<PAGE> 1
AIM V.I. GLOBAL GROWTH AND INCOME FUND
A PORTFOLIO OF
AIM VARIABLE INSURANCE FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
July 20, 2000
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your approval
of the proposed combination of AIM V.I. GLOBAL GROWTH AND INCOME FUND ("Global
Growth and Income Fund" or "Acquired Fund") with AIM V.I. GROWTH AND INCOME FUND
("Growth and Income Fund" or "Acquiring Fund").
The Acquired Fund and the Acquiring Fund (each, a "Fund," and collectively,
the "Funds") are each an investment portfolio of AIM Variable Insurance Funds
("AVIF").
As discussed in the accompanying document, the Acquiring Fund has:
- substantially identical investment objectives,
- substantially similar investment policies,
- the same investment adviser (A I M Advisors, Inc.),
- significantly larger net assets,
- a lower operating expense ratio, and
- better historical performance than the Acquired Fund.
The accompanying document describes the proposed transaction and compares
the investment objectives and policies, net assets, operating expenses,
performance histories and risks of the Acquired Fund and the Acquiring Fund.
Shareholders of the Acquired Fund are being asked to approve an Agreement
and Plan of Reorganization by and among AIM Variable Insurance Funds, on behalf
of the Acquired Fund and the Acquiring Fund, and AIM that will govern the
reorganization of the Acquired Fund into the Acquiring Fund.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF AIM VARIABLE
INSURANCE FUNDS, ON BEHALF OF THE ACQUIRED FUND, HAS UNANIMOUSLY APPROVED THE
PROPOSAL AND RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY AND THEN
VOTE FOR THE PROPOSAL.
Your vote is important. Please take a moment now to sign and return your
proxy cards in the enclosed postage paid return envelope.
Sincerely,
/s/ ROBERT H. GRAHAM
Robert H. Graham
President
<PAGE> 2
AIM V.I. GLOBAL GROWTH AND INCOME FUND
A PORTFOLIO OF
AIM VARIABLE INSURANCE FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 1, 2000
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of AIM V.I. Global Growth and Income Fund will be held at 11 Greenway
Plaza, Suite 100, Houston, Texas, on Friday, September 1, 2000, at 3:00 p.m.
local time, for the following purposes:
(1) To approve an Agreement and Plan of Reorganization (the
"Agreement") by and among AIM Variable Insurance Funds ("AVIF"), on behalf
of its AIM V.I. Global Growth and Income Fund ("Acquired Fund") and its AIM
V.I. Growth and Income Fund ("Acquiring Fund"), and A I M Advisors, Inc.,
and the consummation of the transaction that the Agreement contemplates.
The Agreement contemplates the acquisition of all of the assets and the
assumption of all of the liabilities of the Acquired Fund by the Acquiring
Fund in exchange for shares of the Acquiring Fund, which shares the
Acquiring Fund will directly issue to the shareholders of the Acquired
Fund. Each shareholder of the Acquired Fund will receive that number of the
Acquiring Fund's shares representing interests with an aggregate net asset
value equal to the aggregate net asset value of his or her shares of the
Acquired Fund.
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Shareholders of record at the close of business on June 23, 2000, are
entitled to notice of, and to vote at, the Special Meeting. Please refer to the
accompanying Combined Proxy Statement and Prospectus for more information.
WHETHER OR NOT YOU ATTEND THE SPECIAL MEETING, WE URGE YOU TO PROMPTLY COMPLETE,
SIGN AND RETURN THE ENCLOSED PROXY CARD, SO THAT A QUORUM WILL BE PRESENT AND A
MAXIMUM NUMBER OF SHARES MAY BE VOTED. VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE CONTRACTOWNERS WHO ARE ENTITLED TO INSTRUCT THE VOTING OF SHARES
ATTRIBUTABLE TO THEIR CONTRACTS MAY DO SO BY RETURNING THE ACCOMPANYING VOTING
INSTRUCTION FORM IN THE ENCLOSED ENVELOPE.
By Order of the Board,
/s/ CAROL F. RELIHAN
Carol F. Relihan,
Secretary
Houston, Texas
<PAGE> 3
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. GROWTH AND INCOME FUND
EACH A PORTFOLIO OF
AIM VARIABLE INSURANCE FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 410-4246
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: JULY 20, 2000
This document is being furnished in connection with a special meeting of
Shareholders of AIM V.I. Global Growth and Income Fund ("Acquired Fund"), to be
held on September 1, 2000 (the "Special Meeting").
At the Special Meeting, the shareholders of the Acquired Fund will be asked
to consider and approve an Agreement and Plan of Reorganization (the
"Agreement") by and among AIM Variable Insurance Funds ("AVIF"), a Delaware
business trust, acting on behalf of the Acquired Fund and on behalf of AIM V.I.
Growth and Income Fund ("Acquiring Fund"), and A I M Advisors, Inc. ("AIM"). The
Agreement provides for the reorganization of the Acquired Fund into the
Acquiring Fund (the "Reorganization"). THE BOARD OF TRUSTEES OF THE ACQUIRED
FUND HAS UNANIMOUSLY APPROVED THE AGREEMENT AND REORGANIZATION AS BEING IN THE
BEST INTERESTS OF THE ACQUIRED FUND.
The Agreement provides that:
- all of the assets of the Acquired Fund will be transferred to the
Acquiring Fund,
- the Acquiring Fund will assume all of the liabilities of the Acquired
Fund, and
- the Acquiring Fund will issue its shares to the shareholders of the
Acquired Fund.
The value of each Acquired Fund shareholder's account with the Acquiring
Fund immediately after the Reorganization will be the same as the value of such
shareholder's account with the Acquired Fund immediately prior to the
Reorganization. The Reorganization has been structured as a tax-free
transaction.
The Acquiring Fund is an investment portfolio of AVIF, an open-end, series
management investment company. The investment objective of the Acquiring Fund is
substantially identical to that of the Acquired Fund. AIM serves as the
investment adviser to the Acquired Fund and the Acquiring Fund.
This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
sets forth the information that a shareholder of the Acquired Fund should know
before voting on the Agreement. Please read it and retain it for future
reference.
AVIF also has filed with the Securities and Exchange Commission (the "SEC")
a Statement of Additional Information, dated July 20, 2000, relating to the
Agreement. The Statement of Additional Information is incorporated by reference
into this Proxy Statement/Prospectus.
The Prospectus of the Acquired Fund, dated May 1, 2000 (the "Acquired Fund
Prospectus"), together with the related Statement of Additional Information,
also dated May 1, 2000, are on file with the SEC and are incorporated into this
Proxy Statement/Prospectus by reference. The Prospectus of the Acquiring Fund,
dated May 1, 2000 (the "Acquiring Fund Prospectus") is attached as Appendix II
to this Proxy Statement/ Prospectus. The related Statement of Additional
Information, also dated May 1, 2000, is on file with the SEC. The Acquiring Fund
Prospectus and the related Statement of Additional Information are incorporated
into this Proxy Statement/Prospectus by reference. A copy of portions of the
annual report of the Acquiring Fund for the year ended December 31, 1999, is
attached as Appendix III of this Proxy Statement/Prospectus. You
<PAGE> 4
can get a free copy of any of these documents by writing to A I M Distributors,
Inc., P.O. Box 4739, Houston, Texas 77210-4739 or by calling (800) 410-4246.
The SEC maintains a Web site at http://www.sec.gov that contains the
prospectus and statements of additional information described above, material
incorporated by reference, and other information about the Acquired and
Acquiring Funds.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SECURITIES DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, AND HAS NOT PASSED ON
THE ACCURACY OR THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction................................................ 1
Reasons for the Reorganization.............................. 2
Background and Reasons for the Reorganization............. 2
Synopsis.................................................... 2
The Reorganization........................................ 2
Comparison of the Acquiring Fund and the Acquired Fund.... 2
Distribution of Fund Shares............................... 4
Investment Advisory Services.............................. 4
Principal Risk Factors...................................... 5
Comparison of Risks of the Acquiring Fund and the Acquired
Fund...................................................... 5
Board Considerations........................................ 6
Information about the Acquired Fund and the Acquiring
Fund...................................................... 8
Additional Information about the Agreement.................. 8
Terms of the Reorganization............................... 8
The Reorganization........................................ 8
Other Terms............................................... 9
Federal Tax Consequences.................................. 9
Accounting Treatment...................................... 12
Rights of Shareholders...................................... 12
Ownership of the Acquired Fund and the Acquiring Fund
Shares.................................................... 12
5% Owners................................................. 12
Ownership of Officers and Trustees........................ 13
Capitalization.............................................. 14
Legal Matters............................................... 14
Information Filed with the Securities and Exchange
Commission................................................ 14
</TABLE>
<TABLE>
<S> <C>
Appendices
Agreement and Plan of Reorganization...................... Appendix I
Prospectus of the Acquiring Fund.......................... Appendix II
AIM V.I. Growth and Income Fund Discussion and Analysis... Appendix III
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM Internet
Connect are service marks of A I M Management Group Inc.
i
<PAGE> 6
INTRODUCTION
This Proxy Statement/Prospectus relates to the solicitation of proxies by
the Board of Trustees of the Acquired Fund from the shareholders of the Acquired
Fund for use at the Special Meeting of Shareholders to be held at 11 Greenway
Plaza, Suite 100, Houston, TX 77046-1173 on September 1, 2000, at 3:00 p.m.,
Central time (such meeting and any adjournments thereof are referred to as the
"Special Meeting").
All properly executed and unrevoked proxies received in time for the
Special Meeting will be voted in accordance with the instructions contained
therein. If no instructions are given, shares represented by proxies will be
voted FOR the proposal to approve the Agreement and in accordance with
management's recommendation on other matters. The presence in person or by proxy
of one-third of the outstanding shares of beneficial interest in the Acquired
Fund at the Special Meeting will constitute a quorum ("Quorum") with respect to
the shares. Approval of the Agreement requires the affirmative vote of a
majority of the shares cast by shareholders of the Acquired Fund. Abstentions
will be counted as shares present at the Special Meeting for quorum purposes,
but will not be considered votes cast at the Special Meeting. Any person giving
a proxy has the power to revoke it at any time prior to its exercise by
executing a superseding proxy or by submitting a notice of revocation to the
Secretary of AVIF. In addition, although mere attendance at the Special Meeting
will not revoke a proxy, a shareholder present at the Special Meeting may
withdraw his proxy and vote in person. Shareholders may also transact any other
business not currently contemplated that may properly come before the Special
Meeting in the discretion of the proxies or their substitutes.
In accordance with current law, life insurance company shareholders of the
Acquired Fund, in effect, pass along their voting rights to owners of variable
annuity and variable life insurance contracts issued by the companies.
Essentially, the life insurance companies seek instructions as to how contract
owners wish the companies to vote the Acquired Fund shares (1) technically owned
by the companies but (2) beneficially owned by the contract owners. The life
insurance companies communicate directly with contract owners about the
procedures that the companies follow in seeking instructions and voting shares
under the particular variable annuity and variable life insurance contracts. The
Acquired Fund understands that the life insurance companies will vote shares for
which instructions are not received from contract owners in proportion to shares
for which instructions are received from shareholders.
Shareholders of record as of the close of business on June 23, 2000 (the
"Record Date") are entitled to vote at the Special Meeting. Each share is
entitled to one vote for each full share held, and a fractional vote for a
fractional share held. On the Record Date, there were 1,923,562 shares
outstanding for the Acquired Fund.
The Acquired Fund has engaged the services of Shareholder Communications
Corporation ("SCC") to assist it in the solicitation of proxies for the Special
Meeting. The Acquired Fund expects to solicit proxies principally by mail, but
also may solicit proxies by telephone, facsimile, telegraph or personal
interview. The officers of the Acquired Fund will not receive any additional
or special compensation for any such solicitation. The cost of shareholder
solicitation is anticipated to be approximately $1,500. The Agreement and Plan
of Reorganization provides that the Acquired Fund will bear its costs and
expenses incurred in connection with its Reorganization.
The Acquired Fund intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about July 20, 2000.
1
<PAGE> 7
REASONS FOR THE REORGANIZATION
BACKGROUND AND REASONS FOR THE REORGANIZATION
The Acquired Fund (formerly named the GT Global Variable Growth & Income
Fund) is an investment portfolio of AVIF. AVIF is a Delaware business trust
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). AVIF consists of 17 separate portfolios, including the Acquired and
Acquiring Funds.
Sales of shares of the Acquired Fund have been declining over the past two
years. Because more shares are being redeemed than purchased, the Fund's
relatively small asset base has eroded appreciably.
In view of this situation, AIM, the investment adviser to each Fund,
evaluated the Acquired Fund and the Acquiring Fund and recommended the
Reorganization, because the Acquiring Fund has substantially identical
investment objectives, substantially similar investment policies, better
historical performance, and a lower operating expense ratio than the Acquired
Fund. The Acquiring Fund is also significantly larger than the Acquired Fund and
sales of the Acquiring Fund's shares for the past two years have far exceeded,
and continue to exceed, redemptions. AIM believes that combining the Acquired
Fund with the Acquiring Fund, which has a large increasing base of assets, will
enable Acquired Fund shareholders to participate in economies of scale.
SYNOPSIS
This synopsis is qualified by reference to the more complete information
contained elsewhere in this Proxy Statement/Prospectus, the Prospectus for the
Acquiring Fund, the Prospectus for the Acquired Fund, and the Agreement.
THE REORGANIZATION
The Reorganization will result in the combination of the Acquired Fund with
the Acquiring Fund.
If shareholders of the Acquired Fund approve the Agreement and other
closing conditions are satisfied, all of the assets of the Acquired Fund will be
transferred to the Acquiring Fund, the Acquiring Fund will assume all of the
liabilities of the Acquired Fund, and the Acquiring Fund will issue its shares
to the Acquired Fund's shareholders. The shares of the Acquiring Fund issued in
a Reorganization will have an aggregate net asset value equal to the value of
the Acquired Fund's net assets transferred to the Acquiring Fund. The value of
each shareholder's account with the Acquiring Fund immediately after a
Reorganization will be the same as the value of such shareholder's account with
the Acquired Fund immediately prior to the Reorganization. A copy of the
Agreement is attached as Appendix I to this Proxy Statement/Prospectus. See
"Additional Information About the Agreement" below.
The Acquired Fund has received an opinion of Freedman, Levy, Kroll &
Simonds, to the effect that the Reorganization will constitute tax-free
reorganization for Federal income tax purposes. Thus, shareholders will not have
to pay Federal income taxes as a result of the Reorganization, and owners of
variable annuity and variable life insurance contracts will not bear any adverse
tax consequences. See "Additional Information About the Agreement -- Federal Tax
Consequences" below.
COMPARISON OF THE ACQUIRING FUND AND THE ACQUIRED FUND
Investment Objectives
The Acquiring Fund and the Acquired Fund have substantially identical
investment objectives. The Acquiring Fund seeks growth of capital with a
secondary objective of current income. The Acquired Fund seeks long-term growth
of capital together with current income.
The investment objective(s) of both Funds are non-fundamental policies and
may be changed by the Board of Trustees without shareholder approval.
2
<PAGE> 8
Investment Policies
The investment policies for the Acquiring Fund and the Acquired Fund are
not identical, but are similar in many respects. The Acquiring Fund invests at
least 65% of its total assets in securities of established companies that have
long-term above-average growth in earnings and dividends, and growth companies
that the portfolio managers believe have the potential for above-average growth
in earnings and dividends. The Acquired Fund invests at least 65% of its total
assets in a combination of blue-chip equity securities and high-quality
government bonds of U.S. and foreign issuers.
Each of the Funds invests in foreign securities. However, the Acquiring
Fund may invest up to 25% of its total assets in foreign securities, while the
Acquired Fund generally invests 65% of its assets in U.S. and foreign securities
(although, it is not anticipated that foreign securities will constitute more
than 90% of the value of the total assets of the Acquired Fund).
The Acquired Fund may invest up to 35% of its total assets in other equity
securities and government and corporate debt securities that are investment
grade. The Acquired Fund may purchase debt obligations issued or guaranteed by
the U.S. or foreign governments, including foreign states, provinces or
municipalities, or their agencies, authorities or instrumentalities and debt
obligations of supranational organizations. The Acquired Fund may invest up to
100% of its total assets in either equity or debt securities in response to
general economic changes and market conditions around the world.
The Acquired Fund normally invests in securities of issuers in at least
three countries, including the United States, but may not invest more than 40%
of its assets in securities of issuers in any one country, other than the U.S.
The Acquired Fund may invest in the securities of issuers located in developing
countries. The Acquired Fund may invest in securities denominated in more than
one currency.
The investment policies, strategies and practices of each Fund are also
non-fundamental. The Board of Trustees of AVIF reserves the right to change any
of these non-fundamental investment policies, strategies or practices without
shareholder approval.
The foregoing discussion is a summary of the principal differences and
similarities between the investment policies of the Funds. For a more complete
discussion of each Fund's policies, see "Investment Objectives and Strategies"
in each Fund's Prospectus and "Investment Strategies and Risks" and "Certain
Investment Strategies and Techniques" in each Fund's Statement of Additional
Information.
The investment restrictions adopted by both Funds as fundamental are
identical and are summarized under the caption "Investment Restrictions" in
their respective Prospectuses and Statements of Additional Information. A
fundamental investment restriction cannot be changed without the vote of the
majority of the outstanding voting securities of a fund as defined in the 1940
Act.
Performance
A comparison of the performance of the Acquiring Fund and Acquired Fund is
provided under "Board Considerations," below.
Fee Table
This table compares the fees and expenses of the Acquired Fund and
Acquiring Fund as of April 30, 2000.
3
<PAGE> 9
The Acquired Fund and the Acquiring Fund do not charge any of the following
fees:
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases........................... None
Deferred Sales Charge....................................... None
Sales Charge Imposed on Reinvested Dividends................ None
Redemption Fee.............................................. None
Exchange Fee................................................ None
Maximum Account Fee......................................... None
Distribution or Service (12b-1) Fees........................ None
</TABLE>
<TABLE>
<CAPTION>
AIM V.I. GLOBAL GROWTH AIM V.I. GROWTH AND
AND INCOME FUND INCOME FUND
(ACQUIRED FUND) (ACQUIRING FUND)
---------------------- -------------------
<S> <C> <C>
Management Fees................................ 1.00% 0.60%
Other Expenses................................. 0.65% 0.22%
---- ----
Total Annual Fund Operating Expenses........... 1.65% 0.82%
==== ====
</TABLE>
Expense Example
The following example is intended to help you compare the cost of investing
in the Acquired Fund with the cost of investing in the Acquiring Fund.
The example assumes that you invest $10,000 in each Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's gross operating expenses remain the same. The example does
not reflect the fees and expenses associated with variable annuity and variable
life insurance contracts for which the Funds may serve as investment vehicles.
Although your actual returns may be higher or lower, based on these assumptions
your cost would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. Global Growth and Income Fund (Acquired Fund)...... 168 520 897 1,955
AIM V.I. Growth and Income Fund (Acquiring Fund)............ 84 262 455 1,014
</TABLE>
DISTRIBUTION OF FUND SHARES
The Acquired Fund and the Acquiring Fund each sells its shares exclusively
to separate accounts of life insurance companies to fund variable annuity
contracts and variable life insurance contracts issued by the companies. Under
the contracts, a separate account buys or redeems shares of a Fund based on (1)
a contract owner's instruction to invest or receive back monies under a contract
(such as making a premium payment or surrendering a contract) and (2) the
operation of a contract (such as deduction of contract fees and charges).
Contracts may permit contract owners to transfer monies among investment
portfolios of a single mutual fund or of two or more mutual funds. Separate
accounts generally buy additional shares with dividend and capital gains
distributions declared by the Acquired Fund and the Acquiring Fund.
The life insurance companies, on behalf of their separate accounts, are the
shareholders of Acquired Fund and the Acquiring Fund. The owners of the variable
annuity contracts and the variable life insurance contracts are, through the
separate accounts, the beneficial owners of the shares of the Acquired Fund and
the Acquiring Fund.
INVESTMENT ADVISORY SERVICES
AIM serves as investment adviser to the Acquired Fund and the Acquiring
Fund. There are no sub-advisers to either the Acquired Fund or the Acquiring
Fund.
4
<PAGE> 10
PRINCIPAL RISK FACTORS
The principal risks of investing in the Acquiring Fund are set out below.
There is a risk that you could lose all or a portion of your investment in
the Fund and that the income you may receive from your investment may vary. The
value of your investment in the Fund will go up and down with the prices of the
securities in which the Fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. The values of the convertible
securities in which the Fund may invest also will be affected by market interest
rates, the risk that the issuer may default on interest or principal payments
and the value of the underlying common stock into which these securities may be
converted. Specifically, since these types of convertible securities pay fixed
interest and dividends, their values may fall if market interest rates rise and
rise if market interest rates fall. Additionally, an issuer may have the right
to buy back certain of the convertible securities at a time and at a price that
is unfavorable to the Fund.
The prices of foreign securities in which the Acquiring Fund invests may be
further affected by other factors, including:
- Currency exchange rates -- The dollar value of the fund's foreign
investments will be affected by changes in the exchange rates between the
dollar and the currencies in which those investments are traded.
- Political and economic conditions -- The value of the fund's foreign
investments may be adversely affected by political and social instability
in their home countries and by changes in economic or taxation policies
in those countries.
- Regulations -- Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available
information about foreign companies than about U.S. companies.
- Markets -- The securities markets of other countries are smaller than
U.S. securities markets. As a result, many foreign securities may be less
liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign
companies located in developing countries more than those in countries with
mature economies. For example, many developing countries have, in the past,
experienced high rates of inflation or sharply devaluated their currencies
against the U.S. dollar, thereby causing the value of investments in companies
located in those countries to decline. Transaction costs are often higher in
developing countries and there may be delays in settlement procedures.
In addition, if the seller of a repurchase agreement in which the Fund
invests defaults on its obligation or declares bankruptcy, the Fund may
experience delays in selling the securities underlying the repurchase agreement.
As a result, the Fund may incur losses arising from decline in the value of
those securities, reduced levels of income and expenses of enforcing its rights.
COMPARISON OF RISKS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
The Acquiring Fund presents many of the same principal risks of investing
as does the Acquired Fund. There are, however, certain differences between the
principal risks of investing in the Acquiring and Acquired Fund.
Although the Acquired Fund may invest in convertible securities, the
Acquiring Fund generally will invest in convertible securities to a greater
degree, and, therefore, will have more exposure to the risks associated with
such investments, which are described in the preceding section.
The Acquired Fund generally invests to a greater extent in debt securities
than the Acquiring Fund and, therefore, has greater exposure to the risks of
investing in debt securities than the Acquiring Fund. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases may
5
<PAGE> 11
cause the price of a debt security to decrease. The longer a debt security's
duration, the more sensitive it is to this risk.
The Acquired Fund has greater exposure to the risks of investing in
securities of foreign companies than does the Acquiring Fund. The Acquiring Fund
may invest up to 25% of its total assets in foreign securities, while the
Acquired Fund seeks to meet its objectives by investing at least 65% of its
total assets in a combination of blue chip equity securities and high-quality
government bonds of U.S. and foreign issuers. The Acquired Fund normally invests
in securities of issuers in at least three countries, including the U.S.;
however, the Acquired Fund may not invest more than 40% of its assets in
securities of issuers in any one country, other than the U.S.
PLEASE REFER TO THE PROSPECTUS FOR THE ACQUIRED FUND AND THE ACCOMPANYING
PROSPECTUS FOR THE ACQUIRING FUND FOR MORE DETAILS.
BOARD CONSIDERATIONS
The Board of Trustees of AVIF, on behalf of the Acquired Fund, has
determined that the Reorganization of the Acquired Fund is in the best interests
of the Acquired Fund, and the Board of Trustees recommends approval of the
Agreement by the shareholders of the Acquired Fund at the Special Meeting. The
following is a summary of the information that was presented to, and considered
by, the Board of Trustees in making its determination.
At a meeting of the Board of Trustees held on June 14, 2000, AIM proposed
that the Board of Trustees approve the Reorganization of the Acquired Fund into
the Acquiring Fund. The Board of Trustees received from AIM written materials
that described the structure and tax consequences of the Reorganization and that
contained information concerning the Acquired Fund and the Acquiring Fund,
including a comparison of the investment objectives and policies of the Acquired
Fund and the Acquiring Fund, a comparison of the performance, expenses, and net
assets of the Funds, financial information and information on the portfolio
managers of the Acquiring Fund.
In considering the Reorganization, the Board of Trustees noted that the
Acquired Fund and Acquiring Fund have, for the most part, substantially
identical investment objectives and substantially similar investment policies.
The Board of Trustees also noted that the expense ratios of the Acquired Fund
for each of the past five years and at April 30, 2000, have been higher than
those of the Acquiring Fund, as shown below:
RATIO OF EXPENSES TO AVERAGE NET ASSETS(a)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
AT --------------------------------
FUND 4/30/00 1999 1998 1997 1996 1995
---- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Global Growth and Income Fund (Acquired
Fund)(b)......................................... 1.65% 1.22% 1.18% 1.13% 1.20% 1.23%
AIM V.I. Growth and Income Fund (Acquiring Fund)... 0.82% 0.77% 0.65% 0.69% 0.78% 0.78%(c)
</TABLE>
---------------
(a) Ratios for 1999 are based on average net assets of $43,643,834 for the
Acquired Fund and $1,718,996,207 for the Acquiring Fund.
(b) Ratios for the Acquired Fund are shown net of expense reimbursements.
Absent such expense reimbursements, the expense ratios for each of the
years 1999 through 1995 would have been 1.36%, 1.22% 1.27%, 1.30%, and
1.44%, respectively. In addition, the Acquired Fund bears interest expenses
that are not shown above.
(c) Annualized.
6
<PAGE> 12
NET ASSETS
In addition, the Board of Trustees considered the fact that the net assets
of the Acquired Fund are significantly lower than the net assets of the
Acquiring Fund, as shown below.
<TABLE>
<CAPTION>
NET ASSETS AT NET ASSETS AT
APRIL 28, 2000 DECEMBER 31, 1999
FUND $(000'S) $(000'S)
---- -------------- -----------------
<S> <C> <C>
AIM V.I. Global Growth and Income Fund (Acquired Fund)...... $ 27,273 $ 30,756
AIM V.I. Growth and Income Fund (Acquiring Fund)............ $2,667,325 $2,443,264
</TABLE>
The Board of Trustees also considered the performance of the Acquired Fund
in relation to the performance of the Acquiring Fund, both on the basis of (1)
total returns and (2) industry ranking. Comparative average annual total returns
for the one, three, five year, and since inception periods ended December 31,
1999 and March 31, 2000, and comparative year to date average annual total
returns (through April 30, 2000), are set out below. Past performance cannot
guarantee future results. Average annual total return figures do not reflect
life insurance company charges. If average annual total return figures reflected
life insurance company charges, the figures shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS (AS OF DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE INCEPTION OF
YOUNGER OF
ONE THREE FIVE SINCE ACQUIRED OR
FUND YEAR YEARS YEARS INCEPTION ACQUIRING FUND
---- ----- ----- ----- --------- ------------------
<S> <C> <C> <C> <C> <C>
AIM V.I. Global Growth and Income Fund
(Acquired Fund)........................... (0.13)% 11.55% 13.28% 11.63% 11.55%
02/10/93 05/02/94
AIM V.I. Growth and Income Fund
(Acquiring Fund).......................... 34.25% 29.17% 28.18% 24.49% 24.49%
05/02/94 05/02/94
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS (AS OF APRIL 30, 2000)
<TABLE>
<CAPTION>
SINCE INCEPTION OF
YOUNGER OF
ONE THREE FIVE SINCE ACQUIRED OR
FUND YEAR YEARS YEARS INCEPTION ACQUIRING FUND
---- ----- ----- ----- --------- ------------------
<S> <C> <C> <C> <C> <C>
AIM V.I. Global Growth and Income Fund
(Acquired Fund)........................... (1.52)% 10.47% 12.28% 10.90% 10.68%
02/10/93 05/02/94
AIM V.I. Growth and Income Fund
(Acquiring Fund).......................... 23.69% 27.92% 25.59% 23.24% 23.24%
05/02/94 05/02/94
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS (YEAR TO DATE THROUGH APRIL 30, 2000)
<TABLE>
<CAPTION>
YTD
(APRIL 30,
FUND 2000)
---- ----------
<S> <C>
AIM V.I. Global Growth and Income Fund (Acquired Fund)............................. (1.11)%
AIM V.I. Growth and Income Fund (Acquiring Fund)................................... 1.14%
</TABLE>
7
<PAGE> 13
INDUSTRY RANKINGS
- Lipper Rank (Percentile)(1)
<TABLE>
<CAPTION>
CATEGORY YTD 1 YEAR 3 YEAR 5 YEAR
--------------- --- ------ ------ ------
<S> <C> <C> <C> <C> <C>
AIM V.I. Global Growth and Income Fund....... Global 55% 99% 96% 87%
AIM V.I. Growth and Income Fund.............. Growth & Income 34% 9% 8% 7%
</TABLE>
---------------
(1) Under the Lipper ranking system, the lower the percentile rank the better
the performance.
The Board of Trustees further noted that the Acquired Fund will have been
provided with an opinion of counsel that the Reorganization will be tax-free as
to the Acquired Fund and its shareholders and that there will be no adverse tax
consequences for owners of variable annuity and variable life insurance
contracts.
AIM provided the Board of Trustees with an analysis of the Reorganization,
including, comparisons of each Fund's investment objectives and policies,
principal risks, and management fee rates for the year ended December 31, 1999.
A summary of AIM's comparisons and other expenses is set out below.
INFORMATION ABOUT THE ACQUIRED FUND AND THE ACQUIRING FUND
The Synopsis included in this Proxy Statement/Prospectus briefly compares
each Acquired Fund to the Acquiring Fund into which it would be reorganized,
highlighting certain key features of the Funds and certain additional
information about the differences between the Funds.
The Acquiring Fund's Prospectus, included in Appendix II, provides
additional information about the Acquiring Fund. A portion of the most recent
Annual Report for the Acquiring Fund, included in Appendix III, also provides
information about the Acquiring Fund.
Additional information about the Acquired Fund is incorporated into this
Proxy Statement/Prospectus by reference to the Acquired Fund's Prospectus. If
you want more information about the Acquired Fund, you can request a free copy
of the Acquired Fund's Prospectus by calling 1-800-410-4246.
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated
are set forth in the Agreement. Significant provisions of the Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreement, a copy of which is attached as Appendix I to this
Proxy Statement/Prospectus.
THE REORGANIZATION
The Acquiring Fund will acquire all of the assets of the Acquired Fund with
which it will combine in exchange for shares of the Acquiring Fund and the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund.
Consummation of each Reorganization (the "Closing") is expected to occur on or
about September 18, 2000 (the "Closing Date"), at 8:00 a.m. Central time (the
"Effective Time") on the basis of values calculated as of the close of regular
trading on the NYSE on the preceding business day.
At the Effective Time, the Acquired Fund shall deliver all of its assets to
the Custodian for the account of the corresponding Acquiring Fund in exchange
for (1) the assumption by the Acquiring Fund of all of the liabilities of any
kind of the Acquired Fund, and (2) delivery by the Acquiring Fund directly to
the Acquired Fund shareholders of a number of Acquiring Fund shares (including,
if applicable, fractional shares rounded
8
<PAGE> 14
to the nearest thousandth) having an aggregate net asset value equal to the net
value of the assets of the Acquired Fund so transferred, assigned and delivered.
OTHER TERMS
The Agreement may be amended without shareholder approval by mutual
agreement of AVIF, on behalf of the Acquired Fund and the Acquiring Fund, and
AIM. If any amendment is made to the Agreement that effects a material change to
the Agreement and the Reorganization, such change will be submitted to the
affected shareholders for their approval.
The Acquired Fund and the Acquiring Fund each has made representations and
warranties in the Agreement that are customary in matters such as the
Reorganization. The obligations of the Acquired Fund and the Acquiring Fund
pursuant to the Agreement are subject to various conditions, including the
following:
(a) the assets of the Acquired Fund to be acquired by the Acquiring
Fund shall constitute at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross assets held
by the Acquired Fund immediately prior to the Reorganization, including for
this purpose any amounts used by the Acquired Fund to pay its
Reorganization expenses and all redemptions and distributions made by the
Acquired Fund immediately before the Reorganization (other than the
redemptions pursuant to a demand of a shareholder in the ordinary course of
the Acquired Fund's business as a series of an open-end management
investment company under the 1940 Act and regular, normal dividends not in
excess of the requirements of Section 852 of the Code);
(b) AVIF, on behalf of the Acquired Fund and the Acquiring Fund, shall
have filed with the SEC its Registration Statement on Form N-14 under the
Securities Act of 1933 (the "1933 Act") pertaining to the Reorganization;
such Registration Statement shall have become effective; and 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);
(c) the shareholders of the Acquired Fund shall have approved the
Agreement; and
(d) the Acquired Fund shall have received an opinion from Freedman,
Levy, Kroll & Simonds that the Reorganization will not result in the
recognition of gain or loss for United States Federal income tax purposes
for the Acquired Fund, the Acquiring Fund, or their respective
shareholders.
Each of the Acquired Fund and the Acquiring Fund has agreed to bear its own
expenses in connection with the Reorganization.
The Board of Trustees of AVIF, on behalf of the Acquiring Fund, may waive
without shareholder approval any failure by the Acquired Fund to satisfy (1) any
of the conditions to the Acquiring Fund's obligations under Section 6.1 of the
Agreement, and (2) any of the mutual conditions under Section 6.2 of the
Agreement that the Acquired Fund also waives. The Agreement may be terminated
entirely or abandoned by the Acquired Fund or the Acquiring Fund at any time by
mutual agreement of the parties to the Agreement, or by any party in the event
that the Acquired Fund's shareholders do not approve the Agreement or in the
event the Closing does not occur on or before the Closing Date.
FEDERAL TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the existing
Treasury regulations thereunder, current administrative rulings of the Internal
Revenue Service ("IRS") and judicial decisions, all of which are subject to
change.
The principal Federal income tax consequences that are expected to result
from the Reorganization, under currently applicable law, are as follows:
(1) The transfer of the assets of the Acquired Fund to the Acquiring
Fund in exchange for shares of voting stock of the Acquiring Fund ("voting
stock") distributed directly to the shareholders of the
9
<PAGE> 15
Acquired Fund, as provided in the Agreement, will constitute a
"reorganization" within the meaning of Section 368(a)(1) of the Code, and
the Acquired Fund and the Acquiring Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
(2) In accordance with Section 361(a) and Section 361(c)(1) of the
Code, no gain or loss will be recognized by the Acquired Fund on the
transfer of its assets to the Acquiring Fund solely in exchange for the
voting stock of the Acquiring Fund and the Acquiring Fund's assumption of
the Acquired Fund's liabilities, or on the distribution of the voting stock
to the Acquired Fund's shareholders.
(3) In accordance with Section 1032 of the Code, no gain or loss will
be recognized by the Acquiring Fund on the receipt of assets of the
Acquired Fund in exchange for the voting stock of the Acquiring Fund and
the Acquiring Fund's assumption of the Acquired Fund's liabilities.
(4) In accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by shareholders of the Acquired Fund on the receipt of
the voting stock of the Acquiring Fund in constructive exchange for their
Acquired Fund shares.
(5) In accordance with Section 362(b) of the Code, the basis to the
Acquiring Fund of the assets of the Acquired Fund transferred to it will be
the same as the basis of those assets in the hands of the Acquired Fund
immediately before the Reorganization.
(6) In accordance with Section 358(a) of the Code, the Acquired Fund
shareholders' basis for the voting stock of the Acquiring Fund received by
the Acquired Fund shareholder will be the same as the Acquired Fund
shareholders' basis for Acquired Fund shares constructively exchanged
therefor.
(7) In accordance with Section 1223(1) of the Code, the Acquired Fund
shareholders' holding period for the voting stock of the Acquiring Fund
will include the Acquired Fund shareholders' holding period for the
Acquired Fund shares constructively exchanged therefor, provided that the
Acquired Fund shareholder held the Acquired Fund shares as a capital asset.
(8) In accordance with Section 1223(2) of the Code, the holding period
for assets of the Acquired Fund transferred to the Acquiring Fund in the
Reorganization will include the holding period for those assets in the
hands of the Acquired Fund.
(9) The Acquired Fund and the Acquiring Fund will each be a RIC under
Subchapter M and will each comply with the investment diversification
requirements of Section 817(h) of the Code. Accordingly, the Reorganization
will not produce adverse Federal income tax consequences by reason of
income or gain for any Contract Owner.
As a condition to Closing, Freedman, Levy, Kroll & Simonds will render a
favorable opinion to AVIF, on behalf of the Acquired Fund, as to the foregoing
Federal income tax consequences of the Reorganization, which opinion will be
conditioned upon the accuracy, as of the Closing Date, of certain
representations of AVIF, Acquired Fund upon which Freedman, Levy, Kroll &
Simonds will rely in rendering its opinion, which representations include, but
are not limited to, the following (taking into account for purposes thereof any
events that are part of the plan of reorganization):
(a) The fair market value of the voting stock of the Acquiring Fund
received by each shareholder of the Acquired Fund will be approximately
equal to the fair market value of the shares of the Acquired Fund that such
shareholder held before the Reorganization.
(b) There is no plan or intention by the shareholders of the Acquired
Fund to redeem a number of shares of the voting stock of the Acquiring Fund
received in the Reorganization that would reduce the Acquired Fund
shareholders' ownership of the shares to a number of shares having a value,
as of the Closing Date, of less than 50% of the value of all of the
formerly outstanding shares of the Acquired Fund as of the Closing Date.
(c) Following the Reorganization, the Acquiring Fund will continue the
historic business of the Acquired Fund or use a significant portion of the
Acquired Fund's historic business assets in its business.
10
<PAGE> 16
(d) At the direction of the Acquired Fund, the Acquiring Fund will
issue directly to the Acquired Fund's shareholders pro rata the voting
stock that the Acquired Fund constructively receives in the Reorganization,
and the Acquired Fund will distribute its other properties (if any) to its
shareholders, on or as promptly as practicable after the Closing Date.
(e) The Acquiring Fund has no plan or intention to reacquire any of
its voting stock issued in the Reorganization, except to the extent that
the Acquiring Fund is required by the 1940 Act to redeem any of its shares
of voting stock presented for redemption.
(f) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of the Acquired Fund acquired in the
Reorganization, except for dispositions made in the ordinary course of its
business or dispositions necessary to maintain its status as a RIC under
the Code.
(g) The Acquiring Fund, the Acquired Fund, and each shareholder of the
Acquired Fund will pay its respective expenses, if any, incurred in
connection with the Reorganization.
(h) The Acquiring Fund will acquire at least 90 percent of the fair
market value of the net assets, and at least 70 percent of the fair market
value of the gross assets, held by the Acquired Fund immediately before the
Reorganization, including for this purpose any amounts used by the Acquired
Fund to pay its Reorganization expenses and all redemptions and
distributions made by the Acquired Fund immediately before the
Reorganization (other than redemptions pursuant to a demand of a
shareholder in the ordinary course of the Acquired Fund's business as a
series of an open-end management investment company under the 1940 Act and
regular, normal dividends not in excess of the requirements of Section 852
of the Code).
(i) The Acquiring Fund and the Acquired Fund have each elected to be
taxed as a RIC under Section 851 of the Code and will each have qualified
for the special Federal tax treatment afforded RICs under the Code for all
taxable periods. These taxable periods include the taxable year of the
Acquiring Fund that includes the Closing Date and the last short taxable
period of the Acquired Fund ending on the Closing Date.
(j) The liabilities of the Acquired Fund assumed by the Acquiring Fund
and the liabilities to which the transferred assets of the Acquired Fund
are subject were incurred by the Acquired Fund in the ordinary course of
its business.
(k) There is no intercorporate indebtedness existing between the
Acquiring Fund and the Acquired Fund that was issued, acquired, or will be
settled at a discount.
(l) The Acquiring Fund does not own, directly or indirectly, nor has
it owned during the past five years, directly or indirectly, any shares of
the Acquired Fund from which it is receiving assets in the Reorganization.
(m) The fair market value of the assets of the Acquired Fund
transferred to the Acquiring Fund will equal or exceed the sum of the
liabilities assumed by the Acquiring Fund, plus the amount of liabilities,
if any, to which the transferred assets are subject.
(n) The Acquired Fund is not under the jurisdiction of a court in a
United States Code Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(o) Immediately before the Reorganization, not more than 25 percent of
the value of the total assets of the Acquiring Fund or the Acquired Fund
will be invested in the stock or securities of any one issuer, and not more
than 50 percent of the value of the total assets of the Acquiring Fund or
the Acquired Fund will be invested in the stock or securities of five or
fewer issuers.
(p) The Acquiring Fund and the Acquired Fund will each have satisfied
the investment diversification requirements of Section 817(h) of the Code
for all taxable quarters since its inception, including the last short
taxable period of the Acquired Fund ending on the Closing Date and taxable
quarter of the Acquiring Fund that includes the Closing Date.
11
<PAGE> 17
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF THE ACQUIRED FUND. THE ACQUIRED FUND'S SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM
OF THE REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to the Acquiring Fund of the assets of the
Acquired Fund will be the same as the book cost basis of such assets to the
Acquired Fund.
RIGHTS OF SHAREHOLDERS
The Acquired Fund and the Acquiring Fund are each an investment portfolio
of AVIF, a Delaware business trust. Accordingly, the shareholders of the
Acquired and the Acquiring Funds are entitled to the same rights accorded to
them under the laws of Delaware applicable to business trusts.
OWNERSHIP OF THE ACQUIRED FUND AND THE ACQUIRING FUND SHARES
5% OWNERS
Listed below is the name, address and percent ownership of each person who
as of June 23, 2000, to the knowledge of AVIF, owned of record 5% or more of the
outstanding shares of the Acquired Fund. To the knowledge of AVIF, as of June
23, 2000, no contract owner beneficially owned 5% or more of the outstanding
shares of the Acquired Fund.
<TABLE>
<CAPTION>
PERCENT OWNED
OF RECORD
-------------
<S> <C>
General American Life Insurance Company............... 95.26%*
One Tower Lane, Ste. 3000
Oakbrook, IL 60181
</TABLE>
---------------
* A shareholder who beneficially owns more than 25% of the voting securities of
the Acquired Fund may be presumed to "control" the Fund. The Acquired Fund
understands that insurance company separate accounts owning shares of the
Fund will vote their shares in accordance with instructions received from
contract owners, annuitants and beneficiaries. If an insurance company
determines, however, that it is permitted to vote any such shares of the
Acquired Fund in its own right, it may elect to do so, subject to the then
current interpretation of the 1940 Act and the rules thereunder.
12
<PAGE> 18
Listed below is the name, address and percent ownership of each person who
as of June 23, 2000, to the knowledge of AVIF, owned of record 5% or more of the
outstanding shares of the Acquiring Fund. To the knowledge of AVIF, as of June
23, 2000, no contract owner beneficially owned 5% or more of the outstanding
shares of any Acquiring Fund.
<TABLE>
<CAPTION>
PERCENT OWNED
OF RECORD
-------------
<S> <C>
IDS Life Insurance Company............................ 59.79%*
IDS Tower 10
Minneapolis, MN 55440
Glenbrook Life and Annuity Company.................... 9.45%
3100 Sanders Road
Northbrook, IL 60062
Prudential Life Insurance Company..................... 8.21%
751 Broad Street
Newark, NJ 07102
Connecticut General Life Insurance Company............ 6.65%
3500 Sanders Road
Northbrook, IL 60062
</TABLE>
---------------
* A shareholder who beneficially owns more than 25% of the voting securities of
the Acquiring Fund may be presumed to "control" the Fund. The Acquiring Fund
understands that insurance company separate accounts owning shares of the
Fund will vote their shares in accordance with instructions received from
contract owners, annuitants and beneficiaries. If an insurance company
determines, however, that it is permitted to vote any such shares of the Fund
in its own right, it may elect to do so, subject to the then current
interpretation of the 1940 Act and the rules thereunder.
AIM, a Delaware corporation, is a wholly owned subsidiary of A I M
Management Group Inc. The address of AIM is 11 Greenway Plaza, Suite 100,
Houston, Texas 77048-1173.
OWNERSHIP OF OFFICERS AND TRUSTEES
To the best of the knowledge of AVIF, the beneficial ownership of shares of
the Acquired and Acquiring Funds by officers and trustees of AVIF as a group
constituted less than 1% of the outstanding shares of each such Fund as of June
23, 2000.
13
<PAGE> 19
CAPITALIZATION
The following table sets forth as of June 23, 2000: (i) the capitalization
of the Acquiring Fund's shares, (ii) the capitalization of the Acquired Fund's
shares, (iii) pro forma capitalization of the Acquiring Fund shares as adjusted
to give effect to the transaction contemplated by the Agreement.
<TABLE>
<CAPTION>
PRO FORMA
AIM V.I. GROWTH
AIM V.I. GLOBAL GROWTH AIM V.I. GROWTH AND
AND INCOME FUND AND INCOME FUND INCOME FUND
---------------------- --------------- ---------------
<S> <C> <C> <C>
Net Assets................................ $26,258,004 $2,682,908,852 $2,709,166,856
Shares Outstanding........................ 1,926,330 85,835,303 86,675,222
Net Asset Value Per Share................. $ 13.63 $ 31.26 $ 31.26
</TABLE>
LEGAL MATTERS
Certain legal matters concerning AVIF and its participation in the
Reorganization, the issuance of shares of the Acquiring Fund in connection with
the Reorganization, and the Federal income tax consequences of the
Reorganization will be passed upon by Freedman, Levy, Kroll & Simonds, 1050
Connecticut Avenue, N.W., Washington, D.C. 20036-5366.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports that AVIF has
filed with the SEC pursuant to the requirements of the 1933 Act and the 1940
Act, to which reference is hereby made. The SEC file number for the registration
statement of AVIF containing the Prospectus and Statement of Additional
Information relating to the Acquired Fund and the Acquiring Fund is Registration
No. 33-57340.
AVIF and each of its investment portfolios, including the Acquired Fund and
the Acquiring Fund, are subject to the informational requirements of the 1940
Act and in accordance therewith file reports and other information with the SEC.
Reports, proxy statements, registration statements and other information filed
by those companies (including the Form N-14 Registration Statement of AVIF
relating to the Acquiring Fund of which this Proxy Statement/Prospectus is a
part and which is hereby incorporated by reference) may be inspected without
charge and copied at the prescribed rates at the public reference facilities
maintained by the SEC at Room 1014, Judiciary Plaza, 450 Fifth Street, NW,
Washington, DC 20549, and at the following regional offices of the SEC: 7 World
Trade Center, Suite 1300, New York, New York 10048; 1401 Brickell Avenue, Suite
200, Miami, Florida 33131; 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661; 1801 California Street, Suite 4800, Denver, Colorado 80202; and
5670 Wilshire Blvd., 11th Floor, Los Angeles, California 90036. The SEC
maintains a Web site at http://www.sec.gov that contains information regarding
AVIF and other registrants that file electronically with the SEC.
APPENDICES
Appendices I through III follow.
14
<PAGE> 20
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of June 15th, 2000 (this
"Agreement"), by and among AIM Variable Insurance Funds, a Delaware business
trust ("AVIF"), acting on behalf of AIM V.I. Global Growth and Income Fund
("Acquired Fund"), AVIF, acting on behalf of AIM V.I. Growth and Income Fund
("Acquiring Fund"), and A I M Advisors, Inc. ("AIM"), a Delaware corporation.
WITNESSETH
WHEREAS, AVIF is an investment company registered with the SEC under the
Investment Company Act that offers separate series of its shares representing
interests in separate investment portfolios for sale to separate accounts of
life insurance companies to support investments under variable annuities and
variable life insurance contracts issued by such companies; and
WHEREAS, AIM provides investment advisory services to AVIF; and
WHEREAS, the Acquired Fund desires to provide for its reorganization
through the transfer of all of its assets to the Acquiring Fund with which it
will combine in exchange for the issuance by AVIF of shares of such Acquiring
Fund in the manner set forth in this Agreement and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund; and
WHEREAS, this Agreement is intended to be and is adopted by the parties
hereto 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, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, AVIF and AIM agree as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINITIONS.
For all purposes in this Agreement, the following terms shall have the
respective meanings set forth in this Section 1.1 (such definitions to be
equally applicable to both the singular and plural forms of the terms herein
defined):
"Acquired Fund" means AIM V.I. Global Growth and Income Fund, a separate
series of AVIF.
"Acquired Fund Financial Statements" shall have the meaning set forth in
Section 3.3 of this Agreement.
"Acquired Fund Shareholders" means the holders of record as of the
Effective Time of the issued and outstanding shares of beneficial interest in
the Acquired Fund.
"Acquired Fund Shareholders Meeting" means a meeting of the shareholders of
the Acquired Fund convened in accordance with applicable law and the Agreement
and Declaration of Trust of AVIF to consider and vote upon the approval of this
Agreement and the Reorganization of the Acquired Fund contemplated by this
Agreement.
"Acquired Fund Shares" means the issued and outstanding shares of
beneficial interest in the Acquired Fund.
"Acquiring Fund" means AIM V.I. Growth and Income Fund, a separate series
of AVIF.
I-1
<PAGE> 21
"Acquiring Fund Financial Statements" shall have the meaning set forth in
Section 4.3 of this Agreement.
"Acquiring Fund Shares" means shares of beneficial interest of the
Acquiring issued pursuant to Section 2.6 of this Agreement.
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and
all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization, together with
all schedules and exhibits attached hereto and all amendments hereto and
thereof.
"AVIF" means AIM Variable Insurance Funds, a Delaware business trust.
"AVIF Registration Statement" means the registration statement on Form
N-1A, as amended, of AVIF (File Nos. 33-57340 and 811-7452).
"Benefit Plan" means any material "employee benefit plan" (as defined in
Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, retirement, profit sharing, welfare plans or other plan, arrangement
or understanding maintained or contributed to by AVIF on behalf of the Acquired
Fund, or otherwise providing benefits to any current or former employee, officer
or trustee of AVIF.
"Closing" means the transfer of the assets of the Acquired Fund to the
Acquiring Fund with which it will combine, the assumption of all of the Acquired
Fund's liabilities by the Acquiring Fund and the issuance of the Acquiring Fund
Shares directly to the Acquired Fund Shareholders as described in Section 2.1 of
this Agreement.
"Closing Date" means September 18, 2000, or such other dates as the parties
may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations adopted pursuant thereto.
"Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of the Acquiring Fund and the Acquired
Fund.
"Effective Time" means 8:00 a.m. Central Time on the Closing Date, or such
other times as the parties may mutually determine.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations adopted pursuant thereto.
"Governmental Authority" means any foreign, United States or state
government, government agency, department, board, commission (including the SEC)
or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including without limitation the National
Association of Securities Dealers, Inc., the Commodity Futures Trading
Commission, the National Futures Association, the Investment Management
Regulatory Organization Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
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"Material Adverse Effect" means an effect that would cause a change in the
condition (financial or otherwise), properties, assets or prospects of an entity
having an adverse monetary effect in an amount equal to or greater than $50,000.
"NYSE" means the New York Stock Exchange, Inc.
"Person" means an individual or a corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of the assets of the Acquired Fund
by the Acquiring Fund with which it will combine in consideration of the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund
and the issuance by AVIF of Acquiring Fund Shares directly to Acquired Fund
Shareholders as described in this Agreement, and the termination of the Acquired
Fund's status as a designated series of shares of AVIF.
"Required Shareholder Vote" shall have the meaning set forth in Section
3.17 of this Agreement.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or levy
(including income taxes (including alternative minimum tax and estimated tax),
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall
profit taxes), together with any related penalties, fines, additions to tax or
interest, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof.
ARTICLE 2
TRANSFER OF ASSETS
SECTION 2.1 REORGANIZATION.
At the Effective Time, all of the assets of the Acquired Fund shall be
delivered to the Custodian for the account of the Acquiring Fund in exchange for
the assumption by the Acquiring Fund of all of the liabilities of any kind of
the Acquired Fund and delivery by AVIF directly to the holders of record as of
the Effective Time of the issued and outstanding shares of the Acquired Fund
(including, if applicable, fractional shares rounded to the nearest thousandth)
of a number of Acquiring Fund shares (including, if applicable, fractional
shares rounded to the nearest thousandth), having an aggregate net asset value
equal to the net value of the assets of the Acquired Fund so transferred,
assigned and delivered, all determined and adjusted as provided in Section 2.2
below. Upon delivery of such assets, the Acquiring Fund will receive good and
marketable title to such assets free and clear of all Liens.
SECTION 2.2 COMPUTATION OF NET ASSET VALUE.
(a) The net asset value of the Acquiring Fund Shares, and the net value of
the assets of the Acquired Fund, shall be determined as of the close of regular
trading on the NYSE on the business day immediately preceding the Closing Date.
(b) The net asset value of the Acquiring Fund Shares shall be computed in
accordance with the policies and procedures of the Acquiring Fund as described
in the AVIF Registration Statement.
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(c) The net value of the assets of the Acquired Fund to be transferred to
the Acquiring Fund pursuant to this Agreement shall be computed in accordance
with the policies and procedures of the Acquired Fund as described in the AVIF
Registration Statement.
(d) All computations of value regarding the net assets of the Acquired Fund
and the net asset value of the Acquiring Fund Shares to be issued pursuant to
this Agreement shall be made by AVIF. AVIF agrees to use commercially reasonable
efforts to resolve any material pricing differences between the prices of
portfolio securities determined in accordance with their respective pricing
policies and procedures.
SECTION 2.3 VALUATION.
The assets of the Acquired Fund and the net asset value per share of the
Acquiring Fund Shares shall be valued as of the close of regular trading on the
NYSE on the business day immediately preceding the Closing Date. The share
transfer books of the Acquired Fund will be permanently closed as of the close
of business on the business day immediately preceding the Closing Date and only
requests for the redemption of shares of the Acquired Fund received in proper
form on the day next preceding the close of regular trading on the NYSE on that
date shall be accepted by the Acquired Fund. Redemption requests thereafter
received by the Acquired Fund shall be deemed to be redemption requests for
Acquiring Fund Shares as applicable (assuming that the transactions contemplated
by this Agreement have been consummated), to be distributed to the Acquired Fund
Shareholders under this Agreement.
SECTION 2.4 DELIVERY.
(a) Assets held by the Acquired Fund shall be delivered by AVIF to the
Custodian on the Closing Date. No later than three (3) business days preceding
the Closing Date, AVIF shall instruct the Custodian to transfer such assets to
the account of the Acquiring Fund. The assets so delivered shall be duly
endorsed in proper form for transfer in such condition as to constitute a good
delivery thereof, in accordance with the custom of brokers, and shall be
accompanied by all necessary state stock transfer stamps, if any, or a check for
the appropriate purchase price thereof. Cash held by the Acquired Fund shall be
delivered on the Closing Date and shall be in the form of currency or wire
transfer in Federal funds, payable to the order of the account of the Acquiring
Fund at the Custodian.
(b) If, on the Closing Date, the Acquired Fund is unable to make delivery
in the manner contemplated by Section 2.4(a) of securities held by the Acquired
Fund for the reason that any of such securities purchased prior to the Closing
Date have not yet been delivered to the Acquired Fund or its broker, then AVIF,
on behalf of the Acquiring Fund, shall waive the delivery requirements of
Section 2.4(a) with respect to said undelivered securities if the Acquired Fund
has delivered to the Custodian by or on the Closing Date, and with respect to
said undelivered securities, executed copies of an agreement of assignment and
escrow agreement and due bills executed on behalf of said broker or brokers,
together with such other documents as may be required by AVIF or the Custodian,
including brokers' confirmation slips.
SECTION 2.5 TERMINATION OF SERIES.
As soon as reasonably practicable after the Closing Date, the status of the
Acquired Fund as a designated series of shares of AVIF shall be terminated;
provided, however, that the termination of the status of the Acquired Fund as a
series of shares of AVIF shall not be required if the Reorganization of the
Acquired Fund shall not have been consummated.
SECTION 2.6 ISSUANCE OF ACQUIRING FUND SHARES.
At the Effective Time, the Acquired Fund Shareholders of record as of the
close of business on the business day immediately preceding the Closing Date
holding the Acquired Fund Shares shall be issued that number of full and
fractional shares of the Acquiring Fund having a net asset value (computed in
accordance with Section 2.2 hereof) equal to the net asset value of the Acquired
Fund Shares (computed in accordance with Section 2.2 hereof) held by the
Acquired Fund Shareholders as of the close of business on the business day
immediately preceding the Closing Date. All issued and outstanding shares of
beneficial interest in the
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Acquired Fund shall thereupon be canceled on the books of AVIF. AVIF shall
provide instructions to the transfer agent of AVIF with respect to the Acquiring
Fund Shares to be issued to Acquired Fund Shareholders. AVIF shall have no
obligation to inquire as to the validity, propriety or correctness of any such
instruction, but shall assume that such instruction is valid, proper and
correct. AVIF shall record on its books the ownership of Acquiring Fund Shares
by Acquired Fund Shareholders and shall forward a confirmation of such ownership
to the Acquired Fund Shareholders. No redemption or repurchase of such shares
credited to former Acquired Fund Shareholders in respect of the Acquired Fund
shares represented by unsurrendered shares certificates shall be permitted until
such certificates have been surrendered to AVIF for cancellation, or if such
certificates are lost or misplaced, until lost certificate affidavits have been
executed and delivered to AVIF.
SECTION 2.7 INVESTMENT SECURITIES.
On or prior to the Closing Date, the Acquired Fund shall deliver a list
setting forth the securities the Acquired Fund then owns together with the
respective Federal income tax bases thereof. The Acquired Fund shall provide on
or before the Closing Date, detailed tax basis accounting records for each
security to be transferred to the Acquiring Fund pursuant to this Agreement.
Such records shall be prepared in accordance with the requirements for specific
identification tax lot accounting and clearly reflect the bases used for
determination of gain and loss realized on the sale of any security transferred
to the Acquiring Fund hereunder. Such records shall be made available by the
Acquired Fund prior to the Closing Date for inspection by the Treasurer (or his
designee) or the auditors of the Acquiring Fund upon reasonable request.
SECTION 2.8 LIABILITIES.
The Acquired Fund shall use reasonable best efforts to discharge all of its
known liabilities, so far as may be possible, prior to the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AVIF ON BEHALF OF THE ACQUIRED FUND
AVIF, on behalf of the Acquired Fund, represents and warrants that:
SECTION 3.1 ORGANIZATION; AUTHORITY.
AVIF is duly organized, validly existing and in good standing under the
Delaware Business Trust Act, with all requisite trust power and authority to
enter into this Agreement and perform its obligations hereunder.
SECTION 3.2 REGISTRATION AND REGULATION OF AVIF.
AVIF is duly registered with the SEC as an investment company under the
Investment Company Act and all Acquired Fund Shares which have been or are being
offered for sale have been duly registered under the Securities Act and have
been duly registered, qualified or are exempt from registration or qualification
under the securities laws of each state or other jurisdiction in which such
shares have been or are being offered for sale, and no action has been taken by
AVIF to revoke or rescind any such registration or qualification. The Acquired
Fund is in compliance in all material respects with all applicable laws, rules
and regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws. The
Acquired Fund is in compliance in all material respects with the investment
policies and restrictions applicable to it set forth in the AVIF Registration
Statement currently in effect. The value of the net assets of the Acquired Fund
is determined using portfolio valuation methods that comply in all material
respects with the requirements of the Investment Company Act and the policies of
the Acquired Fund and all purchases and redemptions of Acquired Fund Shares have
been effected at the net asset value per share calculated in such manner.
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SECTION 3.3 FINANCIAL STATEMENTS.
The books of account and related records of the Acquired Fund fairly
reflect in reasonable detail its assets, liabilities and transactions in
accordance with generally accepted accounting principles applied on a consistent
basis. The audited financial statements for the fiscal year ended December 31,
1999 of the Acquired Fund previously delivered to AVIF (the "Acquired Fund
Financial Statements") present fairly in all material respects the financial
position of the Acquired Fund as of the dates indicated and the results of
operations and changes in net assets for the periods then ended in accordance
with generally accepted accounting principles applied on a consistent basis for
the periods then ended.
SECTION 3.4 NO MATERIAL ADVERSE CHANGES; CONTINGENT LIABILITIES.
Since December 31, 1999, no material adverse change has occurred in the
financial condition, results of operations, business, assets or liabilities of
the Acquired Fund or the status of the Acquired Fund as a regulated investment
company under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by the Acquired Fund or occurring in the ordinary course of
business of the Acquired Fund or AVIF. There are no contingent liabilities of
the Acquired Fund not disclosed in the Acquired Fund Financial Statements which
are required to be disclosed in accordance with generally accepted accounting
principles.
SECTION 3.5 ACQUIRED FUND SHARES; LIABILITIES; BUSINESS OPERATIONS.
(a) The Acquired Fund Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(b) There is no plan or intention by the shareholders of the Acquired Fund
to redeem or otherwise dispose of a number of the Acquiring Fund Shares received
by them in connection with the Reorganization that would reduce the Acquired
Fund Shareholder's ownership of voting stock of the Acquiring Fund to a number
of shares having a value, as of the Closing Date, of less than fifty percent
(50%) of the value of all of the formerly outstanding shares of the Acquired
Fund as of the same date. For purposes of this representation, Acquired Fund
Shares exchanged for cash or other property or exchanged for cash in lieu of
fractional shares of the Acquiring Fund will be treated as outstanding Acquired
Fund Shares on the date of the Reorganization. Moreover, Acquired Fund Shares
and Acquiring Fund Shares held by Acquired Fund Shareholders and otherwise sold,
redeemed or disposed of prior or subsequent to the Reorganization will be
considered in making this representation, except for Acquired Fund Shares or
Acquiring Fund Shares which have been, or will be, redeemed by the Acquired Fund
or the Acquiring Fund in the ordinary course of its business as a series of an
open-end, management investment company under the Investment Company Act.
(c) At the time of its Reorganization, the Acquired Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Acquired Fund Shares, except
for the right of investors to acquire the Acquired Fund Shares at net asset
value in the normal course of its business as a series of an open-end management
investment company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the Closing Date,
the Acquired Fund will have conducted its historic business within the meaning
of Section 1.368-1(d)(2) of the Income Tax Regulations under the Code. In
anticipation of its Reorganization, the Acquired Fund will not dispose of assets
that, in the aggregate, will result in less than fifty percent (50%) of its
historic business assets (within the meaning of Section 1.368-1(d) of those
regulations) being transferred to the Acquiring Fund.
(e) AVIF does not have, and has not had during the six (6) months prior to
the date of this Agreement, any employees, and shall not hire any employees from
and after the date of this Agreement through the Closing Date.
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SECTION 3.6 ACCOUNTANTS.
Tait, Weller & Baker, which has reported upon the Acquired Fund Financial
Statements for the period ended December 31, 1999, are independent public
accountants as required by the Securities Act and the Exchange Act.
SECTION 3.7 BINDING OBLIGATION.
This Agreement has been duly authorized, executed and delivered by AVIF on
behalf of the Acquired Fund and, assuming this Agreement has been duly executed
and delivered by AVIF and approved by Acquired Fund Shareholders, constitutes
the legal, valid and binding obligation of AVIF in accordance with its terms
from and with respect to the revenues and assets of the Acquired Fund, except as
the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors' rights
generally, or by general equity principles (whether applied in a court of law or
a court of equity and including limitations on the availability of specific
performance or other equitable remedies).
SECTION 3.8 NO BREACHES OR DEFAULTS.
The execution and delivery of this Agreement by AVIF on behalf of the
Acquired Fund and performance by AVIF of its obligations hereunder has been duly
authorized by all necessary trust action on the part of AVIF, other than the
Acquired Fund Shareholders approval, and (i) do not, and on the Closing Date
will not, result in any violation of the Agreement and Declaration of Trust or
by-laws of AVIF and (ii) do not, and on the Closing Date will not, result in a
breach of any of the terms or provisions of, or constitute (with or without the
giving of notice or the lapse of time or both) a default under, or give rise to
a right of termination, cancellation or acceleration of any obligation or to the
loss of a material benefit under, or result in the creation or imposition of any
Lien upon any property or assets of the Acquired Fund (except for such breaches
or defaults or Liens that would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect) under (A) any indenture,
mortgage or loan agreement or any other material agreement or instrument to
which AVIF is a party or by which it may be bound and which relates to the
assets of the Acquired Fund or to which any property of the Acquired Fund may be
subject; (B) any Permit (as defined below); or (C) any existing applicable law,
rule, regulation, judgment, order or decree of any Governmental Authority having
jurisdiction over AVIF or any property of the Acquired Fund. AVIF 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.
SECTION 3.9 AUTHORIZATIONS OR CONSENTS.
Other than those which shall have been obtained or made on or prior to the
Closing Date and those that must be made after the Closing Date to comply with
Section 2.5 of this Agreement, no authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority will be required to
be obtained or made by AVIF, on behalf of the Acquired Fund, in connection with
the due execution and delivery by AVIF of this Agreement and the consummation by
AVIF of the transactions contemplated hereby.
SECTION 3.10 PERMITS.
AVIF has in full force and effect all approvals, consents, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights of
Governmental Authorities (collectively, "Permits") necessary for it to conduct
its business as presently conducted as it relates to the Acquired Fund, and
there has occurred no default under any Permit, except for the absence of
Permits and for defaults under Permits the absence or default of which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. To the knowledge of AVIF there are no proceedings relating to
the suspension, revocation or modification of any Permit, except for such that
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
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SECTION 3.11 NO ACTIONS, SUITS OR PROCEEDINGS.
(a) There is no pending action, litigation or proceeding, nor, to the
knowledge of AVIF, has any litigation been overtly threatened in writing or, if
probable of assertion, orally, against AVIF, or the Acquired Fund, before any
Governmental Authority which questions the validity or legality of this
Agreement or of the actions contemplated hereby or which seeks to prevent the
consummation of the transactions contemplated hereby, including the
Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of AVIF, threatened in
writing or, if probable of assertion, orally, against AVIF affecting any
property, asset, interest or right of the Acquired Fund, that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Acquired Fund. There are not in existence on the date hereof
any plea agreements, judgments, injunctions, consents, decrees, exceptions or
orders that were entered by, filed with or issued by Governmental Authority
relating to AVIF's conduct of the business of the Acquired Fund affecting in any
significant respect the conduct of such business. AVIF is not, and has not been
to the knowledge of AVIF, the target of any investigation by the SEC or any
state securities administrator with respect to its conduct of the business of
the Acquired Fund.
SECTION 3.12 CONTRACTS.
Neither AVIF nor the Acquired Fund is in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument
to which it is a party and which involves or affects the assets of the Acquired
Fund, by which the assets, business, or operations of the Acquired Fund may be
bound or affected, or under which it or the assets, business or operations of
the Acquired Fund receives benefits, and which default could reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect,
and, to the knowledge of AVIF there has not occurred any event that, with the
lapse of time or the giving of notice or both, would constitute such a default.
SECTION 3.13 PROPERTIES AND ASSETS.
The Acquired Fund has good and marketable title to all properties and
assets reflected in the Acquired Fund Financial Statements as owned by it, free
and clear of all Liens, except as described in the Acquired Fund Financial
Statements.
SECTION 3.14 TAXES.
(a) The Acquired Fund has elected to be a regulated investment company
under Subchapter M of the Code. The Acquired Fund has qualified as such for each
taxable year since inception and that has ended prior to the Closing Date and
will have satisfied the requirements of Part I of Subchapter M of the Code to
maintain such qualification for the period beginning on the first day of its
current taxable year and ending on the Closing Date. The Acquired Fund has no
earnings and profits accumulated in any taxable year in which the provisions of
Subchapter M of the Code did not apply to it. In order to (i) insure continued
qualification of the Acquired Fund as a "regulated investment company" for tax
purposes and (ii) eliminate any tax liability of the Acquired Fund arising by
reason of undistributed investment company taxable income or net capital gain,
AVIF will declare on or prior to the Closing Date to the shareholders of the
Acquired Fund a dividend or dividends that, together with all previous such
dividends, shall have the effect of distributing (A) all of the Acquired Fund's
investment company taxable income (determined without regard to any deductions
for dividends paid) for the taxable year ended December 31, 1999 and for the
short taxable year beginning on January 1, 2000 and ending on the Closing Date
and (B) all of the Acquired Fund's net capital gain reorganized in its taxable
year ended December 31, 1999 and in such short taxable year (after reduction for
any capital loss carryover).
(b) The Acquired Fund has timely filed all Returns required to be filed by
it and all Taxes with respect thereto have been paid, except where the failure
so to file or so to pay, would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. Adequate provision has been
made in the Acquired Fund Financial Statements for all Taxes in respect of all
periods ended on or before the date of such
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financial statements, except where the failure to make such provisions would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No deficiencies for any Taxes have been proposed, assessed or
asserted in writing by any taxing authority against the Acquired Fund, and no
deficiency has been proposed, assessed or asserted, in writing, where such
deficiency would reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect. No waivers of the time to assess any such Taxes
are outstanding nor are any written requests for such waivers pending and no
Returns of the Acquired Fund are currently being or have been audited with
respect to income taxes or other Taxes by any Federal, state, local or foreign
Tax authority.
(c) There is no intercompany indebtedness existing between the Acquiring
Fund and the Acquired Fund that was issued, acquired, or will be settled at a
discount.
(d) The fair market value of the assets of the Acquired Fund transferred to
the Acquiring Fund will equal or exceed the sum of the liabilities assumed by
the Acquiring Fund, plus the amount of liabilities, if any, to which the
transferred assets are subject.
(e) The Acquired Fund is not under the jurisdiction of a court in a United
States Code Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
(f) Immediately before the Reorganization, not more than 25 percent of the
value of the total assets of the Acquired Fund will be invested in the stock or
securities of any one issuer, and not more than 50 percent of the value of the
Acquired Fund will be invested in the stock or securities of five or fewer
issuers.
SECTION 3.15 BENEFIT AND EMPLOYMENT OBLIGATIONS.
On or prior to the Closing Date, the Acquired Fund will have no obligation
to provide any post-retirement or post-employment benefit to any Person,
including but not limited to under any Benefit Plan, and have no obligation to
provide unfunded deferred compensation or other unfunded or self-funded benefits
to any Person.
SECTION 3.16 BROKERS.
No broker, finder or similar intermediary has acted for or on behalf of
AVIF in connection with this Agreement or the transactions contemplated hereby,
and no broker, finder, agent or similar intermediary is entitled to any
broker's, finder's or similar fee or other commission in connection therewith
based on any agreement, arrangement or understanding with AVIF or any action
taken by it.
SECTION 3.17 VOTING REQUIREMENTS.
The vote of a majority of the shares of the Acquired Fund cast at a meeting
at which a quorum is present (the "Required Shareholder Vote") is the only vote
of the holders of any class or series of shares of beneficial interest in the
Acquired Fund necessary to approve this Agreement and the Reorganization of the
Acquired Fund contemplated by this Agreement.
SECTION 3.18 STATE TAKEOVER STATUTES.
No state takeover statute or similar statute or regulation applies or
purports to apply to the Reorganization, this Agreement or any of the
transactions contemplated by this Agreement.
SECTION 3.19 BOOKS AND RECORDS.
The books and records of AVIF relating to the Acquired Fund, reflecting,
among other things, the purchase and sale of Acquired Fund Shares, the number of
issued and outstanding shares owned by the Acquired Fund Shareholders and the
state or other jurisdiction in which such shares were offered and sold, are
complete and accurate in all material respects.
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SECTION 3.20 PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION.
The current prospectus and statement of additional information for the
Acquired Fund as of the date on which it was issued did not contain, and as
supplemented by any supplement thereto dated prior to or on the Closing Date do
not contain, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
SECTION 3.21 NO DISTRIBUTION.
The Acquiring Fund Shares are not being acquired for the purpose of any
distribution thereof, other than in accordance with the terms of this Agreement.
SECTION 3.22 LIABILITIES OF THE ACQUIRED FUND.
The liabilities of the Acquired Fund that are to be assumed by the
Acquiring Fund in connection with the Reorganization, or which the assets of the
Acquired Fund to be transferred in the Reorganization are subject, were incurred
by the Acquired Fund in the ordinary course of its business. The fair market
value of the assets of the Acquired Fund to be transferred to the Acquiring Fund
in the Reorganization will equal or exceed the sum of the liabilities to be
assumed by the Acquiring Fund plus the amount of liabilities, if any, to which
such transferred assets will be subject.
SECTION 3.23 VALUE OF SHARES.
The fair market value of the Acquiring Fund Shares received by Acquired
Fund Shareholders in the Reorganization will be approximately equal to the fair
market value of the Acquired Fund Shares constructively surrendered in exchange
therefor.
SECTION 3.24 SHAREHOLDER EXPENSES.
The Acquired Fund Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization.
SECTION 3.25 INTERCOMPANY INDEBTEDNESS.
There is no intercompany indebtedness between the Acquired Fund and the
Acquiring Fund that was issued or acquired, or will be settled, at a discount.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AVIF
AVIF, on behalf of the Acquiring Fund, represents and warrants as follows:
SECTION 4.1 ORGANIZATION; AUTHORITY.
AVIF is duly organized, validly existing and in good standing under the
Delaware Business Trust Act with all requisite trust power and authority to
enter into this Agreement and perform its obligations hereunder.
SECTION 4.2 REGISTRATION AND REGULATION OF AVIF.
AVIF is duly registered with the SEC as an investment company under the
Investment Company Act. The Acquiring Fund is in compliance in all material
respects with all applicable laws, rules and regulations, including, without
limitation, the Investment Company Act, the Securities Act, the Exchange Act and
all applicable state securities laws. The Acquiring Fund is in compliance in all
material respects with the applicable investment policies and restrictions set
forth in the AVIF Registration Statement. The value of the net assets of the
Acquiring Fund is determined using portfolio valuation methods that comply in
all material respects with the requirements of the Investment Company Act and
the policies of the Acquiring Fund and all
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purchases and redemptions of Acquiring Fund Shares have been effected at the net
asset value per share calculated in such manner.
SECTION 4.3 FINANCIAL STATEMENTS.
The books of account and related records of the Acquiring Fund fairly
reflect in reasonable detail its assets, liabilities and transactions in
accordance with generally accepted accounting principles applied on a consistent
basis. The audited financial statements for the fiscal year ended December 31,
1999 of the Acquiring Fund (the "Acquiring Fund Financial Statements") present
fairly in all material respects the financial position of the Acquiring Fund as
at the dates indicated and the results of operations and changes in net assets
for the periods then ended in accordance with generally accepted accounting
principles applied on a consistent basis for the periods then ended.
SECTION 4.4 NO MATERIAL ADVERSE CHANGES; CONTINGENT LIABILITIES.
Since December 31, 1999, no material adverse change has occurred in the
financial condition, results of operations, business, assets or liabilities of
the Acquiring Fund or the status of the Acquiring Fund as a regulated investment
company under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by the Acquiring Fund or occurring in the ordinary course of
business of the Acquiring Fund or AVIF. There are no contingent liabilities of
the Acquiring Fund not disclosed in the Acquiring Fund Financial Statements
which are required to be disclosed in accordance with generally accepted
accounting principles.
SECTION 4.5 REGISTRATION OF ACQUIRING FUND SHARES.
(a) The shares of beneficial interest of AVIF are divided into 17
portfolios, including the Acquiring Fund. Under its Agreement and Declaration of
Trust, AVIF is authorized to issue an unlimited number of shares of the
Acquiring Fund.
(b) The Acquiring Fund Shares to be issued pursuant to Section 2.6 shall on
the Closing Date be duly registered under the Securities Act by a Registration
Statement on Form N-14 of AVIF then in effect.
(c) The Acquiring Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of its
Reorganization, the Acquiring Fund shall not have outstanding any warrants,
options, convertible securities or any other type of right pursuant to which any
Person could acquire Acquiring Fund Shares, except for the right of investors to
acquire Acquiring Fund Shares at net asset value in the normal course of its
business as a series of an open-end management investment company operating
under the Investment Company Act.
(d) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus") which forms a part of AVIF's Registration Statement on
Form N-14 shall be furnished to the Acquired Fund Shareholders entitled to vote
at the Acquired Fund Shareholders Meeting. The Combined Proxy Statement/
Prospectus and related Statement of Additional Information of the Acquiring
Fund, when they become effective, shall conform to the applicable requirements
of the Securities Act and the Investment Company Act and shall not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not materially misleading.
(e) The shares of the Acquiring Fund which have been or are being offered
for sale (other than Acquiring Fund Shares to be issued in connection with the
Reorganization) have been duly registered under the Securities Act by the AVIF
Registration Statement and have been duly registered, qualified or are exempt
from registration or qualification under the securities laws of each state or
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by AVIF to revoke or rescind any such registration
or qualification.
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SECTION 4.6 ACCOUNTANTS.
Tait, Weller & Baker, which has reported upon the Acquiring Fund Financial
Statements for the period ended December 31, 1999, are independent public
accountants as required by the Securities Act and the Exchange Act.
SECTION 4.7 BINDING OBLIGATION.
This Agreement has been duly authorized, executed and delivered by AVIF on
behalf of the Acquiring Fund and, assuming this Agreement has been duly executed
and delivered by AVIF, constitutes the legal, valid and binding obligation of
AVIF, in accordance with its terms from and with respect to the revenues and
assets of the Acquiring Fund, except as the enforceability hereof may be limited
by bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights generally, or by general equity principles (whether
applied in a court of law or a court of equity and including limitations on the
availability of specific performance or other equitable remedies).
SECTION 4.8 NO BREACHES OR DEFAULTS.
The execution and delivery of this Agreement by AVIF on behalf of the
Acquiring Fund and performance by AVIF of its obligations hereunder have been
duly authorized by all necessary trust action on the part of AVIF and (i) do
not, and on the Closing Date will not, result in any violation of the Agreement
and Declaration of Trust or by-laws of AVIF and (ii) do not, and on the Closing
Date will not, result in a breach of any of the terms or provisions of, or
constitute (with or without the giving of notice or the lapse of time or both) a
default under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of a material benefit under, or
result in the creation or imposition of any Lien upon any property or assets of
the Acquiring Fund (except for such breaches or defaults or Liens that would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect) under (A) any indenture, mortgage or loan agreement or any other
material agreement or instrument to which AVIF is a party or by which it may be
bound and which relates to the assets of the Acquiring Fund or to which any
properties of the Acquiring Fund may be subject; (B) any Permit; or (C) any
existing applicable law, rule, regulation, judgment, order or decree of any
Governmental Authority having jurisdiction over AVIF or any property of the
Acquiring Fund. AVIF 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.
SECTION 4.9 AUTHORIZATIONS OR CONSENTS.
Other than those which shall have been obtained or made on or prior to the
Closing Date, no authorization or approval or other action by, and no notice to,
or filing with, any Governmental Authority will be required to be obtained or
made by AVIF in connection with the due execution and delivery by AVIF of this
Agreement and the consummation by AVIF of the transactions contemplated hereby.
SECTION 4.10 PERMITS.
AVIF has in full force and effect all Permits necessary for it to conduct
its business as presently conducted as it relates to the Acquiring Fund, and
there has occurred no default under any Permit, except for the absence of
Permits and for defaults under Permits the absence or default of which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. To the knowledge of AVIF there are no proceedings relating to
the suspension, revocation or modification of any Permit, except for such that
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 4.11 NO ACTIONS, SUITS OR PROCEEDINGS.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of AVIF, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against AVIF or the Acquiring Fund before any Governmental
Authority which questions the validity or legality of this Agreement or of the
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transactions contemplated hereby, or which seeks to prevent the consummation of
the transactions contemplated hereby, including the Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of AVIF, threatened in
writing or, if probable of assertion, orally, against AVIF affecting any
property, asset, interest or right of the Acquiring Fund, that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Acquiring Fund. There are not in existence on the date
hereof any plea agreements, judgments, injunctions, consents, decrees,
exceptions or orders that were entered by, filed with or issued by Governmental
Authority relating to AVIF's conduct of the business of the Acquiring Fund
affecting in any significant respect the conduct of such business. AVIF is not,
and has not been, to the knowledge of AVIF the target of any investigation by
the SEC or any state securities administrator with respect to its conduct of the
business of the Acquiring Fund.
SECTION 4.12 TAXES.
(a) The Acquiring Fund has elected to be treated as a regulated investment
company under Subchapter M of the Code. The Acquiring Fund has qualified as such
for each taxable year since inception that has ended prior to the Closing Date
and will satisfy the requirements of Part I of Subchapter M of the Code to
maintain such qualification for its current taxable year. The Acquiring Fund has
no earnings or profits accumulated in any taxable year in which the provisions
of Subchapter M of the Code did not apply to it.
(b) The Acquiring Fund has timely filed all Returns required to be filed by
it and all Taxes with respect thereto have been paid, except where the failure
so to file or so to pay, would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. Adequate provision has been
made in the Acquiring Fund Financial Statements for all Taxes in respect of all
periods ending on or before the date of such financial statements, except where
the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, assessed or asserted in writing
by any taxing authority against the Acquiring Fund, and no deficiency has been
proposed, assessed or asserted, in writing, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding
nor are any written requests for such waivers pending and no Return of the
Acquiring Fund is currently being or has been audited with respect to income
taxes or other Taxes by any Federal, state, local or foreign Tax authority.
SECTION 4.13 BROKERS.
No broker, finder or similar intermediary has acted for or on behalf of
AVIF in connection with this Agreement or the transactions contemplated hereby,
and no broker, finder, agent or similar intermediary is entitled to any
broker's, finder's or similar fee or other commission in connection therewith
based on any agreement, arrangement or understanding with AVIF or any action
taken by it.
SECTION 4.14 REPRESENTATIONS CONCERNING THE REORGANIZATION.
(a) The Acquiring Fund does not own directly or indirectly, nor has it
owned at any time during the five-year period ending on the Closing Date, any
shares of the Acquired Fund.
(b) AVIF has no plan or intention to reacquire any of the Acquiring Fund
Shares issued in the Reorganization, except to the extent that the Acquiring
Fund is required by the Investment Company Act, to redeem any of its shares
presented for redemption at net asset value in the ordinary course of its
business as an open-end, management investment company.
(c) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of the Acquired Fund acquired in the
Reorganization, other than in the ordinary course of its business and to the
extent necessary to maintain its status as a "regulated investment company"
under the Code.
(d) Following the Reorganization, the Acquiring Fund will continue the
"historic business" (within the meaning of Section 1.368-1(d) of the Income Tax
Regulations under the Code) of the Acquired Fund from
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<PAGE> 33
which the Acquiring Fund acquired assets in the Reorganization or use a
significant portion of the Acquired Fund's historic business assets in a
business.
(e) Immediately before the Reorganization, not more than 25 percent of the
value of the total assets of the Acquiring Fund will be invested in the stock or
securities of any one issuer, and not more than 50 percent of the value of the
total assets of the Acquiring Fund will be invested in the stock or securities
of five or fewer issuers.
SECTION 4.15 PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION.
The current prospectus and statement of additional information for the
Acquiring Fund as of the date on which it was issued did not contain, and as
supplemented by any supplement thereto dated prior to or on the Closing Date do
not contain, any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading.
SECTION 4.16 VALUE OF SHARES.
The fair market value of the Acquiring Fund Shares received by Acquired
Fund Shareholders in the Reorganization will be approximately equal to the fair
market value of the Acquired Fund Shares constructively surrendered in exchange
therefor.
SECTION 4.17 INTERCOMPANY INDEBTEDNESS; CONSIDERATION.
There is no intercompany indebtedness between the Acquired Fund and the
Acquiring Fund that was issued or acquired, or will be settled, at a discount.
No consideration other than the Acquiring Fund Shares (and the Acquiring Fund's
assumption of the Acquired Fund's liabilities, including for this purpose all
liabilities to which the assets of the Acquired Fund are subject) will be issued
in exchange for the assets of the Acquired Fund acquired by the Acquiring Fund
in connection with the Reorganization. The fair market value of the assets of
the Acquired Fund transferred to the Acquiring Fund in the Reorganization will
equal or exceed the sum of the liabilities assumed by the Acquiring Fund, plus
the amount of liabilities, if any, to which such transferred assets are subject.
ARTICLE 5
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS.
(a) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), AVIF shall conduct the business of the Acquired Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business of the Acquired Fund in the ordinary
course in all material respects.
(b) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), AVIF shall conduct the business of the Acquiring Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business relations
necessary to conduct the business operations of the Acquiring Fund in the
ordinary course in all material respects.
SECTION 5.2 EXPENSES.
The Acquired Fund and the Acquiring Fund shall each bear the expenses it
incurs in connection with this Agreement and the Reorganization and other
transactions contemplated hereby.
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SECTION 5.3 FURTHER ASSURANCES.
Each of the parties hereto shall execute such documents and other papers
and perform such further acts as may be reasonably required to carry out the
provisions hereof and the transactions contemplated hereby. Each such party
shall, on or prior to the Closing Date, use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the Reorganization, including the execution and delivery of any
documents, certificates, instruments or other papers that are reasonably
required for the consummation of the Reorganization.
SECTION 5.4 NOTICE OF EVENTS.
AVIF shall give prompt notice to the Acquired Fund and the Acquiring Fund
of (a) the occurrence or nonoccurrence of any event which to the knowledge of
AVIF the occurrence or non-occurrence of which would be likely to result in any
of the conditions specified in (i) in the case of the Acquired Fund, Sections
6.1 and 6.2 or (ii) in the case of the Acquiring Fund, Sections 6.2 and 6.3, not
being satisfied so as to permit the consummation of the Reorganization and (b)
any material failure on its part to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.5
shall not limit or otherwise affect the remedies available hereunder to any
party.
SECTION 5.6 ACCESS TO INFORMATION.
(a) The Acquired Fund will, during regular business hours and on reasonable
prior notice, allow the Acquiring Fund and its authorized representatives
reasonable access to the books and records of the Acquired Fund pertaining to
the assets of the Acquired Fund and to officers of the Acquired Fund
knowledgeable thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of AVIF.
(b) The Acquiring Fund will, during regular business hours and on
reasonable prior notice, allow the Acquired Fund and its authorized
representatives reasonable access to the books and records of the Acquiring Fund
pertaining to the assets of the Acquiring Fund and to officers of AVIF
knowledgeable thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of AVIF.
SECTION 5.7 CONSENTS, APPROVALS AND FILINGS.
AVIF shall make all necessary filings, as soon as reasonably practicable,
including, without limitation, those required under the Securities Act, the
Exchange Act, the Investment Company Act and the Advisers Act, in order to
facilitate prompt consummation of the Reorganization and the other transactions
contemplated by this Agreement. In addition, AVIF shall use its reasonable best
efforts (i) to comply as promptly as reasonably practicable with all
requirements of Governmental Authorities applicable to the Reorganization and
the other transactions contemplated herein and (ii) to obtain as promptly as
reasonably practicable all necessary permits, orders or other consents of
Governmental Authorities and consents of all third parties necessary for the
consummation of the Reorganization and the other transactions contemplated
herein. AVIF shall use reasonable efforts to provide such information and
communications to Governmental Authorities as such Governmental Authorities may
request.
SECTION 5.8 SUBMISSION OF AGREEMENT TO SHAREHOLDERS.
AVIF shall take all action necessary in accordance with applicable law and
its Agreement and Declaration of Trust and by-laws to convene the Acquired Fund
Shareholders Meeting. AVIF shall, through its Board of Trustees, recommend to
the Acquired Fund Shareholders approval of this Agreement and the transactions
contemplated by this Agreement. AVIF shall use its reasonable best efforts to
hold the Acquired Fund Shareholders Meeting as soon as practicable after the
date hereof.
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ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
SECTION 6.1 CONDITIONS PRECEDENT OF AVIF (ON BEHALF OF THE ACQUIRING FUND).
The obligation of AVIF (on behalf of the Acquiring Fund) to consummate the
Reorganization is subject to the satisfaction, at or prior to the Closing Date,
of all of the following conditions, any one or more of which may be waived in
writing by AVIF (on behalf of the Acquiring Fund).
(a) The representations and warranties of AVIF on behalf of the Acquired
Fund participating in the Reorganization set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date with the same effect as though all such representations
and warranties had been made as of the Closing Date.
(b) AVIF shall have complied with and satisfied in all material respects
all agreements and conditions relating to the Acquired Fund participating in the
Reorganization set forth herein on its part to be performed or satisfied at or
prior to the Closing Date.
(c) AVIF (on behalf of the Acquiring Fund) shall have received the signed
opinion of Freedman, Levy, Kroll & Simonds, as to the matters set forth in
Schedule 6.1(c).
(d) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
SECTION 6.2 MUTUAL CONDITIONS.
The obligations of AVIF (on behalf of the Acquired Fund) and AVIF (on
behalf of the Acquiring Fund) to consummate the Reorganization are subject to
the satisfaction, at or prior to the Closing Date, of all of the following
further conditions, any one or more may be waived in writing by AVIF, but only
if and to the extent that such waiver is made on behalf of both the Acquired
Fund and the Acquiring Fund.
(a) All filings required to be made prior to the Closing Date with, and all
consents, approvals, permits and authorizations required to be obtained on or
prior to the Closing Date from Governmental Authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by AVIF shall have been made or obtained, as
the case may be; provided, however, that such consents, approvals, permits and
authorizations may be subject to conditions that would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
(b) This Agreement, the Reorganization of the Acquired Fund and related
matters shall have been approved and adopted at the Acquired Fund Shareholders
Meeting by the shareholders of the Acquired Fund on the record date by the
Required Shareholder Vote.
(c) The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall constitute at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by the Acquired Fund
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by the Acquired Fund to pay the expenses it incurs in connection
with this Agreement and the Reorganization and to effect all shareholder
redemptions and distributions (other than regular, normal dividends and regular,
normal redemptions pursuant to the Investment Company Act, and not in excess of
the requirements of Section 852 of the Code, occurring in the ordinary course of
the Acquired Fund's business as a series of an open-end management investment
company) after the date of this Agreement shall be included as assets of the
Acquired Fund held immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent injunction or
other order issued by any Governmental Authority preventing the consummation of
the Reorganization on the Closing Date shall be in effect; provided, however,
that the party or parties invoking this condition shall use reasonable efforts
to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by AVIF with respect to
the Acquiring Fund Shares to be issued to Acquired Fund Shareholders in
connection with the Reorganization shall have become
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effective under the Securities Act and no stop order suspending the
effectiveness thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose shall have been
instituted or be pending, threatened or contemplated under the Securities Act.
(f) AVIF shall have received on or before the Closing Date an opinion of
Freedman, Levy, Kroll & Simonds in form and substance reasonably acceptable to
AVIF as to the matters set forth on Schedule 6.2(f).
(g) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
(h) The Acquiring Fund and the Acquired Fund will have satisfied the
investment diversification requirements of Section 817(h) of the Code for all
taxable quarters since its inception, including the last short taxable period of
the Acquired Fund ending on the Closing Date and taxable quarter of the
Acquiring Fund that includes the Closing Date.
SECTION 6.3 CONDITIONS PRECEDENT OF AVIF (ON BEHALF OF THE ACQUIRED FUND).
The obligation of AVIF (on behalf of the Acquired Fund) to consummate the
Reorganization is subject to the satisfaction, at or prior to the Closing Date,
of all of the following conditions, any one or more of which may be waived in
writing by AVIF (on behalf of the Acquired Fund).
(a) The representations and warranties of AVIF on behalf of the Acquiring
Fund participating in the Reorganization set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date with the same effect as though all such representations
and warranties had been made as of the Closing Date.
(b) AVIF shall have complied with and satisfied in all material respects
all agreements and conditions relating to the Acquiring Fund participating in
the Reorganization set forth herein on its part to be performed or satisfied at
or prior to the Closing Date.
(c) AVIF (on behalf of the Acquired Fund) shall have received the signed
opinion of Freedman, Levy, Kroll & Simonds, as to the matters set forth in
Schedule 6.3(c).
ARTICLE 7
TERMINATION OF AGREEMENT
SECTION 7.1 TERMINATION.
(a) This Agreement may be terminated in whole or with respect to the
Reorganization described herein on or prior to the Closing Date at the election
of AVIF if:
(i) the applicable Closing Date shall not be on or before the date set
out under "Closing Date" in Section 1.1, or such later date as the parties
hereto may agree upon, unless the failure to consummate the Reorganization
is the result of a willful and material breach of this Agreement by AVIF;
(ii) upon a vote at the Acquired Fund Shareholders Meeting or any
adjournment thereof, the Required Shareholder Vote shall not have been
obtained as contemplated by Section 5.8; or
(iii) any Governmental Authority shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Reorganization and such order, decree, ruling or
other action shall have become final and nonappealable.
(b) The termination of this Agreement shall be effectuated by the delivery
by AVIF to the Acquired Fund, the Acquiring Fund, and AIM a written notice of
such termination.
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SECTION 7.2 SURVIVAL AFTER TERMINATION.
If this Agreement is terminated in accordance with Section 7.1 hereof and
the Reorganization of the Acquired Fund is not consummated, this Agreement shall
become void and of no further force and effect with respect to such
Reorganization and the Acquired Fund, except for the provisions of Section 5.3.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations, warranties and covenants in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement shall survive the
consummation of the transactions contemplated hereunder for a period of one (1)
year following the Closing Date.
SECTION 8.2 GOVERNING LAW.
This Agreement shall be construed and interpreted according to the laws of
the State of Delaware applicable to contracts made and to be performed wholly
within such state.
SECTION 8.3 BINDING EFFECT, PERSONS BENEFITING, NO ASSIGNMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and the respective successors and assigns of the parties and such
Persons. Nothing in this Agreement is intended or shall be construed to confer
upon any entity or Person other than the parties hereto and their respective
successors and permitted assigns any right, remedy or claim under or by reason
of this Agreement or any part hereof. Without the prior written consent of the
parties hereto, this Agreement may not be assigned by any of the parties hereto.
SECTION 8.4 OBLIGATIONS OF AVIF (WITH RESPECT TO THE ACQUIRING FUND AND THE
ACQUIRED FUND).
(a) AVIF (on behalf of the Acquired Fund) hereby acknowledges and agrees
that the Acquiring Fund is a separate investment portfolio of AVIF, that AVIF is
executing this Agreement on behalf of the Acquiring Fund, and that any amounts
payable by AVIF (on behalf of the Acquiring Fund) under or in connection with
this Agreement shall be payable solely from the revenues and assets of the
Acquiring Fund. AVIF (on behalf of the Acquiring Fund) further acknowledges and
agrees that this Agreement has been executed by a duly authorized officer of
AVIF (on behalf of the Acquired Fund) in his or her capacity as an officer of
AVIF intending to bind AVIF as provided herein, and that no officer, director or
shareholder of AVIF shall be personally liable for the liabilities or
obligations of AVIF incurred hereunder.
(b) AVIF (on behalf of the Acquired Fund) hereby acknowledges and agrees
that the Acquired Fund is a separate investment portfolio of AVIF, that AVIF is
executing this Agreement on behalf of the Acquired Fund and that any amounts
payable by AVIF (on behalf of the Acquired Fund) under or in connection with
this Agreement shall be payable solely from the revenues and assets of the
Acquired Fund. AVIF (on behalf of the Acquiring Fund) further acknowledges and
agrees that this Agreement has been executed by a duly authorized officer of
AVIF in his or her capacity as an officer of AVIF (on behalf of the Acquired
Fund) intending to bind AVIF as provided herein, and that no officer, trustee or
shareholder of AVIF shall be personally liable for the liabilities of AVIF
incurred hereunder.
SECTION 8.5 AMENDMENTS.
This Agreement may not be amended, altered or modified except by a written
instrument executed by AVIF, acting on behalf of the Acquired Fund on behalf of
the Acquiring Fund.
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SECTION 8.6 ENFORCEMENT.
The parties agree irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States or any state having jurisdiction, in
addition to any other remedy to which they are entitled at law or in equity.
SECTION 8.7 INTERPRETATION.
When a reference is made in this Agreement to a Section or Schedule, such
reference shall be to a Section of, or a Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." Each representation and warranty
contained in Article 3 or 4 that relates to a general category of a subject
matter shall be deemed superseded by a specific representation and warranty
relating to a subcategory thereof to the extent of such specific representation
or warranty.
SECTION 8.8 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original and each of which shall constitute one and the same
instrument.
SECTION 8.9 ENTIRE AGREEMENT; SCHEDULES.
This Agreement, including the Schedules, certificates and lists referred to
herein, and any documents executed by the parties simultaneously herewith or
pursuant thereto, constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, written or oral, between the parties
with respect to such subject matter.
SECTION 8.10 NOTICES.
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered by hand or
by overnight courier, two days after being sent by registered mail, return
receipt requested, or when sent by telecopier (with receipt confirmed),
provided, in the case of a telecopied notice, a copy is also sent by registered
mail, return receipt requested, or by courier, addressed as follows (or to such
other address as a party may designate by notice to the other):
(a) If to AVIF:
AIM Variable Insurance Funds, 11 Greenway Plaza, Suite 100 Houston,
Texas 77046-1173 Attn: Nancy L. Martin, Esq. Fax: (713) 993-9185.
with a copy to:
Freedman, Levy, Kroll & Simonds, 1050 Connecticut Avenue, N.W.,
Suite 825, Washington, D.C. 20036 Attn: Gary O. Cohen, Esq. Fax:
(202) 457-5151.
(b) If to AIM:
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100 Houston, Texas
77046-1173 Attn: Nancy L. Martin, Esq. Fax: (713) 993-9185.
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SECTION 8.11 REPRESENTATIONS BY AIM.
In its capacity as investment adviser to AVIF (with respect to the Acquired
Fund), AIM represents to AVIF that to the best of its knowledge the
representations and warranties of AVIF (with respect to the Acquired Fund)
contained in this Agreement are true and correct as of the date of this
Agreement. In its capacity as investment adviser to AVIF (with respect to the
Acquiring Fund), AIM represents to AVIF that to the best of its knowledge the
representations and warranties of AVIF (with respect to the Acquiring Fund)
contained in this Agreement are true and correct as of the date of this
Agreement. For purposes of this Section 8.11, the best knowledge standard shall
be deemed to mean that the officers of AIM who have substantive responsibility
for the provision of investment advisory services to AVIF (with respect to the
Acquired Fund and the Acquiring Fund) do not have actual knowledge to the
contrary after due inquiry.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
AIM VARIABLE INSURANCE FUNDS
acting on behalf of AIM V.I. Global
Growth and Income Fund
ATTEST
<TABLE>
<S> <C>
By: By: /s/ ROBERT H. GRAHAM
/s/ NANCY L. MARTIN -----------------------------------------------------
----------------------------------------------------- Name: Robert H. Graham
Name: Nancy L. Martin Title: President
Title: Assistant Secretary
</TABLE>
AIM VARIABLE INSURANCE FUNDS
acting on behalf of AIM V.I. Growth
and Income Fund
ATTEST
<TABLE>
<S> <C>
By: By: /s/ ROBERT H. GRAHAM
/s/ NANCY L. MARTIN -----------------------------------------------------
----------------------------------------------------- Name: Robert H. Graham
Name: Nancy L. Martin Title: President
Title: Assistant Secretary
</TABLE>
A I M Advisors, Inc.
ATTEST
<TABLE>
<S> <C>
By: By: /s/ ROBERT H. GRAHAM
/s/ NANCY L. MARTIN -----------------------------------------------------
----------------------------------------------------- Name: Robert H. Graham
Name: Nancy L. Martin Title: President
Title: Assistant Secretary
</TABLE>
I-21
<PAGE> 41
SCHEDULE 6.1(C)
OPINION OF COUNSEL TO AVIF (ON BEHALF OF THE ACQUIRED FUND)
1. AVIF is duly organized and validly existing as a business trust under
the Delaware Business Trust Act.
2. AVIF is an open-end, management investment company registered under the
Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AVIF have
been duly authorized and approved by all requisite trust action on the part of
AVIF. The Agreement has been duly executed and delivered by AVIF and constitutes
the valid and binding obligation of AVIF.
4. The Acquired Fund Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are non-assessable.
5. To the best of our knowledge, AVIF is not required to submit any notice,
report or other filing with or obtain any authorization, consent or approval
from any governmental authority or self regulatory organization prior to the
consummation of the transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer who is
the current primary contact for AVIF or who has devoted substantive attention on
behalf of AVIF during the preceding twelve months and who is still currently
employed by or is currently a member of this firm, no litigation or governmental
proceeding is pending or threatened in writing against the Acquired Fund (i)
with respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
I-22
<PAGE> 42
SCHEDULE 6.2(f)
TAX OPINION
(1) The transfer of the assets of the Acquired Fund to the Acquiring Fund
in exchange for voting stock of the Acquiring Fund distributed directly to the
shareholders of the Acquired Fund, as provided in the Agreement, will constitute
a "reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquired Fund and the Acquiring Fund will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code.
(2) In accordance with Section 361(a) and Section 361(c)(1) of the Code, no
gain or loss will be recognized by the Acquired Fund on the transfer of its
assets to the Acquiring Fund solely in exchange for voting stock of the
Acquiring Fund and the Acquiring Fund's assumption of the Acquired Fund's
liabilities, or on the distribution of the voting stock to the Acquired Fund's
shareholders.
(3) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by the Acquiring Fund on the receipt of assets of the Acquired Fund
in exchange for Acquiring Fund voting stock and the Acquiring Fund's assumption
of the Acquired Fund's liabilities.
(4) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by shareholders of the Acquired Fund on the receipt of voting
stock of the Acquiring Fund in constructive exchange for their Acquired Fund
shares.
(5) In accordance with Section 362(b) of the Code, the basis to the
Acquiring Fund of the assets of Acquired Fund transferred to it will be the same
as the basis of those assets in the hands of the Acquired Fund immediately
before the Reorganization.
(6) In accordance with Section 358(a) of the Code, the Acquired Fund
shareholders' basis for voting stock of the Acquiring Fund received by the
Acquired Fund shareholder will be the same as the Acquired Fund shareholders'
basis for Acquired Fund shares constructively exchanged therefor.
(7) In accordance with Section 1223(1) of the Code, the Acquired Fund
shareholders' holding period for voting stock of the Acquiring Fund will include
the Acquired Fund shareholders' holding period for the Acquired Fund shares
constructively exchanged therefor, provided that the Acquired Fund shareholder
held the Acquired Fund shares as a capital asset.
(8) In accordance with Section 1223(2) of the Code, the holding period for
assets of the Acquired Fund transferred to the Acquiring Fund in the
Reorganization will include the holding period for those assets in the hands of
the Acquired Fund.
(9) The Acquired Fund and the Acquiring Fund will each be a RIC under
Subchapter M and will each comply with the investment diversification
requirements of Section 817(h) of the Code. Accordingly, the Reorganization will
not produce adverse Federal income tax consequences by reason of income or gain
for any Contract Owner.
I-23
<PAGE> 43
SCHEDULE 6.3(c)
OPINION OF COUNSEL TO AVIF (ON BEHALF OF TO THE ACQUIRING FUND)
1. AVIF is dully organized and validly existing as a business trust under
the Delaware Business Trust Act.
2. AVIF is an open-end, management investment company registered under the
Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AVIF have
been duly authorized and approved by all requisite trust action on the part of
AVIF. The Agreement has been duly executed and delivered by AVIF and constitutes
the valid and binding obligation of AVIF.
4. The Acquiring Fund Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are non-assessable.
5. To the best of our knowledge, AVIF is not required to submit any notice,
report or other filing with or obtain any authorization, consent or approval
from any governmental authority or self regulatory organization prior to the
consummation of the transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer who is
the current primary contact for AVIF or who has devoted substantive attention on
behalf of AVIF during the preceding twelve months and who is still currently
employed by or is currently a member of this firm, no litigation or governmental
proceeding is pending or threatened in writing against the Acquiring Fund (i)
with respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
I-24
<PAGE> 44
APPENDIX II
AIM V.I. GROWTH
AND INCOME FUND
--------------------------------------------------------------------------------
Shares of the fund are currently offered only to insurance company
separate accounts. AIM V.I. Growth and Income Fund seeks to provide growth
of capital with a secondary objective of current income.
PROSPECTUS AIM--Registered Trademark--
MAY 1, 2000
This prospectus contains important
information. Please read it before
investing and keep it for future
reference.
As with all other mutual fund securities,
the Securities and Exchange Commission
has not approved or disapproved these
securities or determined whether the
information in this prospectus is
adequate or accurate. Anyone who tells
you otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 45
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FUND MANAGEMENT 3
- - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 3
Advisor Compensation 3
Portfolio Managers 3
OTHER INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - -
Purchase and Redemption of Shares 3
Pricing of Shares 3
Taxes 3
Dividends and Distributions 3
FINANCIAL HIGHLIGHTS 4
- - - - - - - - - - - - - - - - - - - - - - - -
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 46
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
--------------------------------------------------------------------------------
The fund's primary investment objective is growth of capital with a secondary
objective of current income. The investment objectives of the fund may be
changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objectives by investing at least 65% of its total
assets in securities of established companies that have long-term above-average
growth in earnings and dividends, and growth companies that the portfolio
managers believe have the potential for above-average growth in earnings and
dividends. The portfolio managers consider whether to sell a particular security
when they believe the security no longer has that potential. The fund may also
invest up to 25% of its total assets in foreign securities. Any percentage
limitations with respect to assets of the fund are applied at the time of
purchase.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
--------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. The values of the convertible
securities in which the fund may invest also will be affected by market interest
rates, the risk that the issuer may default on interest or principal payments
and the value of the underlying common stock into which these securities may be
converted. Specifically, since these types of convertible securities pay fixed
interest and dividends, their values may fall if market interest rates rise and
rise if market interest rates fall. Additionally, an issuer may have the right
to buy back certain of the convertible securities at a time and at a price that
is unfavorable to the fund.
The prices of foreign securities may be further affected by other factors,
including:
- Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devaluated their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
1
<PAGE> 47
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
PERFORMANCE INFORMATION
-------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance. The bar chart and performance table shown
do not reflect charges at the separate account level. If they did, the
performance shown would be lower.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
<S> <C>
1995 ............................................ 33.86%
1996 ............................................ 19.95%
1997 ............................................ 25.72%
1998 ............................................ 27.68%
1999 ............................................ 34.25%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
26.48% (quarter ended December 31, 1998) and the lowest quarterly return was
-11.76% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth and
Income Fund 34.25% 28.18% 24.49% 05/02/94
Standard & Poor's 500
Index(1) 21.03% 28.54% 25.65%(2) 04/30/94(2)
----------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
2
<PAGE> 48
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
FUND MANAGEMENT
--------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The advisor supervises all aspects of the fund's operations and provides
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fund's last fiscal year ended December 31, 1999, the advisor received
compensation of 0.61% of the fund's average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are as follows:
- Monika H. Degan, Senior Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, Ms. Degan was a Senior Financial Analyst for
Shell Oil Co. Pension Trust.
- Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for
the fund since 1994, and has been associated with the advisor and/or its
affiliates since 1987.
OTHER INFORMATION
--------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
The fund ordinarily effects orders to purchase and redeem shares at the fund's
next computed net asset value after it receives an order. Life insurance
companies participating in the fund serve as the fund's designee for receiving
orders of separate accounts that invest in the fund.
The fund currently offers shares only to insurance company separate accounts.
In the future, the fund may offer them to pension and retirement plans that
qualify for special federal income tax treatment.
The Board of Trustees monitors for possible conflicts among separate accounts
(and will do so for plans) buying shares of the fund. A fund's net asset value
could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account (or plan) withdrawing because of a conflict.
PRICING OF SHARES
The fund prices its shares based on its net asset value. The fund values
portfolio securities for which market quotations are readily available at market
value. The fund values short-term investments maturing within 60 days at
amortized cost, which approximates market value. The fund values all other
securities and assets at their fair value. Securities and other assets quoted in
foreign currencies are valued in U.S. dollars based on the prevailing exchange
rates on that day. In addition, if, between the time trading ends on a
particular security and the close of the New York Stock Exchange (NYSE), events
occur that materially affect the value of the security, the fund may value the
security at its fair value as determined in good faith by or under the
supervision of the Board of Trustees. The effect of using fair value pricing is
that the fund's net asset value will be subject to the judgment of the Board of
Trustees or its designee instead of being determined by the market. Because the
fund may invest in securities that are primarily listed on foreign exchanges,
the value of the fund's shares may change on days when the separate account will
not be able to purchase or redeem shares. The fund determines the net asset
value of its shares as of the close of the NYSE on each day the NYSE is open for
business.
TAXES
The amount, timing and character of distributions to the separate account may be
affected by special tax rules applicable to certain investments purchased by the
fund. Holders of variable contracts should refer to the prospectus for their
contracts for information regarding the tax consequences of owning such
contracts and should consult their tax advisors before investing.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually to separate
accounts of participating life insurance companies.
The fund expects that its distributions will consist primarily of capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually to separate
accounts of participating life insurance companies.
At the election of participating life insurance companies, dividends and
distributions are automatically reinvested at net asset value in shares of the
fund.
3
<PAGE> 49
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
The table shows the financial highlights for a share of the fund outstanding
during each of the fiscal years (or periods) indicated.
This information has been audited by Tait, Weller & Baker, whose report, along
with the fund's financial statements, is included in the fund's annual report,
which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999(a) 1998(a) 1997 1996 1995 1995
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98 $10.00
Income from investment operations:
Net investment income 0.06 0.26 0.13 0.16 0.14 0.11
Net gains (losses) on securities (both
realized and unrealized) 8.05 4.95 3.74 2.36 3.11 (0.02)
Total from investment operations 8.11 5.21 3.87 2.52 3.25 0.09
Less distributions:
Dividends from net investment income (0.16) (0.09) (0.01) (0.14) (0.14) (0.11)
Distributions from net realized gains (0.11) (0.24) (0.02) (0.03) (0.41) --
Total distributions (0.27) (0.33) (0.03) (0.17) (0.55) (0.11)
Net asset value, end of period $ 31.59 $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98
Total return(b) 34.25% 27.68% 25.72% 19.95% 32.65% 0.90%
----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,443,264 $1,262,059 $639,113 $209,332 $38,567 $7,380
Ratio of expenses to average net assets 0.77%(c) 0.65% 0.69% 0.78% 0.78%(d) 1.07%(d)(e)
Ratio of net investment income to average net
assets 0.22%(c) 1.34% 1.15% 2.05% 1.92%(d) 1.95%(d)(e)
Portfolio turnover rate 93% 140% 135% 148% 145% 96%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,718,996,207.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.72% (annualized) and 1.30% (annualized), respectively.
4
<PAGE> 50
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
OBTAINING ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you wish to obtain free copies of the fund's current SAI, please send a
written request to A I M Distributors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 or call (800) 410-4246.
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
-----------------------------------
AIM V.I. Growth and Income Fund
SEC 1940 Act file number: 811-7452
-----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 51
APPENDIX III
The Managers' Overview
AIM V.I. GROWTH AND INCOME FUND OUTPERFORMS BENCHMARK
A roundtable discussion with the fund management team for AIM V.I. Growth and
Income Fund for the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Q. THE STOCK MARKET HAS BEEN Q. WHAT WERE MARKET CONDITIONS many large companies, fewer stocks met
VERY VOLATILE OVER THE REPORTING LIKE OVER THE REPORTING PERIOD? our investment criteria. Over the fiscal
PERIOD. HOW DID AIM V.I. GROWTH A. Most market trends of the last few year, we cut the number of holdings in
AND INCOME FUND PERFORM? years continued. The largest stocks in the fund's portfolio. Paring down the port-
A. AIM V.I. Growth and Income Fund the S&P 500 again dominated that index's folio allowed us to concentrate on
produced outstanding results despite returns while the remainder produced stocks that exhibited the strongest
market volatility. For the year ended lackluster results. In fact, despite earnings performance.
December 31, 1999, the fund produced advances by the main market indexes,
a total return of 34.25%, significantly out- most S&P 500 stocks lost value during Q. WHAT WERE THE TOP SECTORS
performing the S&P 500, which returned the fiscal year. FOR THE FUND?
21.03% over the same period. In one of the biggest shake-ups of its A. The fund continued to focus on lead-
103-year history, in October the Dow ing technology, financial and health-care
AIM V.I. GROWTH AND INCOME Jones Industrial Average revised its mem- stocks. Over the fiscal year, the fund's
FUND VS. BENCHMARK INDEX bership to include Microsoft, Intel, SBC technology concentration increased,
Communications and Home Depot. The while its investments in financial and
One-year return as of 12/31/99 move signaled the markets' transition to health-care stocks held steady or
the "new economy," dominated by tech- decreased slightly.
AIM nology, telecommunications and ware-
V.I. GROWTH and S & P 500 house retailers. As of December 31, Q. WHY IS TECHNOLOGY SO
INCOME FUND INDEX 1999, the fund had holdings in Microsoft, IMPORTANT TO THE FUND?
--------------- ---------- SBC Communications and Home Depot. A. Technology was one of the strongest
34.25% 21.03% market sectors over the fiscal year. Our
Q. HOW DID YOU MANAGE THE FUND heavy weighting in technology is one of
DURING THESE CONDITIONS? the main reasons the fund beat the S&P
A. With earnings growth slowing for 500 over the fiscal year.
The fund held the stocks of companies
PORTFOLIO COMPOSITION involved in Internet infrastructure, such
as software, wireless communications
As of 12/31/99, based on total net assets and cable-TV firms. A new stock among
our top 10 holdings is Novell, which
TOP 10 HOLDINGS TOP 10 INDUSTRIES makes software that connects PCs to cor-
porate networks. The company has seen
1. Novell, Inc. 5.15% 1. Computers (Software & Services) 17.17% excellent growth this year based on the
2. Microsoft Corp. 4.78 2. Communications Equipment 8.06 success of its Internet-related products.
3. Tyco International Ltd. 3.58 3. Health Care (Diversified) 7.51
4. Warner-Lambert Co. 3.35 4. Financial (Diversified) 5.40 Q. THE FUND HOLDS MICROSOFT
5. Cisco Systems Inc. 3.07 5. Investment Banking/Brokerage 4.90 STOCK. HOW WILL THE RULING IN
6. Dayton-Hudson Corp. 3.01 6. Manufacturing (Diversified) 3.98 THE DEPARTMENT OF JUSTICE CASE
7. Morgan Stanley Dean Witter 7. Broadcasting AFFECT YOUR INVESTMENT?
& Co. 2.97 (Television, Radio & Cable) 3.80 A. In November, a federal judge ruled
8. Sun Microsystems Inc. 2.92 8. Computers (Hardware) 3.75 that Microsoft is a monopoly. As of this
9. American Express Co. 2.89 9. Retail (General Merchandise) 3.45 writing, neither a settlement nor an
10. General Electric Co. 2.69 10. Computers (Networking) 3.07 appeal has been announced, and it's
unlikely that a final decision will be made
The fund's portfolio composition is subject to change, and there is no assurance until 2001. While we cannot comment on
that the fund will continue to hold any particular security.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
<PAGE> 52
<TABLE>
<CAPTION>
<S> <C> <C>
our specific plans to buy or sell stocks, [GRAPH APPEARS HERE]
we can say that as of this time, Microsoft RESULTS OF A $10,000 INVESTMENT
remains a large holding in the fund. We -------------------------------
believe that the company's growth 5/2/94 - 12/31/99
prospects remain strong, especially with
the upcoming introduction of two new AVERAGE ANNUAL TOTAL RETURNS
software products: Office 2000 and As of 12/31/99
Windows 2000. Over the short term, the Inception (5/2/94) 24.49%
stock may be volatile, but this is a core 5 Years 28.18
growth company that should continue to 1 Year 34.25
be a part of our portfolio.
AIM V.I.
Q. WHAT WERE CONDITIONS LIKE FOR GROWTH AND INCOME RUSSELL S & P
FINANCIAL STOCKS? (In thousands) FUND 1000 500
A. Interest-rate concerns have plagued ------------------------------------------
financial stocks, causing them to experi- 5/2/94 10,000 10,000 10,000
ence substantial volatility. But the long- 12/94 9,999 10,326 10,396
term prospects for banks and insurance 12/95 13,385 14,227 14,299
companies seem favorable based on the 12/96 16,054 17,420 17,579
continued strength of their earnings. 12/97 20,183 23,143 23,443
Another issue gives us reason to believe 12/98 25,771 29,397 30,147
that financial stocks may soon recover. 12/99 34,597 35,545 36,489
Late in 1999, Congress reformed the
Glass-Steagall Act, which was created to ----------------------------------
separate commercial and investment SOURCE: LIPPER, INC.
banking. Many analysts believe this may Past performance cannot guarantee comparable future results.
set off a blizzard of merger-and-acqui-
sition activity among banks, insurance MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE.
companies, investment managers and RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM
brokers. THE HISTORICAL PERFORMANCE SHOWN.
Q. WHAT HAPPENED IN THE HEALTH- The performance figures shown here, which represent AIM V.I. Growth and
CARE INDUSTRY OVER THE PAST YEAR? Income Fund, are not intended to reflect actual annuity values, and they do
A. Health-care stocks have been disap- not reflect charges at the separate-account level which (if applied) would
pointing for several reasons: First, at lower them. AIM V.I. Growth and Income Fund's performance figures are
times during 1999 growth stocks such as historical, and they reflect changes in net asset value and the reinvestment
health care went out of favor and of distributions. The fund's investment return and principal value will
investors looked into cyclical stocks that fluctuate, so an investor's shares, when redeemed, may be worth more or less
are more sensitive to the economy. than their original cost.
Second, many health-care stocks were The unmanaged Russell 1000 Stock Index (the Russell 1000) is generally
considered too expensive, and they have considered representative of the performance of the stocks of
fallen out of favor with some investors. large-capitalization companies. The unmanaged Standard & Poor's Composite of
Third, concerns about political reform 500 Stocks (the S&P 500) is generally considered representative of the
continue to hang over the health-care performance of the stock market in general. Data for the indexes are for the
industry. Recent changes in Medicare's period 4/30/94-12/31/99.
reimbursement programs affect the bot- The fund will no longer measure its performance against the S&P 500,
tom lines of hospitals, nursing homes and the index published in previous shareholder reports. Because this is the
other service providers. Over the long first reporting period since we have adopted the new index, SEC guidelines
term, we believe the industry will make a require us to compare the fund's performance to that of both the old and the
comeback, if for the simple fact that baby new index. An investment cannot be made in an index. Unless otherwise
boomers will spend more money on indicated, index results include reinvested dividends.
health care as they age. The fund's health-
care holdings decreased over the year. Q. BESIDES TECHNOLOGY, WHAT Q. WHAT'S YOUR OUTLOOK FOR THE
OTHER AREAS PERFORMED WELL FOR NEAR TERM?
THE FUND? A. Our outlook for the market remains
A. The fund increased its holdings in positive. The United States is experiencing
consumer cyclicals, including retail one of the longest expansion periods in
stocks. Consumer-cyclical companies its history and inflation is low. We believe
benefited from a booming economy, the environment remains favorable for
nearly full employment and robust sales. equities despite short-term market
Dayton-Hudson, which owns Marshall volatility.
Fields, Target and Mervyn's stores,
became a top 10 holding for the fund
during the year. The company, which
operates more than 1,200 stores, report-
ed strong earnings in its most recent
quarter.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
<PAGE> 53
EVERY VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY!
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
THE TRUSTEES RECOMMEND VOTING "FOR" THE PROPOSAL.
TO VOTE, FILL IN THE BOX COMPLETELY. Example: [ ]
* Please fold and detach card at perforation before mailing *
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. To approve an Agreement and Plan of Reorganization by and among [ ] [ ] [ ]
AIM Variable Insurance Funds, acting on behalf of AIM V.I. Global Growth
and Income Fund and on behalf of AIM V.I. Growth and Income Fund,
and A I M Advisors, Inc.
2. IN THE DISCRETION OF SUCH PROXIES, UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
</TABLE>
<PAGE> 54
EVERY SHAREHOLDER'S VOTE IS IMPORTANT!
PLEASE SIGN, DATE AND RETURN YOUR PROXY TODAY!
PROXY SOLICITED BY THE BOARD OF TRUSTEES OF
AIM V.I. GLOBAL GROWTH AND INCOME FUND
(A PORTFOLIO OF AIM VARIABLE INSURANCE FUNDS)
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 1, 2000
* Please fold and detach card at perforation before mailing *
PROXY CARD PROXY CARD
The undersigned hereby appoints Robert H. Graham, Gary T. Crum and Lewis F.
Pennock, and each of them separately, proxies with the power of substitution to
each, and hereby authorizes them to represent and to vote, as designated below,
at the Special Meeting of Shareholders on September 1, 2000, at 3:00 p.m.,
Central time, and at any adjournment thereof, all shares of the fund which the
undersigned would be entitled to vote if personally present. IF THIS PROXY IS
SIGNED AND RETURNED WITH NO CHOICES INDICATED, THE SHARES WILL BE VOTED "FOR"
THE APPROVAL OF THE PROPOSAL.
DATE: ___________________, 2000
Signature(s)
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
partnership name.
