1
EXHIBIT 5(b)
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, as made the 4th day of August, 1997, by and between
A I M Advisors, Inc. (the "Advisor"), a Delaware corporation, and AIM Advisor
Funds, Inc., a Maryland corporation (the "Fund").
W I T N E S S E T H :
WHEREAS, the Fund is a corporation organized under the laws of the
State of Maryland; and
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), as a diversified, open-end
management investment company and is currently divided into seven series (the
"Shares"), and which may be divided into additional series, each representing
an interest in a separate portfolio of investments (such series as are
presently structured being designated as the AIM Advisor Large Cap Value Fund,
AIM Advisor Income Fund, AIM Advisor Flex Fund, AIM Advisor MultiFlex Fund, AIM
Advisor Real Estate Fund, AIM Advisor International Value Fund, and AIM Advisor
Cash Management Fund. Such series, together with any future series, are
hereinafter referred to as the "Series"); and
WHEREAS, the Fund desires that the Adviser manage its investment
operations and provide it with certain other services, and the Adviser desires
to manage said operations and to provide such other services;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Investment Management Services. The Adviser hereby agrees to manage the
investment operations of the Fund's Series, subject to the terms of this
Agreement and to the supervision of the Fund's directors (the "Directors"). The
Adviser agrees to perform, or arrange for the performance of, the following
specific services for the Fund:
(a) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Fund's Series, and to execute all purchases and
sales of portfolio securities;
(b) to maintain a continuous investment program for the Fund's Series,
consistent with (i) the Series investment policies as set forth in the
Fund's Articles of Incorporation, Bylaws, and Registration Statement, as
from time to time amended, under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act"), and in
any Prospectus and/or Statement of Additional Information of the Fund, as
from time to time amended and in use under the Securities Act of 1933, as
amended, and (ii) the Fund's status as a regulated investment company under
the Internal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or sold for the
Fund's Series, unless otherwise directed by the Directors of the Fund, and
to execute transactions accordingly;
(d) to provide to the Fund's Series the benefit of all of the investment
analyses and research, the reviews of current economic conditions and of
trends, and the consideration of long-range
2
investment policy now or hereafter generally available to investment
advisory customers of the Adviser;
(e) to determine what portion of the Fund's Series should be invested in
the various types of securities authorized for purchase by the Fund; and
(f) to make recommendations as to the manner in which voting rights,
rights to consent to Fund action and any other rights pertaining to the
Series' securities shall be exercised.
With respect to execution of transactions for the Fund's Series, the
Adviser is authorized to employ such brokers or dealers as may, in the
Adviser's best judgment, implement the policy of the Fund to obtain prompt and
reliable execution at the most favorable price obtainable. In assigning an
execution or negotiating the commission to be paid therefor, the Adviser is
authorized to consider the full range and quality of a broker's services which
benefit the Fund, including but not limited to research and analytical
capabilities, reliability of performance, sale of Fund shares, and financial
soundness and responsibility. Research services prepared and furnished by
brokers through which the Adviser effects securities transactions on behalf of
the Fund may be used by the Adviser in servicing all of its accounts, and not
all such services may be used by the Adviser in connection with the Fund. In
the selection of a broker or dealer for execution of any negotiated
transaction, the Adviser shall have no duty or obligation to seek advance
competitive bidding for the most favorable negotiated commission rate for such
transaction; or to select any broker solely on the basis of its purported or
"posted" commission rate for such transaction, provided, however, that the
Adviser shall consider such "posted" commission rates, if any, together with
any other information available at the time as to the level of commissions
known to be charged on comparable transactions by other qualified brokerage
firms, as well as all other relevant factors and circumstances, including the
size of any contemporaneous market in such securities, the importance to the
Fund of speed, efficiency, and confidentiality of execution, the execution
capabilities required by the circumstances of the particular transactions, and
the apparent knowledge or familiarity with sources from or to whom such
securities may be purchased or sold. Where the commission rate reflects
services, reliability and other relevant factors in addition to the cost of
execution, the Adviser shall have the burden of demonstrating that such
expenditures were bona fide and for the benefit of the Fund. Fund transactions
may be effected through qualified broker-dealers who recommend the Fund to
their clients, or who act as agent in the purchase of the Fund's shares for
their clients. When a number of brokers and dealers can provide comparable best
price and execution on a particular transaction, the Adviser may consider the
sale of Fund shares by a broker or dealer in selecting among qualified
broker-dealers.
2. Other Services and Facilities. The Adviser shall, in addition, supply at
its own expense all supervisory and administrative services and facilities
necessary in connection with the day-to-day operations of the Fund's Series
(except those associated with the preparation and maintenance of certain
required books and records and certain sub- accounting services, which services
and facilities are provided under separate Accounting Services, Transfer Agency
and Administrative Services Agreements between the Adviser and A I M Fund
Services, Inc., and those operational services which are necessary for the
day-to-day operations of the Fund's Series, which services are provided under a
separate Operating Services Agreement dated August 4, 1997, between the Fund
and the Adviser (the "Operating Services Agreement"). These services shall
include, but not be limited to: supplying the Fund with officers, clerical
staff and other employees, if any, who are necessary in connection with the
Fund's operations; furnishing office space, facilities, equipment, and
supplies; conducting periodic compliance reviews of the Fund's operations;
preparation and review of certain required documents, reports and filings
(including required reports to the Securities
2
3
and Exchange Commission (the "SEC"), and other corporate documents of the
Fund), except insofar as the assistance of independent accountants or attorneys
is necessary or desirable; supplying basic telephone service and other
utilities; and preparing and maintaining the books and records required to be
prepared and maintained by the Fund pursuant to Rule 31a-1(b)(4), (5), (9), and
(10) under the Investment Company Act. All books and records prepared and
maintained by the Adviser for the Fund under this Agreement shall be the
property of the Fund and, upon request therefor, the Adviser shall surrender to
the Fund such of the books and records so requested.
3. Payment of Costs and Expenses. The Adviser shall bear the costs and
expenses of all personnel, facilities, equipment and supplies reasonably
necessary to provide the services required to be provided by the Adviser under
this Agreement. The Adviser shall pay all of the costs and expenses associated
with the Fund's operations and activities, except those expressly assumed by
the Fund under this Agreement, which shall consist of:
(a) all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Fund in connection with securities transactions to which
the Fund is a party or in connection with securities owned by the Fund's
Series;
(b) the interest on indebtedness, if any, incurred by the Fund;
(c) extraordinary expenses, including unexpected franchise or income
taxes, or business license and other corporate fees (not including SEC and
state securities registration fees) that are not anticipated which the Fund
will be required to pay to federal, state, county, city, or other
governmental agents, and fees and disbursements of Fund counsel in
connection with litigation by or against the Fund;
(d) the expenses of distributing shares of the Fund but only if and to the
extent permissible under a plan of distribution adopted by the Fund pursuant
to Rule 12b-1 under the Investment Company Act; and
(e) all fees paid by the Fund for operational services which are necessary
for the day-to-day operations of the Fund's Series under the Operating
Services Agreement.
4. Use of Affiliated Companies. In connection with the rendering of the
services required to be provided by the Adviser under this Agreement, the
Adviser may, to the extent it deems appropriate and subject to compliance with
the requirements of applicable laws and regulations, and upon receipt of
written approval of the Fund, make use of its affiliated companies and their
employees; provided that the Adviser shall supervise and remain fully
responsible for all such services in accordance with and to the extent provided
by this Agreement, and further provided that all costs and expenses associated
with the providing of services by any such companies or employees and required
by this Agreement to be borne by the Adviser shall be borne by the Adviser or
its affiliated companies.
5. Compensation of the Adviser. For the services to be rendered and the
charges and expenses to be assumed by the Adviser hereunder, the Fund shall pay
to the Adviser an advisory fee which will be computed daily and paid as of the
last day of each month, using for each daily calculation the most recently
determined net asset value of each of the Fund's Series, as determined by
valuations made in accordance with the Fund's procedures for calculating its
net asset value as described in the Fund's Prospectus and/or Statement of
Additional Information. The advisory fee to the Adviser shall be computed at
the annual rates indicated in Schedule A hereto. During any
3
4
period when the determination of the Fund's net asset value is suspended by the
Directors of the Fund, the net asset value of a share of the Fund as of the
last business day prior to such suspension shall, for the purpose of this
Paragraph 5, be deemed to be the net asset value at the close of each
succeeding business day until it is again determined.
No advisory fee shall be paid to the Adviser with respect to any
assets of the Fund's Series which may be invested in any other investment
company for which the Adviser serves as investment adviser or sub-adviser. The
fee provided for hereunder shall be prorated in any month in which this
Agreement is not in effect for the entire month. If, in any given year, the sum
of a Series' expenses exceeds the state-imposed annual expense limitation, if
any to which the Fund is subject, the Adviser will be required to reimburse
that Series for such excess expenses promptly. Interest, taxes and
extraordinary items such as litigation costs are not deemed expenses for
purposes of this paragraph and shall be borne by that Series in any event.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are
accounted for as capital items and shall not be deemed to be expenses for
purposes of this paragraph.
6. Avoidance of Inconsistent Positions and Compliance with Laws. In connection
with purchases or sales of securities for the investment portfolios of the
Fund's Series, neither the Adviser nor its officers or employees will either
act as a principal or agent for any party other than the Fund's Series or
receive any commissions. The Adviser will comply with all applicable laws in
acting hereunder including, without limitation, the Investment Company Act; the
Investment Advisers Act of 1940, as amended; and all rules and regulations duly
promulgated under the foregoing.
7. Duration and Termination. With respect to each of the Fund's Series, this
Agreement is subject to approval by a majority of the outstanding voting
securities of that Series, and shall become effective as of the date so written
above with respect to each Series for which such approval has been obtained,
and unless sooner terminated as hereinafter provided, shall remain in force
with respect to each such Series for an initial term ending two years from the
date of execution, and from year to year thereafter, but only as long as such
continuance is specifically approved at least annually (i) by a vote of a
majority of the outstanding voting securities of such Series or by the
Directors of the Fund, and (ii) by a majority of the Directors of the Fund who
are not interested persons of the Adviser or the Fund by votes cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may, on 60 days' prior written notice, be terminated as
to the Fund or as to any one or more of the Series without the payment of any
penalty, by the Directors of the Fund, or by the vote of a majority of the
outstanding voting securities of the Fund's Series, as the case may be, or by
the Adviser. This Agreement shall immediately terminate in the event of its
assignment, unless an order is issued by the SEC conditionally or
unconditionally exempting such assignment from the provisions of Section 15(a)
of the Investment Company Act, in which event this Agreement shall remain in
full force and effect subject to the terms and provisions of said order. In
interpreting the provisions of this paragraph 7, the definitions contained in
Section 2(a) of the Investment Company Act and the applicable rules under the
Investment Company Act (particularly the definitions of "interested person,"
"assignment" and "vote of a majority of the outstanding voting securities")
shall be applied.
The Adviser agrees to furnish to the Directors of the Fund such
information on an annual basis as may reasonably be necessary to evaluate the
terms of this Agreement.
4
5
Termination of this Agreement shall not affect the right of the
Adviser to receive payments on any unpaid balance of the compensation described
in paragraph 5 earned prior to such termination.
8. Non-Exclusive Services. The Adviser shall, during the term of this
Agreement, be entitled to render investment advisory services to others,
including, without limitation, other investment companies with similar
objectives to those of the Fund's Series. The Adviser may, when it deems such
to be advisable, aggregate orders for its other customers together with any
securities of the same type to be sold or purchased for the Fund's Series in
order to obtain best execution and lower brokerage commissions. In such event,
the Adviser shall allocate the shares so purchased or sold, as well as the
expenses incurred in the transaction, in the manner it considers to be most
equitable and consistent with its fiduciary obligations to the Fund's Series
and the Adviser's other customers. It is understood that directors, officers,
employees and shareholders of the Fund are or may become interested in the
Adviser and its affiliates, as directors, officers, employees and shareholders
or otherwise and that directors, officers, employees and shareholders of the
Adviser, and its affiliates are or may become interested in the Fund as
directors, officers and employees.
9. Miscellaneous Provisions.
Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for the receipt of such notice.
Amendments Hereof. No provision of this Agreement may be orally
changed or discharged, but may only be modified by an instrument in writing
signed by the Fund and the Adviser. In addition, no amendment to this Agreement
shall be effective unless approved by (1) the vote of a majority of the
Directors of the Fund, including a majority of the Directors who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such amendment, and (2)
the vote of a majority of the outstanding voting securities of any of the
Fund's Series as to which such amendment is applicable (other than an amendment
which can be effective without shareholder approval under applicable law).
Severability. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be held illegal or made
invalid by a court decision, statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or enforceability of the remainder of
this Agreement.
Headings. The headings in this Agreement are inserted for convenience
and identification only and are in no way intended to describe, interpret,
define or limit the size, extent or intent of this Agreement or any provision
hereof.
Applicable Law. This Agreement shall be construed in accordance with
the laws of the State of Texas. To the extent that the applicable laws of the
State of Texas, or any of the provisions herein, conflict with applicable
provisions of the Investment Company Act, the latter shall control.
10. License Agreement. The Fund 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 Fund with
respect to such series of shares.
5
6
IN WITNESS WHEREOF, the Adviser and the Fund each has caused this
Agreement to be duly executed on its behalf by an officer thereunto duly
authorized, on the date first above written.
AIM ADVISOR FUNDS, INC.
By: /s/ XXXXXX X. XXXXXX
---------------------------
President
ATTEST:
/s/ XXXXXX X. XXXX
------------------------------
Assistant Secretary
A I M ADVISORS, INC.
By: /s/ XXXXXX X. XXXXXX
---------------------------
President
ATTEST:
/s/ XXXXXXX X. XXXXX
------------------------------
Assistant Secretary
6
7
SCHEDULE A
TO
INVESTMENT ADVISORY AGREEMENT
OF AIM ADVISOR FUNDS, INC.
Pursuant to Clause 5 of the Investment Advisory Agreement, fees
payable thereunder to the Adviser shall be calculated by applying the following
annual rates to the average daily net assets of each Series:
SERIES ANNUAL FEE RATE
------ ---------------
AIM Advisor Large Cap Value Fund 0.75%
AIM Advisor Flex Fund 0.75%
AIM Advisor Real Estate Fund 0.90%
AIM Advisor MultiFlex Fund 1.00%
AIM Advisor International Value Fund 1.00%
AIM Advisor Income Fund 0.65%
AIM Advisor Cash Management Fund 0.50%
7
