THE FUNDS?
UPON YOUR REQUEST, EACH FUND WILL FURNISH YOU A FREE COPY OF ITS MOST
RECENT ANNUAL REPORT AND THE MOST RECENT SEMIANNUAL REPORT SUCCEEDING THE ANNUAL
REPORT, IF ANY. YOU SHOULD DIRECT YOUR REQUEST TO A I M FUND SERVICES, INC. AT
P.O. BOX 4739, HOUSTON, TX 77210-4739 OR BY CALLING 1-800-347-4246.
PROPOSAL 1: ELECTION OF DIRECTORS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THE ELECTION OF DIRECTORS?
Proposal 1 applies to all shareholders of all funds.
WHO ARE THE NOMINEES FOR DIRECTOR?
For election of directors at the meeting, the Board has approved the
nomination of Charles T. Bauer, Bruce L. Crockett, Owen Daly II, Edward K. Dunn,
Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Prema Mathai-Davis,
Lewis F. Pennock and Louis S. Sklar, each to serve as director until his or her
successor is elected and qualified.
The proxies will vote for the election of these nominees unless you
withhold authority to vote for any or all of them in the proxy. Each of the
nominees has indicated that he or she is willing to serve as a director. If any
or all of the nominees should become unavailable for election due to events not
now known or anticipated, the persons named as proxies will vote for such other
nominee or nominees as the directors who are not interested persons of the
company, as defined in the 1940 Act (the independent directors), may recommend.
All of the nominees presently are directors of the company. The nominees
also serve as directors, trustees or officers of the following open-end
management investment companies advised or managed by A I M Advisors, Inc.
(AIM): AIM Advisor Funds, Inc., AIM Equity Funds, Inc., AIM Funds Group, AIM
International Funds, Inc., AIM Investment Securities Funds, AIM Special
Opportunities Funds, AIM Summit Fund, Inc., AIM Tax-Exempt Funds, Inc., AIM
Variable Insurance Funds, Inc., Short-Term Investments Co., Short-Term
Investments Trust and Tax Free Investments Co. (these investment companies and
their series portfolios, if any, are referred to collectively as the AIM funds).
Robert H. Graham also serves as a director or trustee, and officer of other
open-end and closed-end management investment companies managed or advised by
AIM. No director or nominee is a party adverse to the company or any of its
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affiliates in any material pending legal proceedings, nor does any director or
nominee have an interest materially adverse to the company.
The following table sets forth information concerning the nominees:
<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------------ ----------------------------------------
<S> <C> <C>
+*Charles T. Bauer (81) May 3, 1993 Director and Chairman, A I M Management
11 Greenway Plaza Group Inc.; A I M Advisors, Inc., A I M
Suite 100 Capital Management, Inc.; A I M
Houston, TX 77046-1173 Distributors, Inc.; A I M Fund Services,
Inc. and Fund Management Company; and
Executive Vice Chairman and Director,
AMVESCAP PLC.
+Bruce L. Crockett (55) May 5, 1993 Director, ACE Limited (insurance
906 Frome Lane company). Formerly, Director, President
McLean, VA 22102 and Chief Executive Officer, COMSAT
Corporation; and Chairman, Board of
Governors of INTELSAT (international
communications company).
+Owen Daly II (75) May 5, 1993 Formerly, Director, Cortland Trust Inc.
Six Blythewood Road (investment company), CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company
and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
Edward K. Dunn, Jr. (64) March 10, 1998 Chairman of the Board of Directors,
2 Hopkins Plaza Mercantile Mortgage Corporation.
8th Floor, Suite 805 Formerly, Vice Chairman of the Board of
Baltimore, MD 21201 Directors and President and Chief
Operating Officer, Mercantile-Safe
Deposit & Trust Co.; and President,
Mercantile Bankshares.
Jack M. Fields (48) March 11, 1997 Chief Executive Officer, Texana Global,
Jetero Plaza, Suite E Inc. (foreign trading company) and
8810 Will Clayton Parkway Twenty First Century Group, Inc. (a
Humble, TX 77338 governmental affairs company); and
Director, Telscape International and
Administaff. Formerly, Member of the
U.S. House of Representatives.
* Mr. Bauer is an interested person of AIM and the company, as defined in the 1940
Act, primarily because of his positions with AIM and its affiliated companies, as
set forth above, and through his ownership of stock of AMVESCAP PLC, which, through
A I M Management Group Inc., owns all of the outstanding stock of AIM.
+ Does not include years of service as a director or trustee of any predecessor funds.
</TABLE>
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<TABLE>
<CAPTION>
NAME, ADDRESS AND AGE DIRECTOR SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- ------------------ ----------------------------------------
<S> <C> <C>
+**Carl Frischling (63) May 5, 1993 Partner, Kramer Levin Naftalis & Frankel
919 Third Avenue LLP (law firm). Formerly Partner, Reid &
New York, NY 10022 Priest (law firm).
***Robert H. Graham (53) May 10, 1994 Director, President and Chief Executive
11 Greenway Plaza Officer, A I M Management Group Inc.;
Suite 100 Director and President, A I M Advisors,
Houston, TX 77046-1173 Inc.; Director and Senior Vice
President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M
Fund Services, Inc. and Fund Management
Company; and Director and Chief
Executive Officer, Managed Products,
AMVESCAP PLC.
Prema Mathai-Davis (49) September 10, 1998 Chief Executive Officer, YWCA of the
350 Fifth Avenue, U.S.A.
Suite 301
New York, NY 10118
+Lewis F. Pennock (57) May 5, 1993 Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
+Louis S. Sklar (60) May 5, 1993 Executive Vice President, Development
The WilliamsTower and Operations, Hines Interests Limited
50th Floor Partnership (real estate development).
2800 Post Oak Boulevard
Houston, TX 77056
</TABLE>
** Mr. Frischling is an interested person of the company, as defined in the
1940 Act, primarily because of payments received by his law firm from the
company for services to the independent directors of the company.
*** Mr. Graham is an interested person of AIM and the company, as defined in the
1940 Act, primarily because of his positions with AIM and its affiliated
companies, as set forth above, and through his ownership of stock of
AMVESCAP PLC, which, through A I M Management Group Inc., owns all of the
outstanding stock of AIM.
+ Does not include years of service as a director or trustee of any
predecessor funds.
WHAT ARE THE RESPONSIBILITIES OF THE BOARD?
The Board is responsible for the general oversight of the funds' business
and for assuring that the funds are managed in the best interests of each fund's
respective shareholders. The Board periodically reviews the funds' investment
performance as well as the quality of other services provided to the funds and
their shareholders by each of the fund's service providers, including AIM and
its affiliates. At least annually, the Board reviews the fees paid by the
company for these services and the overall level of the funds' operating
expenses.
WHY ARE DIRECTORS BEING ELECTED AT THE PRESENT TIME?
Under the 1940 Act, the Board may fill vacancies on the Board or appoint
new directors only if, immediately thereafter, at least two-thirds of the
directors will have been elected by shareholders. Currently, seven of the
company's ten directors have been elected by shareholders. As directors retire,
resign or
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otherwise cease their service as directors in the future, the company may be
unable to fill the vacancies created by such action because three of the
company's ten directors have not been elected by shareholders. To provide the
Board with the flexibility to fill vacancies created when directors cease their
service as directors, and in light of the fact that only seven of the company's
directors have been elected by shareholders, the Board believes it is
appropriate for shareholders to elect directors at the present time.
HOW LONG CAN DIRECTORS SERVE ON THE BOARD?
Directors generally hold office until their successors are elected and
qualified. Pursuant to a policy adopted by the Board in 1992, each duly elected
or appointed independent director may continue to serve as a director until
December 31 of the year in which the director turns 72. Independent directors
who were age 65 or older and serving on the board of one or more of the AIM
funds when the policy was adopted in 1992 may continue to serve until December
31 of the year in which the director turns 75. A director of the company may
resign or be removed for cause by a vote of the holders of a majority of the
outstanding shares of the funds at any time. A majority of the Board may extend
from time to time the retirement date of a director. The Board has agreed to
extend the retirement date of Mr. Daly, who otherwise would have retired on
December 31, 2000, to December 31, 2001. In making this decision, the Board took
into account Mr. Daly's experience and active participation as a director.
WHAT ARE SOME OF THE WAYS IN WHICH THE BOARD REPRESENTS MY INTERESTS?
The Board seeks to represent shareholder interests by:
- reviewing the funds' investment performance on an individual basis with
the funds' respective managers;
- reviewing the quality of the various other services provided to the funds
and their shareholders by each of the fund's service providers, including
AIM and its affiliates;
- discussing with senior management of AIM steps being taken to address any
performance deficiencies;
- reviewing the fees paid to AIM and its affiliates to ensure that such
fees remain reasonable and competitive with those of other mutual funds,
while at the same time providing sufficient resources to continue to
provide high-quality services in the future;
- monitoring potential conflicts between the funds and AIM and its
affiliates to ensure that the funds continue to be managed in the best
interests of their shareholders; and
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- monitoring potential conflicts among funds to ensure that shareholders
continue to realize the benefits of participation in a large and diverse
family of funds.
WHAT ARE THE COMMITTEES OF THE BOARD?
The standing Committees of the Board are the Audit Committee, the
Capitalization Committee, the Investments Committee and the Nominating and
Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for:
- considering management's recommendations of independent accountants for
each fund and evaluating such accountants' performance, costs and
financial stability;
- with AIM, reviewing and coordinating audit plans prepared by the funds'
independent accountants and management's internal audit staff; and
- reviewing financial statements contained in periodic reports to
shareholders with the funds' independent accountants and management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for:
- increasing or decreasing the aggregate number of shares of any class of
the company's common stock by classifying and reclassifying the company's
authorized but unissued shares of common stock, up to the company's
authorized capital;
- fixing the terms of such classified or reclassified shares of common
stock; and
- issuing such classified or reclassified shares of common stock upon the
terms set forth in the applicable fund's prospectus, up to the company's
authorized capital.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly,
Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr. Mathai-Davis. The
Investments Committee is responsible for:
- overseeing AIM's investment-related compliance systems and procedures to
ensure their continued adequacy; and
- considering and acting on an interim basis between meetings of the full
Board, on investment-related matters requiring Board consideration,
including dividends and distributions, brokerage policies and pricing
matters.
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The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for:
- considering and nominating individuals to stand for election as
independent directors as long as the company maintains a distribution
plan pursuant to Rule 12b-1 under the 1940 Act;
- reviewing from time to time the compensation payable to the independent
directors; and
- making recommendations to the Board regarding matters related to
compensation, including deferred compensation plans and retirement plans
for independent directors.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as directors, provided (i) that such
person is a shareholder of record at the time he or she submits such names and
is entitled to vote at the meeting of shareholders at which directors will be
elected, and (ii) that the Nominating and Compensation Committee or the Board,
as applicable, shall make the final determination of persons to be nominated.
HOW OFTEN DOES THE BOARD MEET?
The Board typically conducts regular meetings nine times a year to review
the operations of the funds and of the other AIM funds. Typically, five of these
nine meetings are held in person, each over a two-day period. One or more
Committees of the Board generally meet in conjunction with each in-person
meeting of the Board. In addition, the Board or any Committee may hold special
meetings by telephone or in person to discuss specific matters that may require
action prior to the next regular meeting.
During the fiscal year ended March 31, 1999, the Board held 9 meetings, the
Audit Committee held 4 meetings, the Investments Committee held 4 meetings and
the Nominating and Compensation Committee held 5 meetings. The Capitalization
Committee did not meet. All of the current directors and Committee members then
serving, except Mr. Graham, attended at least 75% of the meetings of the Board
and applicable Committees, if any, held during the fiscal year ended March 31,
1999. Mr. Graham attended six Board Meetings held during the fiscal year ended
March 31, 1999, but was not able to attend at least 75% of the meetings of the
Board during this time due to various corporate and personal conflicts.
WHAT ARE THE DIRECTORS PAID FOR THEIR SERVICES?
Each director is reimbursed for expenses incurred in connection with each
meeting of the Board or any Committee attended. Each director who is not also an
officer of the company is compensated for his or her services according to a fee
schedule which recognizes the fact that such director also serves as a director
or
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trustee of all of the other AIM funds. Each such director receives a fee,
allocated among the AIM funds for which he or she serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued for
each director:
<TABLE>
<CAPTION>
TOTAL
RETIREMENT BENEFITS COMPENSATION
AGGREGATE COMPENSATION ACCRUED BY ALL FROM ALL
DIRECTOR FROM THE COMPANY(1) AIM FUNDS(2) AIM FUNDS(3)
-------- ---------------------- ------------------- ------------
<S> <C> <C> <C>
Charles T. Bauer..... $ 0 $ 0 $ 0
Bruce L. Crockett.... 3,949 37,485 103,500
Owen Daly II......... 3,949 122,898 103,500
Edward K. Dunn Jr. .. 3,886 0 103,500
Jack M. Fields....... 3,929 15,826 101,500
Carl Frischling(4)... 3,929 97,791 103,500
Robert H. Graham..... 0 0 0
John F. Kroeger(5)... 1,878 107,896 0
Prema Mathai-Davis... 2,262 0 101,500
Lewis F. Pennock..... 3,929 45,766 103,500
Ian W. Robinson(6)... 3,886 94,442 25,000
Louis S. Sklar....... 3,909 90,232 101,500
</TABLE>
(1) The total amount of compensation deferred by all directors of the company
during the fiscal year ended March 31, 1999, including earnings thereon, was
$21,015.
(2) During the fiscal year ended March 31, 1999, the total amount of expenses
allocated to the company in respect of such retirement benefits was $2,228.
Data reflects compensation for the calendar year ended December 31, 1999.
Accruals for 1999 are based on actuarial projections from 1998.
(3) Each director serves as director or trustee of at least 12 registered
investment companies advised by AIM. Data reflects compensation for the
calendar year ended December 31, 1999.
(4) During the fiscal year ended March 31, 1999, the company paid $14,241 in
legal fees to Mr. Frischling's law firm, Kramer Levin Naftalis & Frankel
LLP, for services rendered to the independent directors of the company.
(5) Mr. Kroeger was a director until June 11, 1998, when he resigned. On that
date, he became a consultant to the company. Mr. Kroeger passed away on
November 26, 1998. Mr. Kroeger's widow will receive his pension as described
below under "AIM Funds Retirement Plan for Eligible Directors/Trustees."
(6) Mr. Robinson was a director until March 12, 1999, when he retired.
11
<PAGE> 15
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible Directors/
Trustees, each director (who is not an employee of any of the AIM funds, A I M
Management Group Inc. (AIM Management) or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board. Pursuant to such
plan, a director becomes eligible to retire and to receive full benefits under
the plan when he or she has attained age 65 and has completed at least five
years of continuous service with one or more of the regulated investment
companies managed, administered or distributed by AIM or its affiliates (the
applicable AIM funds). Each eligible director is entitled to receive an annual
benefit from the applicable AIM funds commencing on the first day of the
calendar quarter coincident with or following his or her date of retirement
equal to a maximum of 75% of the annual retainer paid or accrued by the
applicable AIM funds for such director during the twelve-month period
immediately preceding the director's retirement (including amounts deferred
under a separate agreement between the applicable AIM funds and the director)
and based on the number of such director's years of service (not in excess of 10
years of service) completed with respect to any of the applicable AIM funds.
Such benefit is payable to each eligible director in quarterly installments. If
an eligible director dies after attaining the normal retirement date but before
receipt of all benefits under the plan, the director's surviving spouse (if any)
shall receive a quarterly survivor's benefit equal to 50% of the amount payable
to the deceased director for no more than ten years beginning the first day of
the calendar quarter following the date of the director's death. Payments under
the plan are not secured or funded by any applicable AIM fund.
Set forth below is a table that shows the estimated annual benefits payable
to an eligible director upon retirement assuming the retainer amount reflected
below and various years of service. The estimated credited years of service for
Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Pennock, Robinson and
Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 20, 18, 11, 10 and 1 years,
respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
ANNUAL
RETIREMENT
COMPENSATION
PAID BY ALL
NUMBER OF YEARS OF SERVICE APPLICABLE
WITH THE APPLICABLE AIM FUNDS AIM FUNDS
----------------------------- ------------
<S> <C>
10.............................. $67,500
9.............................. $60,750
8.............................. $54,000
7.............................. $47,250
6.............................. $40,500
5.............................. $33,750
</TABLE>
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<PAGE> 16
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (the
deferring directors) have each executed a deferred compensation agreement.
Pursuant to the agreements, the deferring directors may elect to defer receipt
of up to 100% of their compensation payable by the company, and such amounts are
placed into a deferral account. Currently, the deferring directors may select
various AIM funds in which all or part of their deferral accounts shall be
deemed to be invested. Distributions from the deferring directors' accounts will
be paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the agreement) beginning on the date the
deferring director's retirement benefits commence under the plan. The Board, in
its sole discretion, may accelerate or extend the distribution of such deferral
accounts after the deferring director's termination of service as a director of
the company. If a deferring director dies prior to the distribution of amounts
in his deferral account, the balance of the deferral account will be distributed
to his designated beneficiary in a single lump sum payment as soon as
practicable after such deferring director's death. The agreements are not funded
and, with respect to the payments of amounts held in the deferral accounts, the
deferring directors have the status of unsecured creditors of the company and of
each other AIM fund from which they are deferring compensation.
WHAT ARE OFFICERS PAID FOR THEIR SERVICES?
The company does not pay its officers for the services they provide to the
company. Instead, the officers, who are also officers or employees of AIM or its
affiliates, are compensated by AIM Management or its affiliates.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 1?
--------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
--------------------------------------------------------------
PROPOSAL 2: APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION TO REORGANIZE
THE COMPANY AS A DELAWARE BUSINESS TRUST
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 2 applies to all shareholders of all funds.
13
<PAGE> 17
WHAT AM I BEING ASKED TO APPROVE?
The company currently is organized as a Maryland corporation. The Board has
approved an Agreement and Plan of Reorganization (the plan), which provides for
a series of transactions to convert each fund of the company (a current fund) to
a corresponding series (a new fund) of a newly created open-end management
investment company organized as a business trust (the trust) under the Delaware
Business Trust Act. Under the plan, each current fund will transfer all its
assets to a corresponding new fund in exchange solely for voting shares of
beneficial interest in the new fund and the new fund's assumption of all the
current fund's liabilities (collectively, the reorganization). A form of the
plan relating to the proposed reorganization is in Appendix B. If Proposal 2 is
not approved by the shareholders, the company will continue to operate as a
Maryland corporation.
The reorganization is being proposed primarily to modernize the
organizational documents under which the company operates. AIM and the Board
believe that a number of benefits will be available to the current funds and
their shareholders once these documents conform to those of other AIM funds. The
operations of each new fund following the reorganization will be substantially
similar to those of its predecessor current fund, except that each new fund's
advisory agreement will conform to the changes proposed in Proposal 3, to the
extent Proposal 3 is approved; the fundamental investment restrictions for all
of the new funds will conform to the changes proposed in Proposal 4, to the
extent that Proposal 4 is approved; the investment objectives for each of new
High Income Municipal and new Tax-Exempt Cash will be made non-fundamental as
proposed in Proposal 5, if Proposal 5 is approved; and the investment objectives
of new Tax-Exempt Bond and new Tax-Free Intermediate will be changed and made
non-fundamental as proposed in Proposal 6, if Proposal 6 is approved. Finally,
as described below, the trust's Agreement and Declaration of Trust differs from
the company's Charter in certain respects that are expected to improve the
company's and each fund's operations.
WHAT ARE THE REASONS FOR THE PROPOSED REORGANIZATION?
The reorganization is being proposed because, as noted above, AIM and the
Board believe that the Delaware business trust organizational form offers a
number of advantages over the Maryland corporate organizational form. As a
result of these advantages, the Delaware business trust organizational form has
been increasingly used by mutual funds, including many AIM funds.
The Delaware business trust organizational form offers greater flexibility
than the Maryland corporate form. A Maryland corporation is governed by the
detailed requirements imposed by Maryland corporate law and by the terms of its
Charter. A Delaware business trust is subject to fewer statutory requirements.
The trust will be governed primarily by the terms of an Agreement and
Declaration of Trust (trust instrument). In particular, the trust will have
greater
14
<PAGE> 18
flexibility to conduct business without the necessity of engaging in expensive
proxy solicitations to shareholders. For example, under Maryland corporation
law, amendments to the company's Charter would typically require shareholder
approval. Under Delaware law, unless the trust instrument of a Delaware business
trust provides otherwise, amendments to it may be made without first obtaining
shareholder approval. In addition, unlike Maryland corporation law, which
restricts the delegation of a board of directors' functions, Delaware law
permits the board of trustees of a Delaware business trust to delegate certain
of its responsibilities. For example, the board of trustees of a Delaware
business trust may delegate the responsibility of declaring dividends to duly
empowered committees of the board or to appropriate officers. Finally, Delaware
law permits the trustees to adapt a Delaware business trust to future
contingencies. For example, the trustees may, without a shareholder vote, change
a Delaware business trust's domicile or organizational form. In contrast, under
Maryland corporation law, a company's board of directors would be required to
obtain shareholder approval prior to changing domicile or organizational form.
The reorganization will also have certain other effects on the company, its
shareholders and management, which are described below under the heading "How
Will the Trust Compare to the Company?"
WHAT WILL THE PROPOSED REORGANIZATION INVOLVE?
To accomplish the reorganization, the trust has been formed as a Delaware
business trust pursuant to its trust instrument, and each new fund has been
established as a series of the trust. On the closing date, each current fund
will transfer all of its assets to the corresponding classes of the new fund in
exchange solely for a number of full and fractional Class A shares and, in the
case of the High Income Municipal, Class B and Class C shares of the new fund
equal to the number of full and fractional shares of common stock of the
corresponding classes of the current fund then outstanding and the new fund's
assumption of the current fund's liabilities. Immediately thereafter, each
current fund will distribute those new fund shares to its shareholders in
complete liquidation and will, as soon as practicable thereafter, be terminated.
Upon completion of the reorganization, each shareholder of each current fund
will be the owner of full and fractional shares of the corresponding new fund
equal in number and aggregate net asset value to the shares he or she held in
the current fund.
The obligations of the company and the trust under the plan are subject to
various conditions stated therein. To provide against unforeseen events, the
plan may be terminated or amended at any time prior to the closing of the
reorganization by action of the Board, notwithstanding the approval of the plan
by the shareholders of the company. However, no amendments may be made that
would materially adversely affect the interests of shareholders of any current
fund. The company and the trust may at any time waive compliance with any
condition
15
<PAGE> 19
contained in the plan, provided that the waiver does not materially adversely
affect the interests of shareholders of any current fund.
The plan authorizes the company to acquire one share of each class of each
new fund and, as the sole shareholder of the trust prior to the reorganization,
to do each of the following:
- Approve with respect to each new fund a new investment advisory agreement
that will be substantially identical to that described in Proposal 3.
Information on the new advisory agreement, including a description of the
differences between it and the current advisory agreement, is set forth
below under Proposal 3. A form of the new advisory agreement is in
Appendix C. If Proposal 3 is not approved by a current fund's
shareholders, the trust will approve with respect to such fund an
investment advisory agreement that is substantially identical to such
fund's existing investment advisory agreement.
- Assuming that Proposal 3 is approved by shareholders, approve with
respect to each new fund a new administrative services agreement with AIM
that will be substantially identical to the company's existing
administrative services agreement with AIM, except for the changes
described in Proposal 3. If Proposal 3 is not approved by a current
fund's shareholders, the trust will approve for such fund an
administrative services agreement that is substantially identical to such
fund's existing administrative services agreement.
- Approve with respect to each new fund a new distribution agreement with
A I M Distributors, Inc. The proposed distribution agreement will provide
for substantially the same distribution services as currently provided by
A I M Distributors, Inc.
- Approve a new distribution plan pursuant to Rule 12b-1 under the 1940 Act
with respect to each class of each new fund (except for the successor
fund to Tax-Free Intermediate which has not adopted a 12b-1 plan) that
will be substantially identical to the corresponding current fund's
existing distribution plan for that class.
- Approve with respect to each new fund a custodian agreement, with State
Street Bank and Trust Company and a transfer agency and servicing
agreement with A I M Fund Services, Inc., each of which currently
provides such services to the corresponding current fund, and a multiple
class plan pursuant to Rule 18f-3 of the 1940 Act which will be
substantially identical to the multiple class plan that exists for the
corresponding current fund.
- Elect the directors of the company as the trustees of the trust to serve
without limit in time, except as they may resign or be removed by action
of the trust's trustees or shareholders, and except as they retire in
16
<PAGE> 20
accordance with the trust's retirement policy for trustees. The trust's
retirement policy for trustees is substantially identical to the
company's retirement policy for directors.
- Ratify the selection of KPMG LLP, the accountants for each current fund,
as the independent public accountants for each new fund.
- Approve such other agreements and plans as are necessary for each new
fund's operation as a series of an open-end management investment
company.
The trust's transfer agent will establish for each shareholder an account
containing the appropriate number of shares of each class of each new fund. Such
accounts will be identical in all respects to the accounts currently maintained
by the company's transfer agent for each shareholder of the current funds.
Shares held in the current fund accounts will automatically be designated as
shares of the new funds. Certificates for current fund shares issued before the
reorganization will represent shares of the corresponding new fund after the
reorganization. The trust will not normally issue share certificates. Any
account options or privileges on accounts of shareholders under the current
funds will be replicated on the new fund account.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION?
The company and the trust will receive an opinion of Ballard Spahr Andrews
& Ingersoll, LLP to the effect that the reorganization will constitute a
tax-free reorganization under section 368(a)(1)(F) of the Internal Revenue Code
of 1986, as amended. Accordingly, the current funds, the new funds and the
shareholders of the new funds will recognize no gain or loss for federal income
tax purposes as a result of the reorganization. Shareholders of the current
funds should consult their tax advisers regarding the effect, if any, of the
reorganization in light of their individual circumstances and as to state and
local consequences, if any, of the reorganization.
WILL I HAVE APPRAISAL RIGHTS?
Appraisal rights are not available to shareholders. However, shareholders
retain the right to redeem their shares of the current funds or the new funds,
as the case may be, at any time before or after the reorganization.
HOW WILL THE TRUST COMPARE TO THE COMPANY?
Structure of the Trust
The trust has been established under the laws of the State of Delaware by
the filing of a certificate of trust in the office of the Secretary of State of
Delaware. The trust has established series corresponding to and having identical
designations as the series portfolios of the company. The trust has also estab-
17
<PAGE> 21
lished classes with respect to each new fund corresponding to and having
identical designations as the classes of each current fund. Each new fund will
have the same investment objectives, policies, and restrictions as its
predecessor current fund, except that the new funds' fundamental restrictions,
investment objectives and fundamental policies will conform to the changes
proposed in Proposals 4 through 6 (assuming approval of each of these Proposals
by the shareholders). If any of Proposals 4 through 6 is not approved by
shareholders, the new funds affected by the non-approval will continue to be
subject to the corresponding current funds' existing fundamental restrictions,
investment objectives and fundamental policies, as applicable. The trust's
fiscal year is the same as that of the company. The trust will not have any
operations prior to the reorganization. Initially, the company will be the sole
shareholder of the trust.
As a Delaware business trust, the trust's operations are governed by its
trust instrument and Bylaws and applicable Delaware law rather than by the
company's Charter and Amended and Restated Bylaws and applicable Maryland law.
Certain differences between the two domiciles and organizational forms are
summarized below. The operations of the trust will continue to be subject to the
provisions of the 1940 Act and the rules and regulations thereunder.
Trustees and Officers of the Trust
Subject to the provisions of the trust instrument, the business of the
trust will be managed by its trustees, who serve indefinite terms and who have
all powers necessary or convenient to carry out their responsibilities. The
responsibilities, powers, and fiduciary duties of the trustees are substantially
the same as those of the directors of the company.
The trustees of the trust would be those persons elected at this meeting to
serve as directors of the company. Information concerning the nominees for
election as directors of the company, all of whom presently serve in such
positions, is set above under Proposal 1. The current officers of the company,
as well as certain AIM personnel, have been elected to serve as officers of the
trust and the current officers of the company will perform the same functions on
behalf of the trust following the reorganization that they now perform on behalf
of the company.
Shares of the Trust
The beneficial interests in the new funds will be represented by
transferable shares, par value $0.001 per share. Shareholders do not have the
right to demand or require the trust to issue share certificates, although the
trust, in its sole discretion, may issue them. The trustees have the power under
the trust instrument to establish new series and classes of shares; the
company's directors currently have a similar right. The trust instrument permits
the trustees to issue an unlimited number of shares of each class and series.
The company is authorized to issue only the number of shares specified in the
Charter and may
18
<PAGE> 22
issue additional shares only with Board approval and after payment of a fee to
the State of Maryland on any additional shares authorized.
High Income Municipal currently has three classes of shares: Class A, Class
B and Class C. The remaining three funds each currently have one class of
shares: Class A. The trust has established for each new fund the classes that
currently exist for its predecessor current fund. Except as discussed in this
proxy statement, shares of each class of the new funds will have rights,
privileges, and terms substantially similar to those of the corresponding class
of the current funds.
Shareholder Meeting Requirements
Maryland law provides that a special meeting of shareholders shall be
called upon the written request of shareholders holding 25% of the company's
shares. The company's Amended and Restated Bylaws allow a special meeting of
shareholders to be called upon the written request of shareholders holding 10%
of the company's shares. The trust's Bylaws provide that a special meeting of
shareholders for the purpose of voting on the removal of any trustee may be
called by the holders of 10% or more of the outstanding shares of the trust.
The trust, like the company, will operate as an open-end management
investment company registered with the Securities and Exchange Commission (SEC)
under the 1940 Act. As permitted by SEC rules, as amended, the trust will adopt
as its own the registration statement of the company. Shareholders of the new
funds therefore will have the power to vote at special meetings with respect to,
among other things, changes in any fundamental investment objectives and the
fundamental restrictions and policies of the new funds; approval of certain
changes to investment advisory contracts and plans of distribution; and
additional matters relating to the trust required by the 1940 Act.
Shareholder Voting Rights
Under Maryland law, shareholders of the company have the right to vote on
the following matters: the substantive amendment or complete restatement of the
company's Charter; generally, a consolidation, merger, or share exchange
involving the company or a transfer of the company's assets not in the ordinary
course of business; and the voluntary or, in some cases, involuntary dissolution
of the company.
Shareholders of the trust will have only those voting rights that are
explicitly set forth in the trust instrument. Under the trust instrument,
shareholders of the trust have the right to vote on the following matters: the
election or removal of trustees, provided that a meeting of shareholders has
been called for that purpose; the termination of the trust or any fund or class,
provided that a meeting of shareholders has been called for that purpose and
unless there are fewer than 100 holders of record of the trust or such
terminating fund or class; the sale of all or
19
<PAGE> 23
substantially all of the assets of the trust or any fund or class, unless the
primary purpose of such sale is to change the trust's domicile or organizational
form; under certain circumstances, the merger or consolidation of the trust or
any fund or class with and into another company or with and into another fund or
class of the trust; and the amendment of the section of the trust instrument
that governs shareholders' voting rights.
Removal of Directors and Trustees
The company's Charter permits removal of a director prior to the expiration
of his or her term of office for cause, and not otherwise, by the affirmative
vote of a majority of all votes entitled to be cast for the election of
directors. Under the trust's trust instrument, a trustee may be removed by a
written instrument, signed by at least two-thirds of the number of trustees
prior to such removal, or by the affirmative vote of holders of two-thirds of
the trust's outstanding shares at a special meeting called for that purpose.
Shareholders' Rights of Inspection
Maryland law provides generally that persons who have been shareholders of
record for six months or more and who own of record at least 5% of a current
fund's outstanding shares of any class may inspect that current fund's books of
account and stock ledger. Under the trust's trust instrument and Bylaws, new
fund shareholders who have held shares of record for at least six months and who
hold at least 5% of the outstanding shares of any class of a new fund are
permitted, upon written request, to inspect a list of the shareholders of that
fund.
Shareholder Liability
Maryland law provides that a shareholder is not obligated to the company
with respect to the stock held therein, except to the extent that (1) the
subscription price or other agreed consideration for the stock has not been paid
(subject to limited exceptions); (2) the shareholder knowingly accepted an
illegal distribution; or (3) the shareholder is subject to any liability imposed
by law upon the dissolution, voluntary or involuntary, of the company.
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations; however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. However, the trust instrument disclaims
shareholder liability for acts or obligations of the trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the trust or the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the trust. The trust instrument provides
20
<PAGE> 24
for indemnification out of the property of a new fund for all losses and
expenses of any shareholder of such new fund held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss due to shareholder liability is limited to circumstances in which a new
fund would be unable to meet its obligations and the complaining party was held
not to be bound by the liability disclaimer.
Liability of Directors and Trustees
Under its Charter, the company limits the liability of and indemnifies its
present and past directors and officers to the maximum extent permitted by
Maryland law and the 1940 Act. Directors may be personally liable to the company
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of their duties or by reason of reckless disregard of their duties
as directors. In the event of any litigation or other proceeding against a
director or officer of the company, Maryland law permits the company to
indemnify the director or officer for certain expenses and to advance money for
such expenses unless (a) it is established that the act or omission of the
director or officer was material to the matter giving rise to the proceeding and
the act or omission was committed in bad faith or was the result of active and
deliberate dishonesty; (b) the director or officer actually received an improper
personal benefit in money, property or services; or (c) in the case of any
criminal proceeding, the director or officer had reasonable cause to believe the
act or omission was unlawful.
The trust instrument provides indemnification for current and former
trustees, officers, employees and agents of the trust to the fullest extent
permitted by Delaware law, the trust's Bylaws and other applicable law. Trustees
of the trust may be personally liable to the trust and its shareholders by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of their duties or by reason of reckless disregard of their duties as trustees.
Amendment of Charter and Trust Instrument
Under the company's Charter and Maryland law, the Charter may be amended
upon (a) adoption by the Board of a resolution setting forth the proposed
amendment and declaring that such amendment is advisable and (b) approval of
such resolution by the holders of a majority of the company's outstanding
shares. The trust instrument may be amended by a majority of the trustees
without any shareholder vote, except that the shareholders will have the right
to vote on any amendment that affects their voting rights, that reduces the
indemnification provided to shareholders or former shareholders, that is
required to have shareholder approval by law or by the trust's registration
statement, or that is submitted to the shareholders by the trustees.
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<PAGE> 25
---------------------
The foregoing is only a summary of certain differences between and among
the company's Charter and Amended and Restated Bylaws and Maryland law and the
trust instrument and the trust's Bylaws and Delaware law. It is not a complete
list of the differences. Shareholders should refer to the provisions of these
documents and state law directly for a more thorough comparison. Copies of the
Charter and Amended and Restated Bylaws of the company, and of the trust
instrument and the trust's Bylaws are available to shareholders without charge
upon written request to the company or the trust.
WHEN WILL PROPOSAL 2 BE IMPLEMENTED?
Assuming your approval of Proposal 2, the company currently contemplates
that the reorganization will close on May 24, 2000. However, the reorganization
may close on another date if circumstances warrant.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 2?
----------------------------------------------------------------
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
----------------------------------------------------------------
PROPOSAL 3: APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 3 applies to all shareholders of all funds.
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve a new advisory agreement between AIM
and the company for your fund. The Board is asking you to vote on this new
agreement because the company may amend its advisory agreement only with
shareholder approval. A form of the company's proposed Master Investment
Advisory Agreement is in Appendix C. The proposed advisory agreement amends the
current advisory agreement primarily by:
- omitting references to the provision of administrative services to the
funds;
- omitting certain expense limitations that are no longer applicable;
- clarifying existing non-exclusivity provisions;
- clarifying existing delegation provisions;
- adding provisions regarding affiliated brokerage;
22
<PAGE> 26
- adding certain provisions to fully implement the funds' securities
lending program; and
- clarifying existing liability provisions.
At a meeting held on February 3, 2000, the Board voted to recommend that
you approve a proposal to adopt the new advisory agreement.
WHO IS THE FUNDS' INVESTMENT ADVISOR?
AIM became the investment advisor for each of the funds on the dates
indicated in Appendix D. The current Master Investment Advisory Agreement, as
amended, was executed, and the funds' shareholders last voted on such agreement,
on the dates indicated in Appendix D. The Board, including a majority of the
independent directors, last approved the current advisory agreement on May 11,
1999.
AIM is a wholly owned subsidiary of AIM Management, a holding company that
has been engaged in the financial services business since 1976. The address of
AIM and AIM Management is 11 Greenway Plaza, Suite 100, Houston, Texas 77046.
AIM was organized in 1976, and, together with its subsidiaries, advises or
manages approximately 120 investment portfolios encompassing a broad range of
investment objectives. AIM Management is an indirect wholly owned subsidiary of
AMVESCAP PLC, 11 Devonshire Square, London EC2M 4YR, United Kingdom. AMVESCAP
PLC and its subsidiaries are an independent investment management group engaged
in institutional investment management and retail mutual fund businesses in the
United States, Europe and the Pacific region. A list of the principal executive
officer and the directors of AIM is in Appendix E.
DO ANY OF THE COMPANY'S DIRECTORS OR EXECUTIVE OFFICERS HOLD POSITIONS WITH AIM?
Charles T. Bauer, Robert H. Graham, Gary T. Crum, Carol F. Relihan,
Melville B. Cox, Dana R. Sutton, Stuart W. Coco and Karen Dunn Kelley, all of
whom are directors and/or officers of the company, also are directors and/or
executive officers of AIM. Each of them also beneficially owns shares of
AMVESCAP PLC and/or options to purchase shares of AMVESCAP PLC.
WHAT ARE THE TERMS OF THE CURRENT ADVISORY AGREEMENT?
Under the terms of the current advisory agreement, AIM supervises all
aspects of the funds' operations and provides investment advisory services to
the funds. AIM obtains and evaluates economic, statistical and financial
information to formulate and implement investment programs for the funds. AIM
will not be liable to the funds or their shareholders except in the case of
AIM's willful misfeasance, bad faith, gross negligence or reckless disregard of
duty.
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<PAGE> 27
The current advisory agreement provides that the funds will pay or cause to
be paid all of their expenses not assumed by AIM, including without limitation:
- brokerage commissions;
- taxes;
- legal, accounting, auditing or governmental fees;
- the cost of preparing share certificates;
- custodian, transfer and shareholder service agent costs;
- expenses of issue, sale, redemption, and repurchase of shares;
- expenses of registering and qualifying shares for sale;
- expenses relating to director and shareholder meetings;
- the cost of preparing and distributing reports and notices to
shareholders;
- the fees and other expenses incurred by the funds in connection with
membership in investment company organizations;
- the cost of printing copies of prospectuses and statements of additional
information distributed to the funds' shareholders; and
- all other charges and costs of the funds' operations unless otherwise
explicitly provided.
The current advisory agreement will continue in effect from year to year
for each fund only if such continuance is specifically approved at least
annually by (i) the Board or the vote of a majority of the outstanding voting
securities of that fund (as defined in the 1940 Act), and (ii) the affirmative
vote of a majority of independent directors by votes cast in person at a meeting
called for such purpose. The current advisory agreement provides that the Board,
a majority of the outstanding voting securities of a fund or AIM may terminate
the agreement for a fund on 60 days' written notice without penalty. The
agreement terminates automatically in the event of its assignment.
AIM may from time to time waive or reduce its fee. AIM may rescind
voluntary fee waivers or reductions at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee, waiver or reduction prior to
the end of each fiscal year. If AIM has agreed to contractual fee waivers or
reductions, AIM may not alter those arrangements to a fund's detriment during
the period stated in the agreement between AIM and the company. AIM may not
change provisions in the current advisory agreement imposing expense limitations
without shareholder approval.
The annual rates at which AIM receives fees from each fund under the
current advisory agreement, as well as the dollar amounts of advisory fees net
of
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any expense limitations or fee waivers paid to AIM by each fund, and the dollar
amount of advisory fees (if any) waived by AIM for each fund for the fiscal year
ended March 31, 1999, are in Appendix F.
WHAT ADDITIONAL SERVICES ARE PROVIDED BY AIM AND ITS AFFILIATES?
AIM and its affiliates also provide additional services to the company and
the funds. AIM provides or arranges for others to provide administrative
services to the funds. A I M Distributors, Inc. serves as the principal
underwriter for each of the funds, and A I M Fund Services, Inc. serves as the
funds' transfer agent. These companies are wholly owned subsidiaries of AIM.
Information concerning fees paid to AIM and its affiliates for these services is
in Appendix G.
WHAT ADVISORY FEES DOES AIM CHARGE FOR SIMILAR FUNDS IT MANAGES?
The advisory fee schedules for other AIM funds advised by AIM with similar
investment objectives as the funds are in Appendix H.
WHAT ARE THE TERMS OF THE PROPOSED ADVISORY AGREEMENT?
The primary differences between the current advisory agreement and the
proposed advisory agreement that the Board approved are:
- To omit references to the provision of administrative services to the
funds by AIM, because such services are covered by a separate
administrative services agreement between AIM and the company;
- To omit certain expense limitations that are no longer applicable;
- To clarify non-exclusivity provisions that are set forth in the current
advisory agreement;
- To clarify delegation provisions that are set forth in the current
advisory agreement;
- To add provisions regarding affiliated brokerage;
- To add certain provisions to fully implement the funds' securities
lending program; and
- To clarify that one fund is not liable for another fund's obligations,
and that AIM's liability to one fund does not automatically extend to
another fund.
Each of these changes is discussed more fully below. Except for these
changes, the terms of the current advisory agreement and the proposed advisory
agreement are substantially similar, except for the effective dates and the
renewal dates.
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Administrative Services
The company and AIM are parties to a Master Administrative Services
Agreement dated February 28, 1997, as amended on September 20, 1997. The current
advisory agreement states that AIM will provide certain administrative services
to the funds at the Board's request. The Board has traditionally asked AIM to
provide such services to the funds. AIM then provides such services pursuant to
the Master Administrative Services Agreement.
The Board proposes to separate the advisory services and the administrative
services that AIM provides to the company, so that the provision of
administrative services is dealt with solely in a Master Administrative Services
Agreement. As a result, the proposed advisory agreement omits all references to
the Master Administrative Services Agreement. Since this omission will not
change the administrative services that AIM provides to the company or the
compensation AIM receives for providing administrative services, the Board
believes that this change is a matter of form rather than a substantive change
in the relationship between AIM and the company.
Expense Limitations
The current advisory agreement provides that advisory fees will be reduced
in accordance with certain expense limitations set forth in securities
regulations of the states in which the funds' shares are qualified for sale.
States can no longer impose expense limitations because federal law has
pre-empted these state regulations. Accordingly, the Board believes that this
expense limitation provision should be omitted from the proposed advisory
agreement.
Non-Exclusivity Provisions
The current advisory agreement provides that neither AIM nor the directors
or officers of the company owe an exclusive duty to the company. The current
advisory agreement expressly permits AIM to render investment advisory,
administrative and other services to other entities (including investment
companies). The current advisory agreement also expressly permits the directors
and officers of the company to serve as partners, officers, directors or
trustees of other entities (including other investment advisory companies). The
Board believes that the non-exclusivity provision in the current advisory
agreement should be bifurcated into two separate provisions: one dealing with
AIM and the other dealing with officers and directors of the company.
The non-exclusivity provisions of the proposed advisory agreement are
substantially similar to the provision in the current advisory agreement.
However, the proposed advisory agreement explicitly states that the company
recognizes that AIM's obligations to other clients may adversely affect the
company's ability to participate in certain investment opportunities. The
proposed advisory agreement also explicitly states that AIM, in its sole
discretion, shall be entitled to
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determine the allocation of investment opportunities among the AIM funds and
other clients in accordance with a policy that AIM believes to be equitable.
Delegation
The proposed advisory agreement expands the extent to which AIM can
delegate its rights, duties and obligations by expressly providing that AIM may
delegate any or all of its rights, duties or obligations under the agreement to
one or more sub-advisors. It also provides that AIM may replace sub-advisors
from time to time in accordance with applicable federal securities laws and
rules and regulations in effect or interpreted from time to time by the SEC or
with exemptive orders or other similar relief. If, in accordance with the laws,
rules, interpretations and exemptions, AIM is not required to seek shareholder
approval of a substitution in sub-advisors, it may do so upon approval of the
Board.
Affiliated Brokerage
Although AIM does not currently execute trades through brokers or dealers
that are affiliated with AIM, the proposed advisory agreement includes a new
provision that would permit such trades, subject to compliance with applicable
federal securities laws.
Securities Lending
The proposed advisory agreement includes a new provision that discusses the
services to be rendered by AIM if a fund engages in securities lending
activities, as well as the compensation AIM may receive for such services.
Services to be provided include: (a) overseeing participation in the securities
lending program to ensure compliance with all applicable regulatory and
investment guidelines; (b) assisting the securities lending agent or principal
(the agent) in determining which specific securities are available for loan; (c)
monitoring the agent to ensure that securities loans are effected in accordance
with AIM's instructions and with procedures adopted by the Board; (d) preparing
appropriate periodic reports for, and seeking appropriate approvals from, the
Board with respect to securities lending activities; (e) responding to agent
inquiries; and (f) performing such other duties as may be necessary.
As compensation for such services provided, a lending fund shall pay AIM a
fee equal to 25% of the net monthly interest or fee income retained or paid to
the fund from such activities. AIM currently intends to waive such fees, and has
agreed to seek Board approval prior to its receipt of all or a portion of such
fees.
Liability
The proposed advisory agreement clarifies that no fund shall be liable for
the obligations of another fund, and the liability of AIM to one fund shall not
automatically render AIM liable to any other fund.
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WHAT FACTORS DID THE DIRECTORS CONSIDER IN APPROVING THE ADVISORY AGREEMENT?
At the request of AIM, the Board discussed the approval of the proposed
advisory agreement at a meeting held in person on February 3, 2000. The
independent directors also discussed approval of the proposed advisory agreement
with independent counsel at that meeting. In evaluating the proposed advisory
agreement, the Board requested and received information from AIM to assist in
its deliberations. The Board considered various matters in determining the
reasonableness and fairness of the proposed changes in the current advisory
agreement with respect to each fund. In doing so, the Board considered the fact
that the changes (i) would not result in any changes in the persons providing
investment advisory services to the funds; (ii) would not result in any changes
to the types or level of services provided by AIM to the funds (other than to
have AIM provide certain additional services if a fund engages in securities
lending); (iii) would not result in any changes to the advisory fees payable by
the funds (other than to permit AIM's receipt of fees in connection with
securities lending; (iv) would clarify the terms under which AIM will provide
investment advisory services to the funds; and (v) would omit outdated, or
otherwise unnecessary, provisions from the new advisory agreement. After
considering these matters, the Board concluded that it is in the best interests
of the funds and their shareholders to approve the new advisory agreement.
The Board reached its conclusion after careful discussion and analysis. The
Board believes that it has carefully and thoroughly examined the pertinent
issues and alternatives. In recommending that you approve the proposed advisory
agreement, the independent directors have considered what they believe to be in
your best interests. In so doing, they were advised by independent counsel,
retained by the independent directors and paid for by the company, as to the
nature of the matters to be considered and the standards to be used in reaching
their decision.
WHEN WILL PROPOSAL 3 BE IMPLEMENTED?
If approved, the new advisory agreement will become effective on May 24,
2000 and will expire, unless renewed, on or before June 30, 2001. If
shareholders do not approve the proposed advisory agreement with respect to a
fund, the current advisory agreement will continue in effect for such fund.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 3?
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
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PROPOSALS 4(a) THROUGH 4(m): CHANGES TO THE FUNDAMENTAL INVESTMENT RESTRICTIONS
OF EACH FUND
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve changing your fund's investment
restrictions. The Board is asking you to vote on these changes because the
investment restrictions described below are fundamental and shareholders must
approve any change.
Pursuant to the 1940 Act, each fund has adopted fundamental restrictions
covering certain types of investment practices, which may be changed only with
shareholder approval. Restrictions that a fund has not specifically designated
as being fundamental are considered to be "non-fundamental" and may be changed
by the Board without shareholder approval. In addition to investment
restrictions, the funds operate pursuant to investment objectives and policies.
These objectives and policies govern the investment activities of the funds and
further limit their ability to invest in certain types of securities or engage
in certain types of transactions.
The Board is proposing that you approve changes to your fund's fundamental
investment restrictions. The changes will conform these restrictions to a set of
uniform model restrictions under which most AIM funds will operate. The Board
approved the changes to your fund's fundamental investment restrictions at a
meeting held on February 3, 2000. The current fundamental investment
restrictions for each fund are in Appendix I.
WHAT ARE THE REASONS FOR THE PROPOSED CHANGES TO THE FUNDAMENTAL RESTRICTIONS?
Several of the funds' current fundamental restrictions reflect regulatory,
business or industry conditions, practices or requirements that are no longer
applicable. For example, the National Securities Markets Improvement Act of 1996
(NSMIA) preempted state laws, under which the funds previously were regulated
and which required the adoption of certain restrictions. In addition, other
fundamental restrictions reflect federal regulatory requirements that remain in
effect but are not required to be stated as fundamental, or in some cases even
as non-fundamental, restrictions. Also, as new AIM funds have been created or
acquired during recent years, substantially similar fundamental restrictions
often have been phrased in slightly different ways, sometimes resulting in minor
but unintended differences in effect or potentially giving rise to unintended
differences in interpretation.
Accordingly, the Board has approved changes to certain of the funds'
fundamental restrictions in order to simplify, modernize and make more uniform
those restrictions that are required to be fundamental.
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The Board expects that you will benefit from these changes in a number of
ways. The proposed uniform restrictions will provide the funds with as much
investment flexibility as is possible under the 1940 Act. The Board believes
that eliminating the disparities among the AIM funds' fundamental restrictions
will enhance management's ability to manage efficiently and effectively the
funds' assets in changing regulatory and investment environments. In addition,
by reducing to a minimum those restrictions that can be changed only by
shareholder vote, each fund will be able to avoid the costs and delays
associated with a shareholder meeting if the Board decides to make future
changes to its investment policies.
WHAT ARE THE PROPOSED CHANGES TO THE FUNDAMENTAL RESTRICTIONS?
Each proposed change to the funds' fundamental restrictions is discussed
below. The proposed fundamental investment restrictions will provide the funds
with the ability to operate under new interpretations of the 1940 Act or
pursuant to exemptive relief from the SEC without receiving prior shareholder
approval of operating under such interpretations of exemptions. Even though the
funds will have this flexibility, if the proposed fundamental restrictions are
approved, several new non-fundamental investment restrictions (which will
function as internal operating guidelines) will become effective. AIM must
follow these non-fundamental investment restrictions in managing the funds. Of
course, if circumstances change, the Board can approve changes in the manner in
which a fund is managed.
With respect to each fund and each fundamental or non-fundamental
restriction, if a percentage restriction is adhered to at the time of an
investment or transaction, a later increase or decrease in percentage resulting
from a change in the values of the fund's portfolio securities or the amount of
its total assets will not be considered a violation of the restriction.
PROPOSAL 4(A): CHANGE TO FUNDAMENTAL RESTRICTION ON ISSUER DIVERSIFICATION
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(a) applies to shareholders of all funds except Tax-Exempt Bond.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(a), the existing fundamental restriction on
portfolio diversification for each of Tax-Exempt Cash, Tax-Free Intermediate and
High Income Municipal would be changed to read, as follows:
"The fund is a 'diversified company' as defined in the 1940 Act. The
fund will not purchase the securities of any issuer if, as a result,
the fund would fail to be a diversified company within the meaning of
the
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1940 Act, and the rules and regulations promulgated thereunder, as
such statute, rules and regulations are amended from time to time or
are interpreted from time to time by the SEC staff (collectively, the
1940 Act laws and interpretations) or except to the extent that the
fund may be permitted to do so by exemptive order or similar relief
(collectively, with the 1940 Act laws and interpretations, the 1940
Act laws, interpretations and exemptions). In complying with this
restriction, however, the fund may purchase securities of other
investment companies to the extent permitted by the 1940 Act laws,
interpretations and exemptions."
Discussion:
The proposed changes will permit the funds to take advantage of the 1940
Act laws, interpretations and exemptions in effect from time to time relating to
issuer diversification. The proposed changes would also eliminate minor
inconsistencies in the wording of the funds' current restrictions. For example,
the exceptions for investments in securities of government agencies or of other
investment companies contained in the current diversification restrictions of
the above-referenced funds are not identical. High Income Municipal's
diversification restriction also contains a clarification that the fund will
regard each state and political subdivision, agency or instrumentality, and each
multi-state agency of which such state is a member, as a separate issuer.
Finally, the diversification restriction for Tax-Exempt Cash contains a
reference to a rule applicable to only money market funds.
The Board does not expect this change to have any material impact on the
funds' current operations.
If you approve the proposed change, the following non-fundamental
restriction will become effective for Tax-Free Intermediate, High Income
Municipal and Tax-Exempt Cash:
"In complying with the fundamental restriction regarding issuer
diversification, the fund will not, with respect to 75% of its total
assets (and for AIM Tax-Exempt Cash Fund, with respect to 100% of its
total assets), purchase securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities), if, as a result, (i) more than 5% of
the fund's total assets would be invested in the securities of that
issuer, except as permitted by Rule 2a-7 under the 1940 Act, or (ii)
the fund would hold more than 10% of the outstanding voting securities
of that issuer. The fund may (i) purchase securities of other
investment companies as permitted by Section 12(d)(1) of the 1940 Act
and (ii) invest its assets in securities of other money market funds
and lend money to other investment companies and their series
portfolios that have AIM
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as an investment advisor, subject to the terms and conditions of any
exemptive orders issued by the SEC."
If you approve the proposed change, the following non-fundamental
restriction will become effective for Tax-Free Intermediate, High Income
Municipal and Tax-Exempt Cash:
"For purposes of the Fund's fundamental investment restriction
regarding issuer diversification, the Fund will regard each state and
political subdivision, agency or instrumentality, and each multi-state
agency of which such state is a member, as a separate issuer."
PROPOSAL 4(b): CHANGE TO FUNDAMENTAL RESTRICTION ON BORROWING MONEY AND ISSUING
SENIOR SECURITIES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(b) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(b), the existing fundamental restriction on
issuing senior securities and borrowing money for each of the funds would be
changed to read as follows:
"The fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act laws, interpretations and exemptions."
Discussion:
The 1940 Act establishes limits on the ability of the funds to borrow money
or issue "senior securities," a term that is defined, generally, to refer to
obligations that have a priority over the company's shares with respect to the
distribution of its assets or the payment of dividends. Currently, the
fundamental restriction on borrowing money for the funds is more limiting than
required by the 1940 Act. In addition, the current fundamental restriction on
issuing senior securities does not explicitly take advantage of the 1940 Act,
interpretations and exemptions.
The proposed changes would make the funds' restriction on borrowing money
or issuing senior securities consistent and no more limiting than required by
the 1940 Act. The proposed changes will also permit the funds to take advantage
of the 1940 Act laws, interpretations and exemptions in effect from time to time
relating to permitted borrowings and issuances of senior securities. The Board
believes that changing the funds' fundamental restrictions in this manner will
provide flexibility for future contingencies. However, the Board does not expect
this change to have any material impact on the funds' current
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operations. Therefore, if you approve the proposed change, the following non-
fundamental restriction will become effective:
"In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the fund may borrow money in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The fund may
borrow from banks, broker/dealers or other investment companies or
their series portfolios that have AIM or an affiliate of AIM as an
investment advisor (an AIM fund). The fund may not borrow for
leveraging, but may borrow for temporary or emergency purposes, in
anticipation of or in response to adverse market conditions, or for
cash management purposes. The fund may not purchase additional
securities when any borrowings from banks exceed 5% of the fund's
total assets."
PROPOSAL 4(c): ELIMINATION OF FUNDAMENTAL RESTRICTION ON PURCHASING SECURITIES
WHILE BORROWINGS EXCEED 5% OF TOTAL ASSETS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(c) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(c), the funds' existing fundamental
restriction on purchasing securities while borrowings in excess of 5% of the
funds' respective total assets are outstanding would be eliminated.
Discussion:
The 1940 Act does not require that this restriction be fundamental. The
Board believes that eliminating the funds' fundamental restrictions in this
manner will provide flexibility for future contingencies. However, the Board
does not intend the change to affect the funds' current operations.
Consequently, this restriction will continue as a non-fundamental policy.
If you approve this proposal, the following non-fundamental restriction
will become effective:
"The fund may not purchase additional securities when borrowings from
banks exceed 5% of the fund's total assets."
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PROPOSAL 4(d): CHANGE TO FUNDAMENTAL RESTRICTION ON UNDERWRITING SECURITIES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(d) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(d), the existing fundamental restriction on
underwriting securities for each of the funds would be changed to read as
follows:
"The fund may not underwrite the securities of other issuers. This
restriction does not prevent the fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the fund may be considered to be an
underwriter under the Securities Act of 1933."
Discussion:
The proposed changes to this fundamental restriction expand the types of
transactions in which a fund may engage, even if it may be considered to be an
underwriter, and eliminate minor differences in the wording of the funds'
current restriction on underwriting securities. Otherwise, the proposed
restriction is substantially similar to the funds' current investment
restriction.
PROPOSAL 4(e): CHANGE TO FUNDAMENTAL RESTRICTION ON INDUSTRY CONCENTRATION
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(e) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(e), the existing fundamental restriction on
industry concentration for each of the funds would be changed to read as
follows:
"The fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940
Act laws, interpretations and exemptions) of its investments in the
securities of issuers primarily engaged in the same industry. This
restriction does not limit the fund's investments in (i) obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, (ii) tax-exempt obligations issued by governments
or political subdivisions of governments, or (iii) with respect to AIM
Tax-Exempt Cash Fund, bank instruments. In complying with this
restriction, the fund will not
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consider a bank-issued guaranty or financial guaranty insurance as a
separate security."
Discussion:
The proposed changes to the funds' fundamental restriction on concentration
would eliminate minor inconsistencies in the wording of the funds' current
restrictions on concentration. They also clarify that this restriction does not
apply to investments in bank instruments and that for industry concentration
purposes, the funds will not consider bank-issued guaranty or financial guaranty
insurance as a separate security. Finally, the proposed changes will permit the
funds to take advantage of 1940 Act laws, interpretations and exemptions in
effect from time to time relating to concentration issues.
If you approve the proposed change, the following non-fundamental
restriction will become effective for each fund:
"In complying with the fundamental restriction regarding industry
concentration, the fund may invest up to 25% of its total assets in
the securities of issuers whose principal business activities are in
the same industry."
Each of Tax-Exempt Cash Fund and Tax-Free Intermediate Fund will also
maintain three non-fundamental policies regarding concentration of investments
that are currently in effect: (1) neither will invest 25% or more of its assets
in securities whose issuers are located in the same state; (2) neither will
invest 25% or more of its assets in securities the interest upon which is paid
from revenues of similar type projects; and (3) neither will invest 25% or more
of its assets in industrial development bonds.
Tax-Exempt Bond Fund of Connecticut also will maintain the following
non-fundamental policies regarding concentration of investments that are
currently in effect: (1) it will invest 25% or more of its assets in securities
whose issuers are located in the state of Connecticut; (2) it may invest 25% or
more of its assets in securities the interest upon which is paid from revenues
of similar type projects; and (3) it will not invest 25% or more of its assets
in industrial development bonds.
The policy described in (2) above for each of Tax-Exempt Cash Fund, Tax-
Free Intermediate Fund and Tax-Exempt Bond Fund of Connecticut does not apply,
however, if the securities are subject to a guarantee. For securities subject to
a guarantee, the fund does not intend to purchase any such security if, after
giving effect to the purchase, 25% or more of the fund's assets would be
invested in securities issued or guaranteed by entities in a particular
industry. Securities issued or guaranteed by a bank or subject to financial
guaranty insurance are not subject to the limitations set forth in the preceding
sentence.
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High Income Municipal also will maintain its non-fundamental policies
currently in effect regarding concentration of investments: (1) it may invest
25% or more of the value of its total assets in municipal securities issued by
entities having similar characteristics, such as (a) securities the issuers of
which are located in the same geographic area or where issuers' interest
obligations are paid from revenues of similar projects, or (b) industrial
development revenue bonds, including pollution control revenue bonds, housing
finance agency bonds or hospital bonds. The fund may not, however, invest 25% or
more of the value of its total assets in industrial development revenue bonds,
including pollution control revenue bonds, issued for companies in the same
industry. The fund may, but does not currently intend to, invest 25% or more of
the value of its total assets in securities whose issuers are located in any of
the following states: Arizona, California, Colorado, Connecticut, Florida,
Illinois, Michigan, Massachusetts, New Hampshire, New Jersey, New York, Ohio,
Pennsylvania and Texas.
PROPOSAL 4(f): CHANGE TO FUNDAMENTAL RESTRICTION ON PURCHASING OR SELLING REAL
ESTATE
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(f) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(f), the existing fundamental restriction on
real estate investments for each of the funds would be changed to read as
follows:
"The fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments.
This restriction does not prevent the fund from investing in issuers
that invest, deal, or otherwise engage in transactions in real estate
or interests therein, or investing in securities that are secured by
real estate or interests therein."
Discussion:
The proposed changes to this fundamental restriction would clarify the
types of real estate-related securities that are permissible investments for
each fund. In addition, the proposed restriction includes an exception that
permits each fund to hold real estate acquired as a result of ownership of
securities or other interests. This exception is broader and more comprehensive
than the equivalent exception contained in the funds' existing fundamental
restrictions.
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PROPOSAL 4(g): CHANGE TO FUNDAMENTAL RESTRICTION ON PURCHASING OR SELLING
COMMODITIES OR COMMODITIES FUTURES CONTRACTS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(g) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(g), the existing fundamental restriction on
investing in commodities for each of the funds would be changed to read as
follows:
"The fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or
other instruments. This restriction does not prevent the fund from
engaging in transactions involving futures contracts and options
thereon or investing in securities that are secured by physical
commodities."
Discussion:
The proposed changes to this fundamental restriction are intended to ensure
that the funds will have the maximum flexibility to enter into hedging and other
transactions utilizing financial contracts and derivative products when doing so
is permitted by the funds' other investment policies and would eliminate minor
differences in the wording of the funds' current restriction on investing in
commodities. Furthermore, the proposed restrictions would allow the funds to
respond to the rapid and continuing development of derivative products.
In addition, the proposed restriction contains an exception that is not in
the current restrictions of Tax-Exempt Cash, Tax-Free Intermediate or Tax-Exempt
Bond which allows the funds to invest in futures, contracts and options or in
securities secured by physical commodities. This exception is also broader than
the similar exception contained in High Income Municipal's current restriction.
If you approve the proposed change, each fund will have the ability to
invest in futures contracts and options thereon and in securities secured by
physical commodities. Tax-Exempt Cash and Tax-Free Intermediate do not currently
intend to engage in transactions involving futures contracts and options thereon
or invest in securities that are secured by physical commodities.
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PROPOSAL 4(h): CHANGE TO FUNDAMENTAL RESTRICTIONS ON MAKING LOANS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(h) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(h), the existing fundamental restrictions
on making loans for each of the funds would be changed to read as follows:
"The fund may not make personal loans or loans of its assets to
persons who control or are under common control with the fund, except
to the extent permitted by 1940 Act laws, interpretations and
exemptions. This restriction does not prevent the fund from, among
other things, purchasing debt obligations, entering into repurchase
agreements, loaning its assets to broker-dealers or institutional
investors, or investing in loans, including assignments and
participation interests."
Discussion:
Each of the funds are subject to two fundamental investment restrictions
concerning loans. The proposed changes would consolidate these two restrictions
into a single fundamental restriction and would eliminate minor differences in
the wording of the funds' current restrictions on making loans. In addition, the
proposed restriction more completely describes the various types of debt
instruments available in the financial markets that the funds may purchase that
do not constitute the making of a loan, and broadens the potential circumstances
under which the funds could make loans.
If you approve the proposed change, the following non-fundamental
investment restriction will become effective for each of the funds:
"In complying with the fundamental restriction with regard to making
loans, the fund may lend up to 33 1/3% of its total assets and may
lend money to another AIM fund, on such terms and conditions as the
SEC may require in an exemptive order."
PROPOSAL 4(i): APPROVAL OF A NEW FUNDAMENTAL INVESTMENT RESTRICTION ON INVESTING
ALL OF EACH FUND'S ASSETS IN AN OPEN-END FUND
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(i) applies to shareholders of all funds.
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WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(i), the following fundamental investment
restriction on investing in an open-end fund would be added for each of the
funds:
"The fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objectives, policies and restrictions as the
fund."
Discussion:
The Board has approved, subject to shareholder approval, the adoption of a
new fundamental investment restriction that would permit each of the funds to
invest its assets in another open-end fund. At present the Board has not
considered any specific proposal to authorize a fund to invest its assets in
this fashion. The Board will authorize investing a fund's assets in another
open-end fund only if the Board first determines that is in the best interests
of such fund and its shareholders.
The purpose of this proposal is to enhance the flexibility of each fund and
permit it to take advantage of potential efficiencies in the future available
through investment in another open-end fund. This structure allows several funds
with different distribution pricing structures, but the same investment
objective, policies and restrictions, to combine their investments in a pooled
fund instead of managing them separately. This could lower the costs of
obtaining portfolio execution, custodial, investment advisory and other services
for the fund and could assist in portfolio management to the extent the cash
flows of each investment vehicle offset each other or provide for less volatile
asset changes. Of course, such benefits may not occur.
At present, certain of the fundamental investment restrictions of each fund
may prevent it from investing all of its assets in another registered investment
company and would require a vote of fund shareholders before such a structure
could be adopted. To avoid the costs associated with a subsequent shareholder
meeting, the Board recommends that you vote to permit the assets of your fund to
be invested in an open-end fund, without a further vote of shareholders, but
only if the Board subsequently determines that such action is in the best
interests of your fund and its shareholders. If you approve this proposal, the
fundamental restrictions of your fund would be changed to permit such
investment.
A fund's methods of operation and shareholder services would not be
materially affected by its investment in an open-end fund, except that the
assets of the fund might be managed as part of a larger pool. If a fund invested
all of its assets in an open-end fund, it would hold only investment securities
issued by the open-end fund, and the open-end fund would invest directly in
individual
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securities of other issuers. The fund otherwise would continue its normal
operations. The Board would retain the right to withdraw the fund's investments
from the open-end fund, and the fund then would resume investing directly in
individual securities of other issuers as it does currently.
AIM may benefit from the use of this structure if, as a result, overall
assets under management are increased (since management fees are based on
assets). Also, AIM's expense of providing investment and other services to the
funds may be reduced.
If you approve the proposed restriction, each fund will have the ability to
invest all of its assets in another investment company. Because the funds do not
currently intend to do so, each fund will implement the following
non-fundamental investment restriction:
"Notwithstanding the fundamental investment restriction with regard to
investing all assets in an open-end fund, the fund may not invest all
of its assets in the securities of a single open-end management
investment company with the same fundamental investment objectives,
policies and limitations as the fund."
PROPOSAL 4(j): ELIMINATION OF FUNDAMENTAL RESTRICTION ON MARGIN TRANSACTIONS,
SHORT SALES OF SECURITIES AND PUTS, CALLS, STRADDLES, SPREADS OR COMBINATIONS
THEREOF
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(j) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(j), the existing fundamental restriction
on: (a) engaging in margin transactions, (b) engaging in short sales of
securities and (c) writing, purchasing or selling puts, calls, straddles,
spreads or combinations thereof for each of the funds (other than High Income
Municipal, which is not currently prohibited from the activities described in
clause (c)) would be eliminated.
Discussion:
The funds are not required to have a fundamental restriction on margin
transactions or on investing in puts, calls, straddles, spreads or combinations
thereof. In order to maximize the funds' flexibility in this area, the Board
believes that the funds' restriction on margin transactions and such investments
should be deleted. This proposal is not applicable to High Income Municipal with
respect
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to puts, calls, straddles, spreads or combinations thereof because it currently
has no such fundamental restriction.
If shareholders approve Proposal 4(j), each of High Income Municipal,
Tax-Exempt Bond and Tax-Free Intermediate will not purchase any security on
margin, except that each may obtain such short-term credits as may be necessary
for the clearance of purchases and sales of portfolio securities. The payment by
any of those funds of initial or variation margin in connection with futures or
related options transactions will not be considered the purchase of a security
on margin. Tax-Exempt Cash will not purchase any security on margin, except that
it may obtain such short-term credits as may be necessary for the clearance of
purchases and sales of portfolio securities. The Board does not expect the
elimination of the fundamental restrictions regarding margin transactions to
have any material impact on the funds' current operations.
As for the funds' current fundamental restrictions on short sales, those
restrictions prohibit all short sales regardless of whether they are against the
box. A short sale "against the box" means that a fund contemporaneously owns or
has the right to acquire at no additional cost securities identical to, or
convertible into or exchangeable for, those securities sold short. Elimination
of the funds' fundamental restrictions on short sales against the box would make
the funds' restrictions in this area no more limiting than required by the 1940
Act. In addition, the Board believes that the funds' fundamental restrictions on
short sales not against the box is unnecessary and should be eliminated because
the SEC considers such short sales to be "senior securities." As such, they
would be covered under the fundamental restriction on issuing senior securities
that shareholders are being asked to vote on in Proposal 4(b).
If shareholders approve Proposal 4(j), each of High Income, Tax-Exempt Bond
and Tax-Free Intermediate will not make short sales of securities or maintain a
short position unless at all times when a short position is open, the fund owns
an equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold short. In no
event will any of those funds deposit or pledge more than 10% of its total
assets as collateral for such short sales at any one time. Tax-Exempt Cash will
not make short sales of securities or maintain short positions.
If the shareholders approve Proposal 4(j), each of Tax-Exempt Bond and
Tax-Free Intermediate will not invest in puts, calls, straddles, spreads or any
combination thereof, except, however, that the fund may purchase and sell
options on financial futures contracts and may sell covered call options. Tax-
Exempt Cash will not invest in puts, calls, straddles, spreads or any
combination thereof.
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<PAGE> 45
PROPOSAL 4(k): ELIMINATION OF FUNDAMENTAL RESTRICTION ON PLEDGING, MORTGAGING
OR HYPOTHECATING ASSETS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(k) applies to shareholders of all funds.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(k), the existing fundamental restriction on
pledging, mortgaging or hypothecating assets for each of the funds would be
eliminated.
Discussion:
The funds are not required to have a fundamental restriction with respect
to the pledging, mortgaging or hypothecating of assets. In order to maximize the
funds' flexibility in this area, the Board believes that the funds' restriction
on pledging assets should be eliminated. The Board does not expect this change
to have any impact on the funds' operations. Although the funds would have
greater flexibility to pledge, mortgage or hypothecate their assets, they have
no present intention of doing so.
PROPOSAL 4(l): CHANGE TO FUNDAMENTAL INVESTMENT RESTRICTION ON INVESTING IN
TAX-EXEMPT SECURITIES
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(l) applies to shareholders of Tax-Free Intermediate.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(l), the existing fundamental restriction on
investing in tax-exempt securities for Tax-Free Intermediate would be
eliminated.
Discussion:
Tax-Free Intermediate is not required to have a fundamental restriction
with respect to investing in tax-exempt securities. In order to maximize the
fund's flexibility in this area, the Board believes that the fund's restriction
on investing in tax-exempt securities should be eliminated and replaced with a
non-fundamental restriction to the same effect. The Board does not expect this
change to have any material impact on the fund's current operations.
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<PAGE> 46
If shareholders approve Proposal 4(h), the following non-fundamental policy
will become effective for Tax-Free Intermediate:
"The fund will invest its assets so that 80% of the fund's assets will
be invested in securities that generate interest that is exempt from
federal income taxes."
PROPOSAL 4(m): ELIMINATION OF FUNDAMENTAL RESTRICTION ON PURCHASING PRIVATE
ACTIVITY BONDS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 4(m) applies only to shareholders of Tax-Free Intermediate.
WHAT IS THE PROPOSED CHANGE?
Upon the approval of Proposal 4(m), the existing fundamental restriction on
purchasing private activity bonds for the fund would be eliminated.
Discussion:
There is no legal requirement that Tax-Free Intermediate have this
fundamental restriction. In order to maximize its flexibility in this area, the
Board believes that this restriction should be eliminated. The Board does not
expect this change to have any material impact on any fund's current operations.
This proposal is not applicable to the other funds because they currently
have no fundamental restriction concerning private activity bonds.
If you approve the proposed elimination, the following non-fundamental
investment policy will become effective for Tax-Free Intermediate:
"The Fund will seek to avoid the purchase of "private activity bonds"
the interest on which could give rise to an alternative minimum tax
liability for individuals and other noncorporate shareholders."
WHEN WILL PROPOSALS 4(A) THROUGH 4(M) BE IMPLEMENTED?
If you approve each of the above proposals, the new fundamental
restrictions will replace the fundamental investment restrictions for the
specified funds. Accordingly, the proposed fundamental restrictions will become
the only fundamental investment restrictions under which the funds will operate.
If approved, the above restrictions may not be changed with respect to your fund
without the approval of the holders of a majority of your fund's outstanding
voting securities (as defined in the 1940 Act). The Board anticipates that these
proposals, if approved, will be implemented on May 24, 2000.
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<PAGE> 47
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSALS 4(A) THROUGH 4(M)?
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 4(a) THROUGH 4(m).
PROPOSAL 5: CHANGING THE INVESTMENT OBJECTIVES OF HIGH INCOME MUNICIPAL AND
TAX-EXEMPT CASH SO THAT THEY ARE NON-FUNDAMENTAL
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 5 applies to shareholders of High Income Municipal and Tax-Exempt
Cash.
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve making your fund's investment
objective non-fundamental rather than fundamental. The Board is asking you to
vote on this change because the investment objective of your fund presently is
fundamental and shareholders must approve any change.
The current investment objective of your fund is in Appendix J. By making
this objective non-fundamental, the Board may change it as it deems appropriate,
without seeking a shareholder vote. The Board does not anticipate changing the
investment objective of your fund at the present time.
The Board expects that you will benefit from this proposed change because
it will have the ability to respond more quickly to new developments and
changing trends in the marketplace without incurring the time and the costs of a
shareholder vote. This should make your fund more competitive among its peers.
WHEN WILL PROPOSAL 5 BE IMPLEMENTED?
The Board anticipates that Proposal 5, if approved, will be implemented on
May 24, 2000.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 5?
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
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PROPOSAL 6: CHANGING INVESTMENT OBJECTIVES OF AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT AND TAX-FREE INTERMEDIATE AND MAKING THEM NON-FUNDAMENTAL
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 6 applies only to shareholders of Tax-Exempt Bond and Tax-Free
Intermediate.
WHAT AM I BEING ASKED TO APPROVE?
The Board recommends that you approve changing your fund's investment
objective by making it non-fundamental and by eliminating from the investment
objective the types of securities your fund proposes to purchase in seeking to
achieve its objective. The Board is asking you to vote on these changes because
the investment objective of your fund presently is fundamental and shareholders
must approve any change.
The current investment objective of your fund is in Appendix J. By making
this objective non-fundamental, the Board may change it as it deems appropriate,
without seeking a shareholder vote. The Board does not anticipate making
additional changes to the investment objective of your fund at the present time.
Your fund's current investment objective includes the types of securities
that your fund proposes to purchase to achieve its objective. The Board believes
that the basic investment objective of your fund should be separate from the
types of securities your fund may purchase to achieve its objective. This change
will permit the Board to change the types of securities your fund may purchase
without also changing the fund's investment objective.
WHAT ARE THE PROPOSED CHANGES?
Tax-Exempt Bond
If the shareholders of Tax-Exempt Bond approve this proposal, the
investment objective of Tax-Exempt Bond, which will be non-fundamental, will
read as follows:
"The fund's investment objective is to earn a high level of current
income exempt from federal taxes and Connecticut taxes."
Tax-Exempt Bond will also retain the investment policy of investing in at
least 80% of its net assets in municipal securities.
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Tax-Free Intermediate
If the shareholders of Tax-Free Intermediate approve this proposal, the
investment objective of Tax-Free Intermediate, which will be non-fundamental,
will read as follows:
"The fund's investment objective is to generate as high a level of
tax-exempt income as is consistent with preservation of capital."
Tax-Free Intermediate will also retain the investment policy of investing
in high-quality, intermediate-term municipal securities having a maturity of ten
and one-half years or less.
The Board expects that you will benefit from these proposed changes because
it will have the ability to respond more quickly to new developments and
changing trends in the marketplace without incurring the time and the costs of a
shareholder vote. This should make your fund more competitive among its peers.
WHEN WILL PROPOSAL 6 BE IMPLEMENTED?
The Board anticipates that Proposal 6, if approved, will be implemented on
May 24, 2000.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 6?
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
PROPOSAL 7: RATIFICATION OF SELECTION OF KPMG LLP AS INDEPENDENT ACCOUNTANTS
WHICH FUNDS' SHAREHOLDERS WILL VOTE ON THIS PROPOSAL?
Proposal 7 applies to all shareholders of all funds.
WHAT AM I BEING ASKED TO APPROVE?
The Board has selected KPMG LLP as independent accountants for each fund
for its fiscal year ending March 31, 2000. As each fund's independent
accountants, KPMG LLP will examine and verify the accounts and securities of
that fund and report on them to the Board and to that fund's shareholders. The
Board's selection will be submitted for your ratification at the meeting.
WHY HAS THE BOARD SELECTED KPMG LLP AS THE INDEPENDENT ACCOUNTANTS?
KPMG was selected primarily on the basis of its expertise as auditors of
investment companies, its independence from AIM and its affiliates, the quality
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<PAGE> 50
of its audit services, and the competitiveness of the fees charged for these
services. KPMG LLP also serves as independent accountants for some of the other
AIM funds.
WILL A REPRESENTATIVE FROM KPMG LLP BE AVAILABLE FOR QUESTIONS?
The Board expects that a representative of KPMG LLP will be present at the
meeting. The representative will have an opportunity to make a statement should
he or she desire to do so and will be available to respond to shareholders'
questions.
WHAT IS THE BOARD'S RECOMMENDATION ON PROPOSAL 7?
YOUR BOARD, INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
GENERAL INFORMATION
WHO ARE THE EXECUTIVE OFFICERS OF THE COMPANY?
Information about the executive officers of the company is in Appendix K.
WHAT IS THE SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN HOLDERS?
Information about the ownership of each class of each fund's shares by the
directors and the executive officers of the company and by 5% holders of each
class is in Appendix L.
WHO ARE THE INVESTMENT ADVISOR, ADMINISTRATOR AND PRINCIPAL UNDERWRITER OF THE
FUNDS?
A I M Advisors, Inc., whose principal address is 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173, serves as the investment advisor and
administrator for the funds.
A I M Distributors, Inc., whose principal address is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173, serves as the principal underwriter for
each of the funds.
HAS THE COMPANY HIRED A PROXY SOLICITOR?
The company has engaged the services of Shareholder Communications
Corporation (SCC) to assist it in soliciting proxies for the meeting. The
company estimates that the aggregate cost of SCC's services will be
approximately $[ ]. The company will bear the cost of soliciting proxies.
The company expects to solicit proxies principally by mail, but either the
company or SCC may
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also solicit proxies by telephone, facsimile, the Internet or personal
interview. The company may also reimburse firms and others for their expenses in
forwarding solicitation materials to the beneficial owners of shares of the
funds.
HOW CAN I SUBMIT A PROPOSAL?
As a general matter, the funds do not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of a fund, you should send such proposal to the company at the
address set forth on the first page of this proxy statement. To be considered
for presentation at a shareholders' meeting, the company must receive proposals
a reasonable time before proxy materials are prepared relating to that meeting.
Your proposal also must comply with applicable law.
OTHER MATTERS
The Board does not know of any matters to be presented at the meeting other
than those set forth in this proxy statement. If any other business should come
before the meeting, the persons named in the accompanying proxy will vote
thereon in accordance with their best judgment.
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APPENDIX A
SHARES OF AIM TAX-EXEMPT FUNDS, INC.
OUTSTANDING ON FEBRUARY 18, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES
OUTSTANDING ON
NAME OF FUND (CLASS) FEBRUARY 18, 2000
- -------------------- -----------------
<S> <C>
AIM High Income Municipal Fund
Class A................................................... [ ]
Class B................................................... [ ]
Class C................................................... [ ]
AIM Tax-Exempt Cash Fund
Class A................................................... [ ]
AIM Tax-Exempt Bond Fund of Connecticut
Class A................................................... [ ]
AIM Tax-Free Intermediate Fund
Class A................................................... [ ]
</TABLE>
A-1
<PAGE> 53
APPENDIX B
AIM TAX-EXEMPT FUNDS, INC.
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
December 7, 1999, is entered into by and between AIM Tax-Exempt Funds, Inc., a
Maryland corporation (the "Company"), acting on its own behalf and on behalf of
each of its series portfolios, all of which are identified on Schedule A to this
Agreement, and AIM Tax-Exempt Funds, a Delaware business trust (the "Trust"),
acting on its own behalf and on behalf of each of its series portfolios, all of
which are identified on Schedule A to this Agreement.
BACKGROUND
The Company is organized as a series management investment company and is
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940. The Company currently publicly offers shares of common
stock representing interests in four separate series portfolios. Each of these
series portfolios is listed on Schedule A and is referred to in this Agreement
as a "Current Fund."
The Board of Directors of the Company has designated multiple classes of
common stock that represent interests in each Current Fund. Each of these
classes is listed on Schedule B and is referred to in this Agreement as a
"Current Fund Class."
The Company desires to change its form and place of organization by
reorganizing as the Trust. In anticipation of such reorganization (the
"Reorganization"), the Board of Trustees of the Trust has established four
series portfolios corresponding to the Current Funds (each a "New Fund"), and
has designated multiple classes of shares of beneficial interest in each New
Fund corresponding to the Current Fund Classes (each a "New Fund Class").
Schedule A lists the New Funds and Schedule B lists the New Fund Classes.
The Reorganization will occur through the transfer of all of the assets of
each Current Fund to the corresponding New Fund. In consideration of its receipt
of these assets, each New Fund will assume all of the liabilities of the
corresponding Current Fund, and will issue to the Current Fund shares of
beneficial interest in the New Fund ("New Fund Shares"). New Fund Shares
received by the Current Fund will have an aggregate net asset value equal to the
aggregate net asset value of the shares of the Current Fund immediately prior to
the Reorganization (the "Current Fund Shares"). The Current Fund will then
distribute the New Fund Shares it has received to its shareholders.
The Reorganization is subject to, and shall be effected in accordance with,
the terms of this Agreement. This Agreement is intended to be and is adopted by
B-1
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the Company, on its own behalf and on behalf of the Current Funds, and by the
Trust, on its own behalf and on behalf of the New Funds, as a Plan of
Reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
Any capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the preamble or background to this Agreement. In addition,
the following terms shall have the following meanings:
1.1 "Assets" shall mean all assets including, without limitation, all
cash, cash equivalents, securities, receivables (including interest and
dividends receivable), claims and rights of action, rights to register shares
under applicable securities laws, books and records, deferred and prepaid
expenses shown as assets on a Current Fund's books, and other property owned by
a Current Fund at the Effective Time.
1.2 "Closing" shall mean the consummation of the transfer of assets,
assumption of liabilities and issuance of shares described in Sections 2.1 and
2.2 of this Agreement, together with the related acts necessary to consummate
the Reorganization, to occur on the date set forth in Section 3.1.
1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "Current Fund" shall mean each of the Company's four series
portfolios.
1.5 "Current Fund Class" shall mean each class of common stock of the
Company representing an interest in a Current Fund.
1.6 "Current Fund Shares" shall mean the shares of the Current Funds
outstanding immediately prior to the Reorganization.
1.7 "Effective Time" shall have the meaning set forth in Section 3.1.
1.8 "Liabilities" shall mean all liabilities of a Current Fund including,
without limitation, all debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
determinable at the Effective Time, and whether or not specifically referred to
herein.
1.9 "New Fund" shall mean each of the series portfolios of the Trust, one
of which shall correspond to one of the Current Funds as shown on Schedule A.
1.10 "New Fund Class" shall mean each class representing an interest in a
New Fund, one of which shall correspond to one of the Current Fund Classes as
shown on Schedule B.
B-2
<PAGE> 55
1.11 "New Fund Shares" shall mean those shares of beneficial interest in a
New Fund, issued to a Current Fund in consideration of the New Fund's receipt of
the Current Fund's Assets.
1.12 "Registration Statement" shall have the meaning set forth in Section
5.4
1.13 "RIC" shall mean a regulated investment company under Subchapter M of
the Code.
1.14 "SEC" shall mean the Securities and Exchange Commission.
1.15 "Shareholder(s)" shall mean a Current Fund's shareholder(s) of
record, determined as of the Effective Time.
1.16 "Shareholders' Meeting" shall have the meaning set forth in Section
5.1.
1.17 "Transfer Agent" shall have the meaning set forth in Section 2.2
1.18 "1940 Act" shall mean the Investment Company Act of 1940, as amended.
2. PLAN OF REORGANIZATION.
2.1 The Company agrees, on behalf of each Current Fund, to assign, sell
convey, transfer and deliver all of the Assets of each Current Fund to its
corresponding New Fund. The Trust, on behalf of the each New Fund agrees in
exchange therefor:
(a) to issue and deliver to the Current Fund the number of full and
fractional (rounded to the third decimal place) New Fund Shares for each
New Fund Class designated in Schedule B equal to the number of full and
fractional Current Fund Shares for each corresponding Current Fund Class
designated in Schedule B; and
(b) to assume all of the Current Fund's Liabilities.
Such transactions shall take place at the Closing.
2.2 At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Shares issued pursuant to Section 5.2 shall be
redeemed by each New Fund for $1.00 and (b) each Current Fund shall distribute
the New Fund Shares received by it pursuant to Section 2.1 to the Current Fund's
Shareholders in exchange for such Shareholders' Current Fund Shares. Such
distribution shall be accomplished through opening accounts, by the transfer
agent for the Trust (the "Transfer Agent"), on each New Fund's share transfer
books in the Shareholders' names and transferring New Fund Shares to such
accounts. Each Shareholder's account shall be credited with the respective pro
rata number of full and fractional (rounded to the third decimal place) New
B-3
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Fund Shares of each New Fund Class due that Shareholder. All outstanding
Current Fund Shares, including those represented by certificates, shall
simultaneously be canceled on each Current Fund's share transfer books. The
Trust shall not issue certificates representing the New Fund Shares in
connection with the Reorganization. However, certificates representing Current
Fund Shares shall represent New Fund Shares after the Reorganization.
2.3 As soon as reasonably practicable after distribution of the New Fund
Shares pursuant to Section 2.2, the Company shall dissolve its existence as
corporation under Maryland law.
2.4 Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder of the Current Fund Shares exchanged
therefor shall be paid by the person to whom such New Fund Shares are to be
issued, as a condition of such transfer.
2.5 Any reporting responsibility of the Company or each Current Fund to a
public authority is, and shall remain its responsibility up to and including the
date on which it is terminated.
3. CLOSING.
3.1 The Closing shall occur at the principal office of the Company on May
26, 2000, or on such other date and at such other place upon which the parties
may agree. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the Company's and the Trust's close of business on the date
of the Closing or at such other time as the parties may agree (the "Effective
Time").
3.2 The Company or its fund accounting agent shall deliver to the Trust at
the Closing, a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities, transferred by the Current Funds to
the New Funds, as reflected on the New Funds' books immediately following the
Closing, does or will conform to such information on the Current Funds' books
immediately before the Closing. The Company shall cause the custodian for each
Current Fund to deliver at the Closing a certificate of an authorized officer of
the custodian stating that (a) the Assets held by the custodian will be
transferred to each corresponding New Fund at the Effective Time and (b) all
necessary taxes in conjunction with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made.
3.3 The Company shall deliver to the Trust at the Closing a list of the
names and addresses of each Shareholder of each Current Fund and the number of
outstanding Current Fund Shares of the Current Fund Class owned by each
Shareholder, all as of the Effective Time, certified by the Company's Secretary
or Assistant Secretary. The Trust shall cause the Transfer Agent to deliver at
the
B-4
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Closing a certificate as to the opening on each New Fund's share transfer books
of accounts in the Shareholders' names. The Trust shall issue and deliver a
confirmation to the Company evidencing the New Fund Shares to be credited to
each corresponding Current Fund at the Effective Time or provide evidence
satisfactory to the Company that such shares have been credited to each Current
Fund's account on such books. At the Closing, each party shall deliver to the
other such bills of sale, checks, assignments, stock certificates, receipts, or
other documents as the other party or its counsel may reasonably request.
3.4 The Company and the Trust shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES.
4.1 The Company represents and warrants on its own behalf and on behalf of
each Current Fund as follows:
(a) The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and its Charter
is on file with the Maryland Department of Assessments and Taxation;
(b) The Company is duly registered as an open-end series management
investment company under the 1940 Act, and such registration is in full
force and effect;
(c) Each Current Fund is a duly established and designated series of
the Company;
(d) At the Closing, each Current Fund will have good and marketable
title to its Assets and full right, power, and authority to sell, assign,
transfer, and deliver its Assets free of any liens or other encumbrances;
and upon delivery and payment for the Assets, the corresponding New Fund
will acquire good and marketable title to the Assets;
(e) The New Fund Shares are not being acquired for the purpose of
making any distribution thereof, other than in accordance with the terms
hereof;
(f) Each Current Fund is a "fund" as defined in Section 851(g)(2) of
the Code; each Current Fund qualified for treatment as a RIC for each past
taxable year since it commenced operations and will continue to meet all
the requirements for such qualification for its current taxable year (and
the Assets will be invested at all times through the Effective Time in a
manner that ensures compliance with the foregoing); each Current Fund has
no earnings and profits accumulated in any taxable year in which the
provisions
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of Subchapter M did not apply to it; and each Current Fund has made all
distributions for each such past taxable year that are necessary to avoid
the imposition of federal excise tax or has paid or provided for the
payment of any excise tax imposed for any such year;
(g) There is no plan or intention of the Shareholders who individually
own 5% or more of any Current Fund Shares and, to the best of the Company's
knowledge, there is no plan or intention of the remaining Shareholders to
redeem or otherwise dispose of any New Fund Shares to be received by them
in the Reorganization. The Company does not anticipate dispositions of
those shares at the time of or soon after the Reorganization to exceed the
usual rate and frequency of redemptions of shares of the Current Fund as a
series of an open-end investment company. Consequently, the Company is not
aware of any plan that would cause the percentage of Shareholder interests,
if any, that will be disposed of as a result of or at the time of the
Reorganization will be one percent (1%) or more of the shares of the
Current Fund outstanding as of the Effective Time;
(h) The Liabilities were incurred by the Current Funds in the ordinary
course of their business and are associated with the Assets;
(i) The Company is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of Section 368(a)(3)(A) of the Code;
(j) As of the Effective Time, no Current Fund will have outstanding
any warrants, options, convertible securities, or any other type of rights
pursuant to which any person could acquire Current Fund Shares except for
the right of investors to acquire its shares at net asset value in the
normal course of its business as an open-end diversified management
investment company operating under the 1940 Act;
(k) At the Effective Time, the performance of this Agreement shall
have been duly authorized by all necessary action by the Company's
shareholders; and
(l) Throughout the five-year period ending on the date of the Closing,
each Current Fund will have conducted its historic business within the
meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code
in a substantially unchanged manner;
(m) The fair market value of the Assets of each Current Fund
transferred to the corresponding New Fund will equal or exceed the sum of
the Liabilities assumed by the New Fund plus the amount of Liabilities, if
any, to which the transferred Assets are subject.
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4.2 The Trust represents and warrants on its own behalf, and on behalf of
each New Fund as follows:
(a) The Trust is a business trust duly organized, validly existing,
and in good standing under the laws of the State of Delaware, and its
Certificate of Trust has been duly filed in the office of the Secretary of
State of Delaware;
(b) At the Effective Time, the Trust will succeed to the Company's
registration statement filed under the 1940 Act with the SEC and thus will
become duly registered as an open-end management investment company under
the 1940 Act;
(c) At the Effective Time, each New Fund will be a duly established
and designated series of the Trust;
(d) No New Fund has commenced operations nor will it commence
operations until after the Closing;
(e) Prior to the Effective Time, there will be no issued and
outstanding shares in any New Fund or any other securities issued by the
Trust on behalf of any New Fund, except as provided in Section 5.2;
(f) No consideration other than New Fund Shares (and the New Fund's
assumption of the Liabilities) will be issued in exchange for the Assets in
the Reorganization;
(g) The New Fund Shares to be issued and delivered to the
corresponding Current Fund hereunder will, at the Effective Time, have been
duly authorized and, when issued and delivered as provided herein, will be
duly and validly issued and outstanding shares of the New Fund, fully paid
and non-assessable;
(h) Each New Fund will be a "fund" as defined in Section 851(g)(2) of
the Code and will meet all the requirements to qualify for treatment as a
RIC for its taxable year in which the Reorganization occurs;
(i) The Trust, on behalf of the New Funds, has no plan or intention to
issue additional New Fund Shares following the Reorganization except for
shares issued in the ordinary course of its business as a series of an
open-end investment company; nor does the Trust, on behalf of the New
Funds, have any plan or intention to redeem or otherwise reacquire any New
Fund Shares issued pursuant to the Reorganization, other than in the
ordinary course of its business or to the extent necessary to comply with
its legal obligation under Section 22(e) of the 1940 Act;
(j) Each New Fund will actively continue the corresponding Current
Fund's business in substantially the same manner that the Current Fund
conducted that business immediately before the Reorganization; and no New
Fund has any plan or intention to sell or otherwise dispose of any of the
Assets, except for dispositions made in the ordinary course of its business
or
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dispositions necessary to maintain its qualification as a RIC, although in
the ordinary course of its business the New Fund will continuously review
its investment portfolio (as each Current Fund did before the
Reorganization) to determine whether to retain or dispose of particular
stocks or securities, including those included in the Assets;
(k) There is no plan or intention for any of the New Funds to be
dissolved or merged into another corporation or business trust or "fund"
thereof (within the meaning of section 851(g)(2) of the Code) following the
Reorganization; and
4.3 Each of the Company and the Trust, on its own behalf and on behalf of
each Current Fund or each New Fund, as appropriate, represents and warrants as
follows:
(a) The fair market value of the New Fund Shares of each New Fund
received by each Shareholder will be equal to the fair market value of the
Current Fund Shares of the corresponding Current Fund surrendered in
exchange therefor;
(b) Immediately following consummation of the Reorganization, the
Shareholders will own all the New Fund Shares of each New Fund and will own
such shares solely by reason of their ownership of the Current Fund Shares
of the corresponding Current Fund immediately before the Reorganization;
(c) The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
(d) There is no intercompany indebtedness between a Current Fund and a
New Fund that was issued or acquired, or will be settled, at a discount;
and
(e) Immediately following consummation of the Reorganization, each New
Fund will hold the same assets, except for assets distributed to
shareholders in the course of its business as a RIC and assets used to pay
expenses incurred in connection with the Reorganization, and be subject to
the same liabilities that the corresponding Current Fund held or was
subject to immediately prior to the Reorganization. Assets used to pay (i)
expenses, (ii) all redemptions (other than redemptions at the usual rate
and frequency of the Current Fund as a series of an open-end investment
company), and (iii) distributions (other than regular, normal
distributions), made by a Current Fund after the date of this Agreement
will, in the aggregate, constitute less than one percent (1%) of its net
assets.
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5. COVENANTS
5.1 As soon as practicable after the date of this Agreement, the Company
shall call a meeting of its Shareholders (the "Shareholders Meeting") to
consider and act on this Agreement. The Board of Directors of the Company shall
recommend that Shareholders approve this Agreement and the transactions
contemplated by this Agreement. Approval by Shareholders of this Agreement will
authorize the Company, and the Company hereby agrees, to vote on the matters
referred to in Sections 5.2 and 5.3.
5.2 The Trust's trustees shall authorize the issuance of, and each New
Fund shall issue, prior to the Closing, one New Fund Share in each New Fund
Class of each New Fund to the Company in consideration of the payment of $1.00
per share for the purpose of enabling the Company to elect the Company's
directors as the Trust's trustees (to serve without limit in time, except as
they may resign or be removed by action of the Trust's trustees or
shareholders), to ratify the selection of the Trust's independent accountants,
and to vote on the matters referred to in Section 5.3;
5.3 Immediately prior to the Closing, the Trust (on its own behalf of and
with respect to each New Fund or each New Fund Class, as appropriate) shall
enter into a Master Investment Advisory Agreement, a Master Administrative
Services Agreement, Master Distribution Agreements, a Custodian Agreement and a
Transfer Agency and Servicing Agreement; shall adopt plans of distribution
pursuant to Rule 12b-1 of the 1940 Act, a multiple class plan pursuant to Rule
18f-3 of the 1940 Act and shall enter into or adopt, as appropriate, such other
agreements and plans as are necessary for each New Fund's operation as a series
of an open-end investment company. Each such agreement and plan shall have been
approved by the Trust's trustees and, to the extent required by law, by such of
those trustees who are not "interested persons" of the Trust (as defined in the
1940 Act) and by the Company as the sole shareholder of each New Fund.
5.4 The Company or the Trust, as appropriate, shall file with the SEC one
or more post-effective amendments to the Company's Registration Statement on
Form N-1A under the Securities Act of 1933, as amended, and the 1940 Act, as
amended (the "Registration Statement"), (i) which contain such amendments to
such Registration Statement as are determined by the Company to be necessary and
appropriate to effect the Reorganization and (ii) pursuant to which the Trust
adopts such Registration Statement, as so amended, as its own, and shall use its
best efforts to have such post-effective amendment or amendments to the
Registration Statement become effective as of the Closing.
6. CONDITIONS PRECEDENT.
The obligations of the Company, on its own behalf and on behalf of each
Current Fund, and the Trust, on its own behalf and on behalf of each New Fund,
will be subject to (a) performance by the other party of all its obligations to
be
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performed hereunder at or before the Effective Time, (b) all representations and
warranties of the other party contained herein being true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated hereby, as of the Effective Time, with the same
force and effect as if made on and as of the Effective Time, and (c) the further
conditions that, at or before the Effective Time:
6.1 The Shareholders of the Company shall have approved this Agreement and
the transactions contemplated by this Agreement in accordance with applicable
law.
6.2 All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either the Company or the Trust to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain such consults, orders,
and permits would not involve a risk of a material adverse effect on the assets
or properties of either a Current Fund or a New Fund, provided that either the
Company or the Trust may for itself waive any of such conditions.
6.3 Each of the Company and the Trust shall have received an opinion from
Ballard Spahr Andrews & Ingersoll, LLP as to the federal income tax consequences
mentioned below. In rendering such opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters of representation
that the Company and the Trust shall use their best efforts to deliver to such
counsel) and the certificates delivered pursuant to Section 3.4. Such opinion
shall be substantially to the effect that, based on the facts and assumptions
stated therein and conditioned on consummation of the Reorganization in
accordance with this Agreement, for federal income tax purposes:
(a) The Reorganization will constitute a reorganization within the
meaning of section 368(a) of the Code, and each Current Fund and each New
Fund will be "a party to a reorganization" within the meaning of section
368(b) of the Code;
(b) No gain or loss will be recognized to a Current Fund on the
transfer of the Assets to the corresponding New Fund in exchange solely for
New Fund Shares and the New Fund's assumption of the Liabilities or on the
subsequent distribution of New Fund Shares to the Shareholders, in
constructive exchange for their Current Fund Shares, in liquidation of the
Current Fund;
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(c) No gain or loss will be recognized to a New Fund on its receipt of
the Assets in exchange for New Fund Shares and its assumption of the
Liabilities;
(d) Each New Fund's basis for the Assets will be the same as the basis
thereof in the corresponding Current Fund's hands immediately before the
Reorganization, and the New Fund's holding period for the Assets will
include the Current Fund's holding period therefor;
(e) A Shareholder will recognize no gain or loss on the constructive
exchange of Current Fund Shares solely for New Fund Shares pursuant to the
Reorganization; and
(f) A Shareholder's basis for the New Fund Shares of each New Fund to
be received in the Reorganization will be the same as the basis for the
Current Fund Shares of the corresponding Current Fund to be constructively
surrendered in exchange for such New Fund Shares, and a Shareholder's
holding period for such New Fund Shares will include its holding period for
the Current Fund Shares constructively surrendered, provided that the New
Fund Shares are held as capital assets by the Shareholder at the Effective
Time.
6.4 No stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the SEC (and not withdrawn or terminated).
At any time prior to the Closing, any of the foregoing conditions (except
those set forth in Section 6.1) may be waived by the directors/trustees of
either the Company or the Trust if, in their judgment, such waiver will not have
a material adverse effect on the interests of the Current Fund's shareholders.
7. EXPENSES.
Except as otherwise provided in Section 4.3(c), all expenses incurred in
connection with the transactions contemplated by this Agreement (regardless of
whether they are consummated) will be borne by the parties as they mutually
agree.
8. ENTIRE AGREEMENT.
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties.
9. AMENDMENT.
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding its approval by the Company's Shareholders, in such manner as
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may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
10. TERMINATION.
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by the Company's Shareholders:
10.1 By either the Company or the Trust (a) in the event of the other
party's material breach of any representation, warranty, or covenant contained
herein to be performed at or prior to the Effective Time, (b) if a condition to
its obligations has not been met and it reasonably appears that such condition
will not or cannot be met, or (c) if the Closing has not occurred on or before
July 31, 1999; or
10.2 By the parties' mutual agreement.
Except as otherwise provided in Section 7, in the event of termination
under Sections 10.1(c) or 10.2, there shall be no liability for damages on the
part of either the Company or the Trust or any Current Fund or corresponding New
Fund, to the other.
11. MISCELLANEOUS.
11.1 This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be construed
to confer upon or give any person, firm, trust, or corporation other than the
parties and their respective successors and assigns any rights or remedies under
or by reason of this Agreement.
11.3 The execution and delivery of this Agreement have been authorized by
the Trust's trustees, and this Agreement has been executed and delivered by
authorized officers of the Trust acting as such; neither such authorization by
such trustees nor such execution and delivery by such officers shall be deemed
to have been made by any of them individually or to impose any liability on any
of them or any shareholder of the Trust personally, but shall bind only the
assets and property of the New Funds, as provided in the Trust's Agreement and
Declaration of Trust.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed and
delivered by its duly authorized officers as of the day and year first written
above.
<TABLE>
<S> <C>
Attest: AIM TAX-EXEMPT FUNDS, INC.,
on behalf of each of its series
listed in Schedule A to this
Agreement
/s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
Title: President
Attest: AIM TAX-EXEMPT FUNDS
on behalf of each of its series
listed in Schedule A to this
Agreement
/s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
Title: President
</TABLE>
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SCHEDULE A
<TABLE>
<CAPTION>
SERIES OF CORRESPONDING SERIES OF
AIM TAX-EXEMPT FUNDS, INC. AIM TAX-EXEMPT FUNDS
(EACH A "CURRENT FUND") (EACH A "NEW FUND")
- ------------------------------------ ----------------------------------------
<S> <C>
AIM High Income Municipal Fund AIM High Income Municipal Fund
AIM Tax-Exempt Bond Fund of AIM Tax-Exempt Bond Fund of
Connecticut Connecticut
AIM Tax-Exempt Cash Fund AIM Tax-Exempt Cash Fund
AIM Tax-Free Intermediate Fund AIM Tax-Free Intermediate Fund
</TABLE>
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SCHEDULE B
<TABLE>
<CAPTION>
CLASSES OF EACH CURRENT FUND CORRESPONDING CLASSES OF EACH NEW FUND
- ---------------------------- --------------------------------------
<S> <C>
AIM High Income Municipal Fund AIM High Income Municipal Fund
Class A Shares Class A Shares
Class B Shares Class B Shares
Class C Shares Class C Shares
AIM Tax-Exempt Bond Fund of AIM Tax-Exempt Bond Fund of
Connecticut Connecticut
Class A Shares Class A Shares
AIM Tax-Exempt Cash Fund AIM Tax-Exempt Cash Fund
Class A Shares Class A Shares
AIM Tax-Free Intermediate Fund AIM Tax-Free Intermediate Fund
Class A Shares Class A Shares
</TABLE>
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<PAGE> 68
APPENDIX C
AIM TAX-EXEMPT FUNDS, INC.
FORM OF MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this day of , , by and
between AIM Tax-Exempt Funds, Inc., a Maryland corporation (the "Company") with
respect to its series of shares shown on the Appendix A attached hereto, as the
same may be amended from time to time, and A I M Advisors, Inc., a Delaware
corporation (the "Advisor").
RECITALS
WHEREAS, the Company is registered under the Investment Company Act of
1940, as amended (the "l940 Act"), as an open-end, diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Company's charter (the "Charter") authorizes the Board of
Directors of the Company (the "Board of Directors") to create separate series of
shares of common stock in the Company, and as of the date of this Agreement, the
Board of Directors has created four separate series portfolios (such portfolios
and any other portfolios hereafter added to the Company being referred to
collectively herein as the "Funds"); and
WHEREAS, the Company and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor for the
Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Board of Directors. The Advisor shall give the
Company and the Funds the benefit of its best judgment, efforts and facilities
in rendering its services as investment advisor.
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2. Investment Analysis and Implementation. In carrying out its obligations
under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Funds,
and whether concerning the individual issuers whose securities are included
in the assets of the Funds or the activities in which such issuers engage,
or with respect to securities which the Advisor considers desirable for
inclusion in the Funds' assets;
(c) determine which issuers and securities shall be represented in the
Funds' investment portfolios and regularly report thereon to the Board of
Directors;
(d) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report thereon to the
Board of Directors; and
(e) take, on behalf of the Company and the Funds, all actions which
appear to the Company and the Funds necessary to carry into effect such
purchase and sale programs and supervisory functions as aforesaid,
including but not limited to the placing of orders for the purchase and
sale of securities for the Funds.
3. Securities Lending Duties and Fees. The Advisor agrees to provide the
following services in connection with the securities lending activities of each
Fund: (a) oversee participation in the securities lending program to ensure
compliance with all applicable regulatory and investment guidelines; (b) assist
the securities lending agent or principal (the "Agent") in determining which
specific securities are available for loan; (c) monitor the Agent to ensure that
securities loans are effected in accordance with the Advisor's instructions and
with procedures adopted by the Board of Directors; (d) prepare appropriate
periodic reports for, and seek appropriate approvals from, the Board of
Directors with respect to securities lending activities; (e) respond to Agent
inquiries; and (f) perform such other duties as necessary.
As compensation for such services provided by the Advisor in connection
with securities lending activities of each Fund, a lending Fund shall pay the
Advisor a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities.
4. Delegation of Responsibilities. The Advisor is authorized to delegate
any or all of its rights, duties and obligations under this Agreement to one or
more sub-advisors, and may enter into agreements with sub-advisors, and may
replace any such sub-advisors from time to time in its discretion, in accordance
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with the 1940 Act, the Advisers Act, and rules and regulations thereunder, as
such statutes, rules and regulations are amended from time to time or are
interpreted from time to time by the staff of the Securities and Exchange
Commission ("SEC"), and if applicable, exemptive orders or similar relief
granted by the SEC and upon receipt of approval of such sub-advisors by the
Board of Directors and by shareholders (unless any such approval is not required
by such statutes, rules, regulations, interpretations, orders or similar
relief).
5. Independent Contractors. The Advisor and any sub-advisors shall for all
purposes herein be deemed to be independent contractors and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Company in any way or otherwise be deemed to be an agent of the
Company.
6. Control by Board of Directors. Any investment program undertaken by the
Advisor pursuant to this Agreement, as well as any other activities undertaken
by the Advisor on behalf of the Funds, shall at all times be subject to any
directives of the Board of Directors.
7. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act and
any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Company, as
the same may be amended from time to time under the Securities Act of 1933
and the 1940 Act;
(c) the provisions of the Charter, as the same may be amended from
time to time;
(d) the provisions of the by-laws of the Company, as the same may be
amended from time to time; and
(e) any other applicable provisions of state, federal or foreign law.
8. Broker-Dealer Relationships. The Advisor is responsible for decisions to
buy and sell securities for the Funds, broker-dealer selection, and negotiation
of brokerage commission rates.
(a) The Advisor's primary consideration in effecting a security
transaction will be to obtain the best execution.
(b) In selecting a broker-dealer to execute each particular
transaction, the Advisor will take the following into consideration: the
best net price available; the reliability, integrity and financial
condition of the broker-dealer; and the value of the expected contribution
of the broker-dealer to the investment performance of the Funds on a
continuing basis. Accordingly, the price to the Funds in any transaction
may be less favorable than that
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available from another broker-dealer if the difference is reasonably
justified by other aspects of the fund execution services offered.
(c) Subject to such policies as the Board of Directors may from time
to time determine, the Advisor shall not be deemed to have acted unlawfully
or to have breached any duty created by this Agreement or otherwise solely
by reason of its having caused the Funds to pay a broker or dealer that
provides brokerage and research services to the Advisor an amount of
commission for effecting a fund investment transaction in excess of the
amount of commission another broker or dealer would have charged for
effecting that transaction, if the Advisor determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the Advisor's overall
responsibilities with respect to a particular Fund, other Funds of the
Company, and to other clients of the Advisor as to which the Advisor
exercises investment discretion. The Advisor is further authorized to
allocate the orders placed by it on behalf of the Funds to such brokers and
dealers who also provide research or statistical material, or other
services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor shall
determine and the Advisor will report on said allocations regularly to the
Board of Directors indicating the brokers to whom such allocations have
been made and the basis therefor.
(d) With respect to one or more Funds, to the extent the Advisor does
not delegate trading responsibility to one or more sub-advisors, in making
decisions regarding broker-dealer relationships, the Advisor may take into
consideration the recommendations of any sub-advisor appointed to provide
investment research or advisory services in connection with the Funds, and
may take into consideration any research services provided to such sub-
advisor by broker-dealers.
(e) Subject to the other provisions of this Section 8, the 1940 Act,
the Securities Exchange Act of 1934, and rules and regulations thereunder,
as such statutes, rules and regulations are amended from time to time or
are interpreted from time to time by the staff of the SEC, any exemptive
orders issued by the SEC, and any other applicable provisions of law, the
Advisor may select brokers or dealers with which it or the Funds are
affiliated.
9. Compensation. The compensation that each Fund shall pay the Advisor is
set forth in Appendix B attached hereto.
10. Expenses of the Funds. All of the ordinary business expenses incurred
in the operations of the Funds and the offering of their shares shall be borne
by the Funds unless specifically provided otherwise in this Agreement. These
expenses borne by the Funds include but are not limited to brokerage
commissions, taxes, legal, accounting, auditing, or governmental fees, the cost
of
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preparing share certificates, custodian, transfer and shareholder service agent
costs, expenses of issue, sale, redemption and repurchase of shares, expenses of
registering and qualifying shares for sale, expenses relating to directors and
shareholder meetings, the cost of preparing and distributing reports and notices
to shareholders, the fees and other expenses incurred by the Company on behalf
of the Funds in connection with membership in investment company organizations
and the cost of printing copies of prospectuses and statements of additional
information distributed to the Funds' shareholders.
11. Services to Other Companies or Accounts. The Company understands that
the Advisor now acts, will continue to act and may act in the future as
investment manager or advisor to fiduciary and other managed accounts, and as
investment manager or advisor to other investment companies, including any
offshore entities, or accounts, and the Company has no objection to the Advisor
so acting, provided that whenever the Company and one or more other investment
companies or accounts managed or advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each company and account.
The Company recognizes that in some cases this procedure may adversely affect
the size of the positions obtainable and the prices realized for the Funds.
12. Non-Exclusivity. The Company understands that the persons employed by
the Advisor to assist in the performance of the Advisor's duties under this
Agreement will not devote their full time to such service and nothing contained
in this Agreement shall be deemed to limit or restrict the right of the Advisor
or any affiliate of the Advisor to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature. The Company
further understands and agrees that officers or directors of the Advisor may
serve as officers or directors of the Company, and that officers or directors of
the Company may serve as officers or directors of the Advisor to the extent
permitted by law; and that the officers and directors of the Advisor are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
13. Effective Date, Term and Approval. This Agreement shall become
effective with respect to a Fund, if approved by the shareholders of such Fund,
on the Effective Date for such Fund, as set forth in Appendix A attached hereto.
If so approved, this Agreement shall thereafter continue in force and effect
until June 30, 2001, and may be continued from year to year thereafter, provided
that the continuation of the Agreement is specifically approved at least
annually:
(a) (i) by the Board of Directors or (ii) by the vote of "a majority
of the outstanding voting securities" of such Fund (as defined in Section
2(a)(42) of the 1940 Act); and
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(b) by the affirmative vote of a majority of the directors who are not
parties to this Agreement or "interested persons" (as defined in the 1940
Act) of a party to this Agreement (other than as Company directors), by
votes cast in person at a meeting specifically called for such purpose.
14. Termination. This Agreement may be terminated as to the Company or as
to any one or more of the Funds at any time, without the payment of any penalty,
by vote of the Board of Directors or by vote of a majority of the outstanding
voting securities of the applicable Fund, or by the Advisor, on sixty (60) days'
written notice to the other party. The notice provided for herein may be waived
by the party entitled to receipt thereof. This Agreement shall automatically
terminate in the event of its assignment, the term "assignment" for purposes of
this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
15. Amendment. No amendment of this Agreement shall be effective unless it
is in writing and signed by the party against which enforcement of the amendment
is sought.
16. Liability of Advisor and Fund. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Company or to
the Funds or to any shareholder of the Funds for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security. Any
liability of the Advisor to one Fund shall not automatically impart liability on
the part of the Advisor to any other Fund. No Fund shall be liable for the
obligations of any other Fund.
17. Liability of Shareholders. Notice is hereby given that, as provided by
applicable law, the obligations of or arising out of this Agreement are not
binding upon any of the shareholders of the Company individually but are binding
only upon the assets and property of the Company and that the shareholders shall
be entitled, to the fullest extent permitted by applicable law, to the same
limitation on personal liability as shareholders of private corporations for
profit.
18. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Company and that of the Advisor shall be 11 Greenway
Plaza, Suite 100, Houston, Texas 77046-1173.
19. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the 1940 Act or the Advisers Act shall be resolved by
reference to such term or provision of the 1940 Act or the Advisers Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of
C-6
<PAGE> 74
any controlling decision of any such court, by rules, regulations or orders of
the SEC issued pursuant to said Acts. In addition, where the effect of a
requirement of the 1940 Act or the Advisers Act reflected in any provision of
the Agreement is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
Subject to the foregoing, this Agreement shall be governed by and construed in
accordance with the laws (without reference to conflicts of law provisions) of
the State of Texas.
20. License Agreement. The Company shall have the non-exclusive right to
use the name "AIM" to designate any current or future series of shares only so
long as A I M Advisors, Inc. serves as investment manager or advisor to the
Company with respect to such series of shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
<TABLE>
<S> <C>
Attest: AIM Tax-Exempt Funds, Inc.
(a Maryland corporation)
By:
- --------------------------------------- ----------------------------------
Assistant Secretary President
(SEAL)
Attest: A I M Advisors, Inc.
By:
- --------------------------------------- -----------------------------------
Assistant Secretary President
(SEAL)
</TABLE>
C-7
<PAGE> 75
APPENDIX A
FUNDS AND EFFECTIVE DATES
<TABLE>
<CAPTION>
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
- ------------ ------------------
<S> <C>
AIM High Income Municipal Fund...................... May 24, 2000
AIM Tax-Exempt Bond Fund of Connecticut............. May 24, 2000
AIM Tax-Exempt Cash Fund............................ May 24, 2000
AIM Tax-Free Intermediate Fund...................... May 24, 2000
</TABLE>
C-8
<PAGE> 76
APPENDIX B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full
compensation for all services rendered, an advisory fee for such Fund set forth
below. Such fee shall be calculated by applying the following annual rates to
the average daily net assets of such Fund for the calendar year computed in the
manner used for the determination of the net asset value of shares of such Fund.
AIM TAX-FREE INTERMEDIATE FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ----------- -----------
<S> <C>
First $500 million............................... 0.30%
Over $500 million to and including $1 billion.... 0.25%
Over $1 billion.................................. 0.20%
</TABLE>
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
All Assets....................................... 0.50%
</TABLE>
AIM TAX-EXEMPT CASH FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
All Assets....................................... 0.35%
</TABLE>
AIM HIGH INCOME MUNICIPAL FUND
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ----------- -----------
<S> <C>
First $500 million............................... 0.60%
Over $500 million to and including $1 billion.... 0.55%
Over $1 billion to and including $1.5 billion.... 0.50%
Over $1.5 billion................................ 0.45%
</TABLE>
C-9
<PAGE> 77
APPENDIX D
DATES OF ADVISORY AGREEMENTS
<TABLE>
<CAPTION>
DATE LAST SUBMITTED DATE SINCE AIM HAS
DATE OF CURRENT TO A VOTE OF SERVED AS INVESTMENT
NAME OF FUND ADVISORY AGREEMENT SHAREHOLDERS ADVISOR
- ------------ ------------------- ------------------- --------------------
<S> <C> <C> <C>
AIM High Income February 28, 1997 December 26, 1997* September 20, 1997
Municipal Fund as amended
September 20, 1997
AIM Tax-Exempt Cash February 28, 1997 February 7, 1997** June 30, 1992
Fund as amended
September 20, 1997
AIM Tax-Exempt Bond February 28, 1997 February 7, 1997** June 30, 1992
Fund of Connecticut as amended
September 20, 1997
AIM Tax-Free February 28, 1997 February 7, 1997** December 4, 1986
Intermediate Fund as amended
September 20, 1997
</TABLE>
* The current advisory agreement was submitted to a vote of the initial
shareholders of the fund prior to commencement of operations.
** The current advisory agreement was last submitted to a vote of public
shareholders of the fund in connection with a merger between A I M Management
Group Inc. and a subsidiary of INVESCO PLC.
D-1
<PAGE> 78
APPENDIX E
PRINCIPAL EXECUTIVE OFFICER AND DIRECTORS OF
A I M ADVISORS, INC.
The following table provides information with respect to the principal
executive officer and the directors of A I M Advisors, Inc., all of whose
business address is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION WITH AIM PRINCIPAL OCCUPATION
- ---------------- --------------------- -----------------------------------
<S> <C> <C>
Charles T. Bauer Director and Chairman See director table under Proposal 1
Gary T. Crum Director and Senior See Appendix K
Vice President
Robert H. Graham Director and See director table under Proposal 1
President
Dawn M. Hawley Director, Senior Vice Senior Vice President, Chief
President and Financial Officer and Treasurer,
Treasurer A I M Management Group Inc., and
Vice President and Treasurer, A I M
Capital Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund Management
Company
Carol F. Relihan Director, Senior Vice See Appendix K
President, General
Counsel and Secretary
</TABLE>
E-1
<PAGE> 79
APPENDIX F
ADVISORY AGREEMENT FEE SCHEDULE
<TABLE>
<CAPTION>
FEE
WAIVERS
AGGREGATE NET FOR THE
ANNUAL RATE TOTAL NET ASSETS FEES PAID TO AIM MOST
(BASED ON FOR THE MOST FOR THE MOST RECENTLY
AVERAGE DAILY RECENTLY COMPLETED RECENTLY COMPLETED COMPLETED
NAME OF FUND NET ASSETS) FISCAL YEAR FISCAL YEAR FISCAL YEAR
------------ ---------------- ------------------ ------------------ -----------
<S> <C> <C> <C> <C>
AIM High Income 0.60% of the $ 66,436,663 $ 0 $272,006
Municipal Fund first $500
million; 0.55%
over $500
million up to $1
billion; 0.50%
over $1 billion;
0.45% of the
excess over $1.5
billion
AIM Tax-Exempt 0.35% $ 61,158,998 $250,445 $ 0
Cash Fund
AIM Tax-Exempt 0.50% $ 41,439,802 $158,050 $ 47,933
Bond Fund of
Connecticut
AIM Tax-Free 0.30% of the $244,499,469 $623,357 $ 0
Intermediate first $500
Fund million; 0.25%
over $500
million up to $1
billion; 0.20%
of the excess
over $1 billion
</TABLE>
F-1
<PAGE> 80
APPENDIX G
FEES PAID TO AIM AND AFFILIATES
IN MOST RECENT FISCAL YEAR
The following chart sets forth the fees paid during the fiscal period or
year ended March 31, 1999 by the company to A I M Advisors, Inc. ("AIM") for
administrative services, and to affiliates of AIM. The administrative and other
services currently provided by AIM and its affiliates will continue to be
provided after the investment advisory contract with AIM is approved.
<TABLE>
<CAPTION>
AIM
(ADMINISTRATIVE A I M A I M FUND
SERVICES) DISTRIBUTORS, INC.* SERVICES, INC.
--------------- ------------------- --------------
<S> <C> <C> <C>
AIM TAX-EXEMPT FUNDS, INC.
AIM High Income Municipal Fund.... $ 0 $102,328 $ 8,935
AIM Tax-Exempt Cash Fund.......... 49,285 31,623 39,222
AIM Tax-Exempt Bond Fund of
Connecticut..................... 48,824 3,323 16,390
AIM Tax-Free Intermediate Fund.... 50,951 0 41,409
</TABLE>
* Net amount received from Rule 12b-1 fees. Excludes amounts reallowed to
brokers, dealers, agents and other service providers.
G-1
<PAGE> 81
APPENDIX H
ADVISORY FEE SCHEDULES FOR OTHER AIM FUNDS
The following table provides information with respect to the annual
advisory fee rates paid to AIM by certain funds that have the same
investment objective as High Income Municipal and Tax-Exempt Bond.
High Income Municipal and Tax-Exempt Bond are the only AIM funds with
substantially similar investment objectives.
<TABLE>
<CAPTION>
TOTAL NET ASSETS
FOR THE MOST FEE WAIVERS,
ANNUAL RATE RECENTLY EXPENSE CAPS
(BASED ON AVERAGE COMPLETED AND/OR EXPENSE
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR REIMBURSEMENTS
- ------------------------- ------------------------- ---------------- --------------
<S> <C> <C> <C>
AIM High Income Municipal
Fund................... 0.60% of the first $500 $66,436,663
million;
0.55% over $500 million
up to $1 billion;
0.50% over $1 billion;
0.45% of the excess over
$1.5 billion
AIM Tax-Exempt Bond Fund
of Connecticut......... 0.50% $41,439,802
</TABLE>
The following table provides information with respect to the annual
advisory fee rates paid to AIM by certain funds that have the same
investment objective as Tax-Exempt Cash and Tax-Free Intermediate.
<TABLE>
<CAPTION>
TOTAL NET ASSETS
FOR THE MOST FEE WAIVERS,
ANNUAL RATE RECENTLY EXPENSE CAPS
(BASED ON AVERAGE COMPLETED AND/OR EXPENSE
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR REIMBURSEMENTS
- ------------------------- ------------------------- ---------------- --------------
<S> <C> <C> <C>
Cash Reserve Portfolio... 0.25% of the first $500 $1,170,341,884
million;
0.20% in excess of $500
million
</TABLE>
H-1
<PAGE> 82
APPENDIX I
CURRENT FUNDAMENTAL INVESTMENT RESTRICTIONS
AIM Tax-Exempt Cash Fund may not:
1. With respect to 75% of its total assets, purchase the securities of
any issuer if such purchase would cause more than 5% of the value of its
total assets to be invested in the securities of such issuer (except
securities issued, guaranteed or sponsored by the U.S. Government or its
agencies and instrumentalities and except as permitted by Rule 2a-7, as
amended from time to time, and except that such Fund may purchase
securities of other investment companies to the extent permitted by
applicable law or exemptive order).
2. Borrow money or issue senior securities except for temporary or
emergency purposes, except that it may enter into reverse repurchase
agreements and may purchase when-issued securities (consistent with its
investment policies and objectives).
3. Purchase securities while borrowings in excess of 5% of its total
assets are outstanding and, in addition, will not borrow money if such
borrowing will exceed the borrowing limits established by the SEC for money
market funds, as amended from time to time.
4. Lend any portfolio securities if the value of the securities loaned
by it would exceed an amount equal to one-third of its total assets.
5. Concentrate 25% or more of its total assets in issuers in a
particular industry. Tax-exempt securities issued by governments or
political subdivisions of governments are not included within this
restriction.
6. Make short sales of securities or purchase securities on margin or
invest in puts, calls, straddles, spreads or any combination thereof,
except that it may obtain such short-term credits as are necessary for the
clearance of purchases and sales of securities.
7. Make loans, other than by investing in obligations in which it may
invest consistent with its investment objective and policies, and other
than by engaging in repurchase agreements and loans of portfolio securities
as described above.
8. Pledge, mortgage or hypothecate more than 33 1/3% of its total
assets; provided that for purposes of this restriction, reverse repurchase
agreements and loans of portfolio securities are not deemed to involve the
pledge, mortgage or hypothecation of assets.
9. Purchase or sell real estate, but it may invest in marketable
securities secured by real estate or interests therein.
10. Purchase or sell commodities or commodities futures contracts.
I-1
<PAGE> 83
11. Underwrite any issue of securities, except that it may purchase
securities, either directly from an issuer or from an underwriter for an
issuer, and later dispose of such securities in accordance with its
investment program.
AIM Tax-Free Intermediate Fund may not:
1. With respect to 75% of its total assets, purchase the securities of
any issuer if such purchase would cause more than 5% of the value of its
total assets to be invested in the securities of such issuer (except
securities issued, guaranteed or sponsored by the U.S. Government or its
agencies and instrumentalities and except that the Fund may purchase
securities of other investment companies to the extent permitted by
applicable law or exemptive order).
2. Borrow money or issue senior securities except for temporary or
emergency purposes, except that it may enter into reverse repurchase
agreements and may purchase when-issued securities (consistent with its
investment policies and objectives).
3. Purchase securities while borrowings in excess of 5% of its total
assets are outstanding.
4. Lend money or lend any portfolio securities if the value of the
securities loaned by it would exceed an amount equal to one-third of its
total assets.
5. Concentrate 25% or more of its total assets in issuers in a
particular industry. Tax-exempt securities issued by governments or
political subdivisions of governments are not included within this
restriction.
6. Make short sales of securities or purchase securities on margin or
invest in puts, calls, straddles, spreads or any combination thereof,
except that it may obtain such short-term credits as are necessary for the
clearance of purchases and sales of securities.
7. Make loans, other than by investing in obligations in which it may
invest consistent with its investment objective and policies, and other
than by engaging in repurchase agreements and loans of portfolio securities
as described above.
8. Pledge, mortgage or hypothecate more than 33 1/3% of its total
assets; provided that for purposes of this restriction, reverse repurchase
agreements and loans of portfolio securities are not deemed to involve the
pledge, mortgage or hypothecation of assets.
9. Purchase or sell real estate, but it may invest in marketable
securities secured by real estate or interests therein.
10. Purchase or sell commodities or commodities futures contracts.
I-2
<PAGE> 84
11. Underwrite any issue of securities, except that it may purchase
securities, either directly from an issuer or from an underwriter for an
issuer, and later dispose of such securities in accordance with its
investment program.
It is a fundamental policy of the Fund to invest its assets so that at
least 80% of the Fund's assets will be invested in securities that generate
interest that is exempt from federal income taxes. The Fund will seek to avoid
the purchase of "private activity bonds" the interest on which could give rise
to an alternative minimum tax liability for individuals and other noncorporate
shareholders.
AIM Tax-Exempt Bond Fund of Connecticut may not:
1. Borrow money or issue senior securities except for temporary or
emergency purposes, except that it may enter into reverse repurchase
agreements and may purchase when-issued securities (consistent with its
investment policies and objectives), and except that it may enter into
financial futures contracts and it may borrow from banks provided that no
borrowing exceeds one-third of the value of its total assets.
2. Purchase securities while borrowings in excess of 5% of its total
assets are outstanding.
3. Lend any portfolio securities if the value of the securities loaned
by it would exceed an amount equal to one-third of its total assets.
4. Concentrate 25% or more of its total assets in issuers in a
particular industry. Tax-exempt securities issued by governments or
political subdivisions of governments are not included within this
restriction.
5. Make short sales of securities or purchase securities on margin or
invest in puts, calls, straddles, spreads or any combination thereof,
except that it may obtain such short-term credits as are necessary for the
clearance of purchases and sales of securities, and it may make margin
payments in connection with transactions in financial futures contracts and
options thereon and municipal bond index futures contracts.
6. Make loans, other than by investing in obligations in which it may
invest consistent with its investment objective and policies, and other
than by engaging in repurchase agreements and loans of portfolio securities
as described above.
7. Pledge, mortgage or hypothecate more than 33 1/3% of its total
assets; provided that for purposes of this restriction, reverse repurchase
agreements and loans of portfolio securities are not deemed to involve the
pledge, mortgage or hypothecation of assets, and provided further that
collateral arrangements with respect to margin for financial or municipal
bond index futures contracts are not deemed to involve the pledge, mortgage
or hypothecation of assets.
I-3
<PAGE> 85
8. Purchase or sell real estate, but it may invest in marketable
securities secured by real estate or interests therein.
9. Purchase or sell commodities or commodities futures contracts.
10. Underwrite any issue of securities, except that it may purchase
securities, either directly from an issuer or from an underwriter for an
issuer, and later dispose of such securities in accordance with its
investment program.
AIM High Income Municipal Fund may not:
1. With respect to 75% of its total assets, purchase the securities of
any issuer if such purchase would cause more than 5% of the value of its
total assets to be invested in the securities of such issuer (except
securities issued, guaranteed or sponsored by the U.S. Government or its
agencies, authorities and instrumentalities and except that the Fund may
purchase securities of other investment companies to the extent permitted
by the 1940 Act, and the rules and regulations thereunder, and (if
applicable) exemptive orders granted by the SEC or by applicable law). For
purposes of this restriction, the Fund will regard each state and each
political subdivision, agency or instrumentality of such state, and each
multi-state agency of which such state is a member, as a separate issuer.
2. Borrow money or issue senior securities, except (a) that it may
borrow from banks for temporary or emergency purposes provided that
borrowings may not exceed 33 1/3% of the value of its total assets
(including the amount of such borrowings), and (b) that it may enter into
reverse repurchase agreements and financial futures contracts, and (c) that
it may purchase when-issued securities (consistent with its investment
policies and objectives). For purposes of this restriction, collateral
arrangements with respect to margin for financial futures contracts are not
deemed to be a pledge of assets.
3. Purchase securities while borrowings in excess of 5% of the value
of its total assets are outstanding.
4. Lend any of its portfolio securities if the value of the securities
loaned by it would exceed an amount equal to one-third of its total assets.
5. Lend money, other than by investing in debt instruments consistent
with its investment objective and policies, and other than by entering into
repurchase agreements and loans of portfolio securities as provided above.
6. Concentrate 25% or more of the value of its total assets in
industrial development revenue bonds, including pollution control bonds,
issued for companies in the same industry. Investments in municipal
securities and obligations issued, guaranteed or sponsored by the U.S.
Government, its
I-4
<PAGE> 86
agencies, authorities or instrumentalities do not involve investment in any
industry for purposes of this restriction.
7. Pledge, mortgage or hypothecate more than 33 1/3% of its total
assets; provided that for purposes of this restriction reverse repurchase
agreements and loans of portfolio securities are not deemed to involve the
pledge, mortgage or hypothecation of assets.
8. Purchase or sell real estate, but it may invest in marketable
securities secured by real estate or interests therein.
9. Purchase or sell physical commodities or physical commodities
futures contracts, except that it may purchase and sell financial futures
contracts and options thereon for hedging purposes.
10. Act as a securities underwriter except to the extent that it may
be deemed to be an underwriter under the Securities Act of 1933 when
purchasing or selling a portfolio security.
11. Make short sales of securities or purchase securities on margin,
except that it may obtain such short-term credits as are necessary for the
clearance of purchases and sales of securities and may make margin payments
in connection with transactions in financial futures contracts and options
thereon.
I-5
<PAGE> 87
APPENDIX J
CURRENT INVESTMENT OBJECTIVES
AIM HIGH INCOME MUNICIPAL FUND
The fund's investment objective is to achieve a high level of current
income that is exempt from federal income taxes.
AIM TAX-EXEMPT CASH FUND
The fund's investment objective is to earn the highest level of current
income exempt from federal income taxes that is consistent with the preservation
of capital and liquidity.
AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
The fund's investment objective is to earn a high level of current income
exempt from federal taxes and Connecticut taxes by investing at least 80% of its
net assets in municipal securities.
AIM TAX-FREE INTERMEDIATE FUND
The fund's investment objective is to generate as high a level of
tax-exempt income as is consistent with preservation of capital by investing in
high-quality, intermediate-term municipal securities having a maturity of ten
and one-half years or less.
J-1
<PAGE> 88
APPENDIX K
EXECUTIVE OFFICERS OF AIM TAX-EXEMPT FUNDS, INC.
The following table provides information with respect to the executive
officers of the company. Each executive officer is elected by the Board and
serves until his or her successor is chosen and qualified or until his or her
resignation or removal by the Board. The business address of all officers of the
company is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
<TABLE>
<CAPTION>
NAME, AGE AND POSITION PRINCIPAL OCCUPATION(S)
WITH THE COMPANY OFFICER SINCE DURING PAST 5 YEARS
- ---------------------- ------------------- -------------------------------
<S> <C> <C>
Charles T. Bauer (81), May 5, 1993 See director table under
Chairman Proposal 1.
Robert H. Graham (53), January 1, 1994 See director table under
President Proposal 1.
Gary T. Crum (52), September 11, 1993 Director and President, A I M
Senior Vice President Capital Management, Inc.,
Director and Executive Vice
President, A I M Management
Group Inc.; Director and Senior
Vice President, A I M Advisors,
Inc.; and Director, A I M
Distributors, Inc. and AMVESCAP
PLC.
Carol F. Relihan (45), August 4, 1994 Director, Senior Vice
Senior Vice President and President, General Counsel and
Secretary Secretary, A I M Advisors,
Inc.; Senior Vice President,
General Counsel and Secretary,
A I M Management Group Inc.;
Director, Vice President and
General Counsel, Fund
Management Company; Vice
President and General Counsel,
A I M Fund Services, Inc; and
Vice President, A I M Capital
Management, Inc. and A I M
Distributors, Inc.
Melville B. Cox (56), September 11, 1993 Vice President and Chief
Vice President Compliance Officer, A I M
Advisors, Inc., A I M Capital
Management, Inc., A I M
Distributors, Inc., A I M Fund
Services, Inc. and Fund
Management Company
Dana R. Sutton (41), September 11, 1993 Vice President and Fund
Vice President and Controller, A I M Advisors,
Treasurer Inc.; and Assistant Vice
President and Assistant
Treasurer, Fund Management
Company.
</TABLE>
K-1
<PAGE> 89
<TABLE>
<CAPTION>
NAME, AGE AND POSITION PRINCIPAL OCCUPATION(S)
WITH THE COMPANY OFFICER SINCE DURING PAST 5 YEARS
- ---------------------- ------------------- -------------------------------
<S> <C> <C>
Stuart W. Coco (44), September 11, 1993 Senior Vice President, A I M
Vice President Capital Management, Inc.; and
Vice President, A I M Advisors,
Inc.
Karen Dunn Kelley (39), September 11, 1993 Senior Vice President, A I M
Vice President Capital Management, Inc.; and
Vice President, A I M Advisors,
Inc.
</TABLE>
K-2
<PAGE> 90
APPENDIX L
SECURITY OWNERSHIP OF CERTAIN OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the ownership
of the shares of common stock of each of the funds by the directors and
executive officers of the company. No information is given as to a fund or a
class if a director or officer held no shares of any or all classes of such fund
as of February 18, 2000.
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY AS OF PERCENT
NAME OF DIRECTOR/OFFICER FUND (CLASS) FEBRUARY 18, 2000 OF CLASS
------------------------ ------------ ------------------ --------
<S> <C> <C> <C>
Charles T. Bauer..........................
Bruce L. Crockett.........................
Owen Daly II..............................
Edward K. Dunn Jr.........................
Jack M. Fields............................
Carl Frischling...........................
Robert H. Graham..........................
Prema Mathai-Davis........................
Lewis F. Pennock..........................
Louis S. Sklar............................
Gary T. Crum..............................
Carol F. Relihan..........................
Melville B. Cox...........................
Dana R. Sutton............................
Stuart W. Coco............................
Karen Dunn Kelley.........................
All Directors and Officers as a Group.....
</TABLE>
* Less than 1% of the outstanding shares of the class.
L-1
<PAGE> 91
SECURITY OWNERSHIP OF CERTAIN RECORD OWNERS
To the best knowledge of the company, the names and addresses of the
holders of 5% or more of the outstanding shares of each class of each fund as of
February 18, 2000, and the amount of the outstanding shares owned of record or
beneficially by such holders, are set forth below.
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
FUND NAME AND ADDRESS SHARES OF CLASS OWNED SHARES OWNED CLASS OWNED
(CLASS) OF RECORD OWNER RECORD OWNED OF RECORD BENEFICIALLY* BENEFICIALLY*
- ------- ---------------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
</TABLE>
* The Company has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.
L-2
<PAGE> 92
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
- --------------------------------------------------------------------------------
PROXY PROXY
PROXY SOLICITED BY THE BOARD
OF AIM HIGH INCOME MUNICIPAL FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 2000
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of AIM High Income Municipal Fund, a portfolio of AIM
Tax-Exempt Funds, Inc., on May 3, 2000, at 3:00 p.m., Central time, and at any
adjournment thereof, all of the shares of AIM High Income Municipal Fund which
the undersigned would be entitled to vote if personally present. IF THIS PROXY
IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
EACH DIRECTOR AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
CONTROL NUMBER:
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON
THIS PROXY CARD. All joint owners should sign.
When signing as executor, administrator, attorney,
director or guardian or as custodian for a minor,
please give full title as such. If a corporation,
please sign in full corporate name and indicate
the signer's office. If a partner, sign in the
partnership name.
-------------------------------------------------
Signature
-------------------------------------------------
Signature (if held jointly)
Dated
--------------------------------------------
<PAGE> 93
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" EACH PROPOSAL.
TO VOTE, FILL IN BOX COMPLETELY. EXAMPLE: [X]
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE ,MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE(S)'
NAME. YOUR SHARES WILL BE VOTED "FOR" THE REMAINING NOMINEE(S)
1. To elect ten individuals to the Board of Directors of AIM Tax-Exempt
Funds, Inc., each of whom will serve until his or her successor is
elected and qualified:
FOR WITHHOLD FOR ALL EXCEPT
AUTHORITY
FOR ALL
NOMINEES
[ ] [ ] [ ]
Charles T. Bauer Carl Frischling
Bruce L. Crockett Robert H. Graham
Owen Daly II Prema Mathai-Davis
Edward K. Dunn Jr. Lewis F. Pennock
Jack Fields Louis S. Sklar
2. To approve an Agreement and Plan of Reorganization which provides for
the reorganization of AIM Tax-Exempt Funds, Inc. as a Delaware business
trust.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve a new Master Investment Advisory Agreement with A I M
Advisors, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE> 94
4. To approve a proposal to amend AIM High Income Municipal Fund's
fundamental investment restrictions.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
(a) Change to Fundamental Restriction on Issuer
Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction on Borrowing Money and
Issuing Senior Securities [ ] [ ] [ ]
(c) Elimination of Fundamental Restriction on Purchasing
Securities While Borrowings Exceed 5% of Total Assets [ ] [ ] [ ]
(d) Change to Fundamental Restriction on Underwriting
Securities [ ] [ ] [ ]
(e) Change to Fundamental Restriction on Industry
Concentration [ ] [ ] [ ]
(f) Change to Fundamental Restriction on Purchasing or Selling
Real Estate [ ] [ ] [ ]
(g) Change to Fundamental Restriction on Purchasing or Selling
Commodities or Commodities Futures Contracts [ ] [ ] [ ]
(h) Change to Fundamental Restrictions on Making Loans [ ] [ ] [ ]
(i) Approval of a New Fundamental Investment Restriction on
Investing All of Each Fund's Assets in an Open-End Fund [ ] [ ] [ ]
(j) Elimination of Fundamental Restriction on Margin
Transactions, Short Sales of Securities and Puts, Calls,
Straddles, Spreads or Combination Thereof [ ] [ ] [ ]
(k) Elimination of Fundamental Restriction on Pledging,
Mortgaging or Hypothecating Assets [ ] [ ] [ ]
(l) THIS PROPOSAL IS NOT APPLICABLE TO AIM HIGH INCOME
MUNICIPAL FUND
(m) THIS PROPOSAL IS NOT APPLICABLE TO AIM HIGH INCOME
MUNICIPAL FUND
</TABLE>
5. To approve a proposal to change the investment objectives of AIM High
Income Municipal Fund and AIM Tax-Exempt Cash Fund so that they are
non-fundamental.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE> 95
6. THIS PROPOSAL IS NOT APPLICABLE TO AIM HIGH INCOME MUNICIPAL FUND.
7. To ratify the selection of KPMG LLP as independent accountants of AIM
High Income Municipal Fund for the fiscal year ending in 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
8. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.
<PAGE> 96
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
- --------------------------------------------------------------------------------
PROXY PROXY
PROXY SOLICITED BY THE BOARD
OF AIM TAX-EXEMPT CASH FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 2000
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of AIM Tax-Exempt Cash Fund, a portfolio of AIM
Tax-Exempt Funds, Inc., on May 3, 2000, at 3:00 p.m., Central time, and at any
adjournment thereof, all of the shares of AIM Tax-Exempt Cash Fund which the
undersigned would be entitled to vote if personally present. IF THIS PROXY IS
SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
EACH DIRECTOR AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
CONTROL NUMBER:
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint owners
should sign. When signing as executor,
administrator, attorney, director or
guardian or as custodian for a minor, please
give full title as such. If a corporation,
please sign in full corporate name and
indicate the signer's office. If a partner,
sign in the partnership name.
--------------------------------------------
Signature
--------------------------------------------
Signature (if held jointly)
Dated
--------------------------------------
<PAGE> 97
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" EACH PROPOSAL.
TO VOTE, FILL IN BOX COMPLETELY. EXAMPLE: [X]
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE ,MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE(S)'
NAME. YOUR SHARES WILL BE VOTED "FOR" THE REMAINING NOMINEE(S)
1. To elect ten individuals to the Board of Directors of AIM Tax-Exempt
Funds, Inc., each of whom will serve until his or her successor is
elected and qualified:
FOR WITHHOLD FOR ALL EXCEPT
AUTHORITY
FOR ALL
NOMINEES
[ ] [ ] [ ]
Charles T. Bauer Carl Frischling
Bruce L. Crockett Robert H. Graham
Owen Daly II Prema Mathai-Davis
Edward K. Dunn Jr. Lewis F. Pennock
Jack Fields Louis S. Sklar
2. To approve an Agreement and Plan of Reorganization which provides for
the reorganization of AIM Tax-Exempt Funds, Inc. as a Delaware business
trust.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve a new Master Investment Advisory Agreement with A I M
Advisors, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE> 98
4. To approve a proposal to amend AIM Tax-Exempt Cash Fund's fundamental
investment restrictions.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
(a) Change to Fundamental Restriction on Issuer Diversification
(b) Change to Fundamental Restriction on Borrowing Money and
Issuing Senior Securities [ ] [ ] [ ]
(c) Elimination of Fundamental Restriction on Purchasing
Securities While Borrowings Exceed 5% of Total Assets [ ] [ ] [ ]
(d) Change to Fundamental Restriction on Underwriting
Securities [ ] [ ] [ ]
(e) Change to Fundamental Restriction on Industry
Concentration [ ] [ ] [ ]
(f) Change to Fundamental Restriction on Purchasing or Selling
Real Estate [ ] [ ] [ ]
(g) Change to Fundamental Restriction on Purchasing or Selling
Commodities or Commodities Futures Contracts [ ] [ ] [ ]
(h) Change to Fundamental Restrictions on Making Loans [ ] [ ] [ ]
(i) Approval of a New Fundamental Investment Restriction on
Investing All of Each Fund's Assets in an Open-End Fund [ ] [ ] [ ]
(j) Elimination of Fundamental Restriction on Margin
Transactions, Short Sales of Securities and Puts, Calls,
Straddles, Spreads or Combination Thereof [ ] [ ] [ ]
(k) Elimination of Fundamental Restriction on Pledging,
Mortgaging or Hypothecating Assets [ ] [ ] [ ]
(l) THIS PROPOSAL IS NOT APPLICABLE TO AIM TAX-EXEMPT CASH FUND
(m) THIS PROPOSAL IS NOT APPLICABLE TO AIM TAX-EXEMPT CASH FUND
</TABLE>
5. To approve a proposal to change the investment objectives of AIM High
Income Municipal Fund and AIM Tax-Exempt Cash Fund so that they are
non-fundamental.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. THIS PROPOSAL IS NOT APPLICABLE TO AIM TAX-EXEMPT CASH FUND.
<PAGE> 99
7. To ratify the selection of KPMG LLP as independent accountants of AIM
Tax-Exempt Cash Fund for the fiscal year ending in 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
8. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.
<PAGE> 100
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
- --------------------------------------------------------------------------------
PROXY PROXY
PROXY SOLICITED BY THE BOARD
OF AIM TAX-EXEMPT BOND FUND OF CONNECTICUT
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 2000
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of AIM Tax-Exempt Bond Fund of Connecticut, a portfolio
of AIM Tax-Exempt Funds, Inc., on May 3, 2000, at 3:00 p.m., Central time, and
at any adjournment thereof, all of the shares of AIM Tax-Exempt Bond Fund of
Connecticut which the undersigned would be entitled to vote if personally
present. IF THIS PROXY IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE
SHARES WILL BE VOTED "FOR" EACH DIRECTOR AND "FOR" THE APPROVAL OF EACH OTHER
PROPOSAL.
CONTROL NUMBER:
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint owners
should sign. When signing as executor,
administrator, attorney, director or
guardian or as custodian for a minor, please
give full title as such. If a corporation,
please sign in full corporate name and
indicate the signer's office. If a partner,
sign in the partnership name.
--------------------------------------------
Signature
--------------------------------------------
Signature (if held jointly)
Dated
--------------------------------------
<PAGE> 101
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" EACH PROPOSAL.
TO VOTE, FILL IN BOX COMPLETELY. EXAMPLE: [X]
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE ,MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE(S)'
NAME. YOUR SHARES WILL BE VOTED "FOR" THE REMAINING NOMINEE(S)
1. To elect ten individuals to the Board of Directors of AIM Tax-Exempt
Funds, Inc., each of whom will serve until his or her successor is
elected and qualified:
FOR WITHHOLD FOR ALL EXCEPT
AUTHORITY
FOR ALL
NOMINEES
[ ] [ ] [ ]
Charles T. Bauer Carl Frischling
Bruce L. Crockett Robert H. Graham
Owen Daly II Prema Mathai-Davis
Edward K. Dunn Jr. Lewis F. Pennock
Jack Fields Louis S. Sklar
2. To approve an Agreement and Plan of Reorganization which provides for
the reorganization of AIM Tax-Exempt Funds, Inc. as a Delaware business
trust.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve a new Master Investment Advisory Agreement with A I M
Advisors, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE> 102
4. To approve a proposal to amend AIM Tax-Exempt Bond Fund of
Connecticut's fundamental investment restrictions.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
(a) THIS PROPOSAL IS NOT APPLICABLE TO AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT [ ] [ ] [ ]
(b) Change to Fundamental Restriction on Borrowing Money and Issuing
Senior Securities [ ] [ ] [ ]
(c) Elimination of Fundamental Restriction on Purchasing Securities
While Borrowings Exceed 5% of Total Assets [ ] [ ] [ ]
(d) Change to Fundamental Restriction on Underwriting Securities [ ] [ ] [ ]
(e) Change to Fundamental Restriction on Industry Concentration [ ] [ ] [ ]
(f) Change to Fundamental Restriction on Purchasing or Selling Real
Estate [ ] [ ] [ ]
(g) Change to Fundamental Restriction on Purchasing or Selling
Commodities or Commodities Futures Contracts [ ] [ ] [ ]
(h) Change to Fundamental Restrictions on Making Loans [ ] [ ] [ ]
(i) Approval of a New Fundamental Investment Restrictions on Investing
All of Each Fund's Assets in an Open-End Fund [ ] [ ] [ ]
(j) Elimination of Fundamental Restriction on Margin Transactions,
Short Sales of Securities and Puts, Calls, Straddles, Spreads or
Combination Thereof [ ] [ ] [ ]
(k) Elimination of Fundamental Restriction on Pledging, Mortgaging or
Hypothecating Assets [ ] [ ] [ ]
(l) THIS PROPOSAL IS NOT APPLICABLE TO AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT [ ] [ ] [ ]
(m) THIS PROPOSAL IS NOT APPLICABLE TO AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT [ ] [ ] [ ]
</TABLE>
5. THIS PROPOSAL IS NOT APPLICABLE TO AIM TAX-EXEMPT BOND FUND OF
CONNECTICUT
<PAGE> 103
6. To approve changing the investment objectives of AIM Tax-Exempt Bond
Fund of Connecticut and AIM Tax-Free Intermediate Fund and making them
non-fundamental.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. To ratify the selection of KPMG LLP as independent accountants of AIM
Tax-Exempt Bond Fund of Connecticut for the fiscal year ending in 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
8. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.
<PAGE> 104
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
- --------------------------------------------------------------------------------
PROXY PROXY
PROXY SOLICITED BY THE BOARD
OF AIM TAX-FREE INTERMEDIATE FUND
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD MAY 3, 2000
The undersigned hereby appoints Robert H. Graham and Gary T. Crum, and each of
them separately, proxies with the power of substitution to each, and hereby
authorizes them to represent and to vote, as designated below, at the Special
Meeting of Shareholders of AIM Tax-Free Intermediate Fund, a portfolio of AIM
Tax-Exempt Funds, Inc., on May 3, 2000, at 3:00 p.m., Central time, and at any
adjournment thereof, all of the shares of AIM Tax-Free Intermediate Fund which
the undersigned would be entitled to vote if personally present. IF THIS PROXY
IS SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
EACH DIRECTOR AND "FOR" THE APPROVAL OF EACH OTHER PROPOSAL.
CONTROL NUMBER:
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME
APPEARS ON THIS PROXY CARD. All joint owners
should sign. When signing as executor,
administrator, attorney, director or
guardian or as custodian for a minor, please
give full title as such. If a corporation,
please sign in full corporate name and
indicate the signer's office. If a partner,
sign in the partnership name.
--------------------------------------------
Signature
--------------------------------------------
Signature (if held jointly)
Dated
---------------------------------------
<PAGE> 105
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY
TODAY!
Please detach at perforation before mailing.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS. THE DIRECTORS
RECOMMEND VOTING "FOR" EACH PROPOSAL.
TO VOTE, FILL IN BOX COMPLETELY. EXAMPLE: [X]
IF YOU DO NOT WISH YOUR SHARES VOTED "FOR" A PARTICULAR NOMINEE ,MARK
THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE THROUGH THE NOMINEE(S)'
NAME. YOUR SHARES WILL BE VOTED "FOR" THE REMAINING NOMINEE(S)
1. To elect ten individuals to the Board of Directors of AIM Tax-Exempt
Funds, Inc., each of whom will serve until his or her successor is
elected and qualified:
FOR WITHHOLD FOR ALL EXCEPT
AUTHORITY
FOR ALL
NOMINEES
[ ] [ ] [ ]
Charles T. Bauer Carl Frischling
Bruce L. Crockett Robert H. Graham
Owen Daly II Prema Mathai-Davis
Edward K. Dunn Jr. Lewis F. Pennock
Jack Fields Louis S. Sklar
2. To approve an Agreement and Plan of Reorganization which provides for
the reorganization of AIM Tax-Exempt Funds, Inc. as a Delaware business
trust.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve a new Master Investment Advisory Agreement with A I M
Advisors, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<PAGE> 106
4. To approve a proposal to amend AIM Tax-Free Intermediate Fund's
fundamental investment restrictions.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
(a) Change to Fundamental Restriction on Issuer
Diversification [ ] [ ] [ ]
(b) Change to Fundamental Restriction on Borrowing Money and
Issuing Senior Securities [ ] [ ] [ ]
(c) Elimination of Fundamental Restriction on Purchasing
Securities While Borrowings Exceed 5% of Total Assets [ ] [ ] [ ]
(d) Change to Fundamental Restriction on Underwriting
Securities [ ] [ ] [ ]
(e) Change to Fundamental Restriction on Industry
Concentration [ ] [ ] [ ]
(f) Change to Fundamental Restriction on Purchasing or Selling
Real Estate [ ] [ ] [ ]
(g) Change to Fundamental Restriction on Purchasing or Selling
Commodities or Commodities Futures Contracts [ ] [ ] [ ]
(h) Change to Fundamental Restrictions on Making Loans [ ] [ ] [ ]
(iii) Approval of a New Fundamental Investment Restriction on
Investing All of Each Fund's Assets in an Open-End Fund [ ] [ ] [ ]
(j) Elimination of Fundamental Restriction on Margin
Transactions, Short Sales of Securities and Puts, Calls,
Straddles, Spreads or Combination Thereof [ ] [ ] [ ]
(k) Elimination of Fundamental Restriction on Pledging,
Mortgaging or Hypothecating Assets [ ] [ ] [ ]
(l) Change to Fundamental Restriction on Investing in Tax-
Exempt Securities
(m) Elimination of Fundamental Restriction on Purchasing
Private Activity Bonds
</TABLE>
5. THIS PROPOSAL IS NOT APPLICABLE TO AIM TAX-FREE INTERMEDIATE FUND.
<PAGE> 107
6. To approve changing the investment objectives of AIM Tax-Exempt Bond
Fund of Connecticut and AIM Tax-Free Intermediate Fund and making them
non-fundamental.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. To ratify the selection of KPMG LLP as independent accountants of AIM
Tax-Free Intermediate Fund for the fiscal year ending in 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
8. In the discretion of such proxies, upon such other business as may
properly come before the meeting or any adjournment thereof.
<PAGE> 108
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
ENCLOSED YOU WILL FIND ONE OR MORE PROXY CARDS RELATING TO EACH OF THE
FUNDS FOR WHICH YOU ARE ENTITLED TO VOTE. PLEASE INDICATE YOUR VOTING
INSTRUCTIONS ON EACH OF THE ENCLOSED PROXY CARDS, DATE AND SIGN THEM,
AND RETURN THEM IN THE ENVELOPE PROVIDED. IF YOU SIGN, DATE AND RETURN
A PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED
"FOR" THE NOMINEES FOR DIRECTOR NAMED IN THE ATTACHED PROXY STATEMENT
AND "FOR" ALL OTHER PROPOSALS INDICATED ON THE CARDS. IN ORDER TO AVOID
THE ADDITIONAL EXPENSES OF FURTHER SOLICITATION, WE ASK YOUR
COOPERATION IN MAILING IN YOUR PROXY CARDS PROMPTLY. UNLESS PROXY CARDS
ARE SIGNED BY THE APPROPRIATE PERSONS AS INDICATED IN THE INSTRUCTIONS
BELOW, THEY WILL NOT BE VOTED.
- --------------------------------------------------------------------------------
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance to
you and avoid the time and expense involved in validating your vote if you fail
to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of registration. For
example:
<TABLE>
<CAPTION>
REGISTRATION VALID SIGNATURE
------------ ---------------
<S> <C>
Trust Accounts
(1) ABC Trust Account................................... John B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78................. Jane B. Doe
Partnership Accounts
(1) The XYZ Partnership................................. Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership................ Jane B. Smith, General Partner
Custodial or Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGMA/UTMA........................................... John B. Smith
(2) Estate of John B. Smith............................. John B. Smith, Jr., Executor
Corporate Accounts
(1) ABC Corp............................................ ABC Corp.
John Doe, Treasurer
(2) ABC Corp............................................ John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer................... John Doe
(4) ABC Corp. Profit Sharing Plan....................... John Doe, Trustee
</TABLE>
