SUB-ITEM 77M
MERGERS
AIM VARIABLE INSURANCE FUNDS
INVESCO VIF-GROWTH FUND INTO AIM V.I. GROWTH FUND
On December 10, 2003, the Board of Directors of INVESCO Variable Investment
Funds, Inc. ("IVIF") and the Board of Trustees of AIM Variable Insurance Funds
("AVIF") approved an Agreement and Plan of Reorganization (the "Agreement"). On
April 2, 2004, at a Special Meeting for shareholders of INVESCO VIF-Growth
Fund, an investment portfolio of IVIF, shareholders approved the Agreement that
provided for the combination of INVESCO VIF-Growth Fund with AIM V.I. Growth
Fund, an investment portfolio of AVIF (the "Reorganization"). Pursuant to the
Agreement, on April 30, 2004, all of the assets of INVESCO VIF-Growth Fund were
transferred to AIM V.I. Growth Fund, AIM V.I. Growth Fund assumed all of the
liabilities of INVESCO VIF-Growth Fund, and AVIF issued shares of AIM V.I.
Growth Fund to INVESCO VIF-Growth Fund's shareholders. The value of each
INVESCO VIF-Growth Fund shareholder's account with AIM V.I. Growth Fund
immediately after the Reorganization was the same as the value of such
shareholder's account with INVESCO VIF-Growth Fund immediately prior to the
Reorganization. The Reorganization was structured as a tax-free transaction.
For a more detailed discussion on the merger, please see the attached proxy
statement (attached hereto as Attachment A).
ATTACHMENT A
(INVESCO LOGO)
INVESCO VIF -- GROWTH FUND,
A PORTFOLIO OF INVESCO VARIABLE INVESTMENT FUNDS, INC.
00 XXXXXXXX XXXXX, XXXXX 000
HOUSTON, TEXAS 77046-1173
February 26, 2004
Dear Contract Owner:
As you may be aware, AMVESCAP PLC, the parent company of INVESCO
VIF -- Growth Fund's investment advisor, has undertaken an integration
initiative for its North American mutual fund operations.
Shares of INVESCO VIF -- Growth Fund (the Fund) are sold to and held by
separate accounts of various insurance companies to fund variable annuity or
variable life insurance contracts offered by the insurance companies. The
separate accounts invest in shares of the Fund in accordance with instructions
from variable annuity or variable life contract owners. Except as otherwise
might be provided by applicable law, the separate accounts provide pass-through
voting to contract owners, and you, as a contract owner, have the right to
instruct the separate account on how to vote shares of the Fund held by the
separate account under your contract.
In the first phase of the integration initiative, A I M Distributors, Inc.
became the sole distributor for all retail AMVESCAP PLC mutual funds in the
United States. A I M Distributors, Inc. is now the distributor for all retail
INVESCO Funds and the retail AIM Funds. If the redomestication of the Fund
(discussed below) is not approved, A I M Distributors, Inc. will become the
distributor for the Fund on April 30, 2004.
AMVESCAP PLC also reviewed all INVESCO Funds and AIM Funds and concluded
that it would be appropriate to reduce the number of smaller and less efficient
funds that compete for limited shareholder assets and to consolidate certain
funds having similar investment objectives and strategies. The Fund is one of
the funds that AMVESCAP PLC recommended, and its Board of Directors approved, be
consolidated with another fund. The attached proxy statement/prospectus seeks
your approval of this consolidation.
As part of the integration initiative, AMVESCAP PLC has recommended
restructuring the advisory and administrative servicing arrangements so that
A I M Advisors, Inc. is the advisor and administrator for all INVESCO Funds and
AIM Funds. The Board has approved a new advisory agreement under which A I M
Advisors, Inc. will serve as the investment advisor for the Fund, and a new
sub-advisory agreement under which INVESCO Institutional (N.A.), Inc., an
affiliate of INVESCO Funds Group, Inc., which is currently serving as the Fund's
investment advisor, will serve as sub-advisor. The portfolio management team for
the Fund will not change as a result of this restructuring. The attached proxy
statement/prospectus seeks your approval of this new investment advisory
agreement and sub-advisory agreements. If approved, this new agreement will
become effective only if the proposal to consolidate the Fund is not approved.
The integration initiative also calls for changing the organizational
structure of the INVESCO Funds and the AIM Funds. To accomplish this goal,
AMVESCAP PLC has recommended that all INVESCO Funds and AIM Funds organized as
Maryland corporations change their form and state of organization to Delaware
statutory trusts. The Board has approved redomesticating the Fund as a series of
a Delaware statutory trust. The attached proxy statement/prospectus seeks your
approval of this redomestication. If approved, the redomestication of the Fund
will become effective only if the proposal to consolidate the Fund is not
approved.
Finally, the independent directors of the Board believe that your interests
would best be served if the INVESCO Funds and the AIM Funds had a unified board
of directors/trustees. The attached proxy statement/prospectus seeks your vote
in favor of the persons nominated to serve as directors.
Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card or voting instruction card in the
enclosed postage paid return envelope. If you attend the meeting, you may vote
in person. If you expect to attend the meeting in person, with proper
authorization from your life insurance company or have questions, please notify
us by calling (000) 000-0000. If we do not hear from you after a reasonable
amount of time, you may receive a telephone call from us reminding you to vote.
Sincerely,
/s/ XXXXXX X. XXXXXX
--------------------------------------
Xxxxxx X. Xxxxxx
President
INVESCO VIF -- GROWTH FUND,
A PORTFOLIO OF INVESCO VARIABLE INVESTMENT FUNDS, INC.
00 XXXXXXXX XXXXX, XXXXX 000
HOUSTON, TEXAS 77046-1173
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 2, 2004
We cordially invite you to attend our Special Meeting of Shareholders to:
1. Approve an Agreement and Plan of Reorganization, and in connection
therewith, the sale of all of the Fund's assets and the termination of the
Fund as a designated series of the INVESCO Variable Investment Funds, Inc.
("Company") (the "Agreement"). Under the agreement:
- all of the assets of INVESCO VIF--Growth Fund (the "Fund"), an
investment portfolio of Company, will be transferred to AIM V.I.
Growth Fund ("Buying Fund"), an investment portfolio of AIM Variable
Insurance Funds, ("Buyer"); and
- Buying Fund will assume the liabilities of the Fund and Buyer will
issue shares of each class of Buying Fund to shareholders of the
corresponding class of shares of the Fund.
2. Elect 16 directors to the Board of Directors of Company, each of
whom will serve until his or her successor is elected and qualified.
3. Approve a new investment advisory agreement with A I M Advisors,
Inc. ("AIM") for the Fund.
4. Approve a new sub-advisory agreement between AIM and INVESCO
Institutional (N.A.), Inc. for the Fund.
5. Approve an Agreement and Plan of Reorganization (the "Plan") which
provides for the redomestication of each series portfolio of Company as a
new series portfolio of Buyer, an existing Delaware statutory trust, and,
in connection therewith, the sale of all of Company's assets and the
dissolution of Company as a Maryland corporation.
6. Transact any other business, not currently contemplated, that may
properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.
We are holding the Special Meeting at 00 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000-1173 on April 2, 2004, at 3:00 p.m., Central Time.
Shares of the Fund are sold to and held by separate accounts of various
insurance companies to fund variable annuity or variable life insurance
contracts offered by the insurance companies. The separate accounts invest in
shares of the Fund in accordance with instructions from variable annuity or
variable life contract owners. Except as otherwise might be provided by
applicable law, the separate accounts provide pass-through voting to contract
owners, and you, as a contract owner, have the right to instruct the separate
account on how to vote shares of the Fund held by the separate account under
your contract.
The Board is sending this Notice of Special Meeting of Shareholders,
Combined Proxy Statement and Prospectus, and proxy solicitation materials to (i)
all separate accounts, which are the shareholders who owned shares of common
stock in the Fund at the close of business on January 9, 2004 (the record date),
and (ii) all contract owners who had their variable annuity or variable life
contract values allocated to the Fund as of the close of business on January 9,
2004 and who are entitled to instruct the corresponding separate account on how
to vote.
WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY, WHICH IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF
COMPANY. YOUR VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE
SPECIAL MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY
EXECUTING AND SUBMITTING A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION
TO THE SECRETARY OF COMPANY OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
/s/ Xxxxx X. Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx
Secretary
February 26, 2004
INVESCO VIF -- GROWTH FUND, AIM V.I. GROWTH FUND,
A PORTFOLIO OF A PORTFOLIO OF
INVESCO VARIABLE AIM VARIABLE
INVESTMENT FUNDS, INC. INSURANCE FUNDS
00 XXXXXXXX XXXXX, XXXXX 000 00 XXXXXXXX XXXXX, XXXXX 000
XXXXXXX, XXXXX 00000-0000 XXXXXXX, XXXXX 77046-1173
(000) 000-0000 (000) 000-0000
COMBINED PROXY STATEMENT AND PROSPECTUS
FEBRUARY 26, 2004
This document is a combined Proxy Statement and Prospectus ("Proxy
Statement/Prospectus"). We are sending you this Proxy Statement/Prospectus in
connection with the Special Meeting of Shareholders (the "Special Meeting") of
INVESCO VIF -- Growth Fund. The Special Meeting will be held on April 2, 2004.
We intend to mail this Proxy Statement/Prospectus, the enclosed Notice of
Special Meeting of Shareholders and the enclosed proxy card or voting
instruction card on or about February 26, 2004 to all shareholders entitled to
vote.
Each series of INVESCO Variable Investment Funds, Inc. and
AIM Variable
Insurance Funds are used solely as an investment vehicle for variable annuity
and variable life insurance contracts issued by certain life insurance
companies. You cannot purchase shares of INVESCO Variable Investment Funds, Inc.
and
AIM Variable Insurance Funds directly. As a contract owner of a variable
annuity or variable life insurance contract that offers one or more series of
INVESCO Variable Investment Funds, Inc. and
AIM Variable Insurance Funds as an
investment option, however, you may allocate your contract values to a separate
account of the insurance company that invests in a series of INVESCO Variable
Investment Funds, Inc. and
AIM Variable Insurance Funds.
In accordance with current law, the life insurance company separate
accounts, which are the shareholders of record of the INVESCO Variable
Investment Funds, Inc., in effect, pass along their voting rights to the
contract owners. Essentially, each life insurance company seeks instructions as
to how its contract owners wish the life insurance company to vote the shares of
the INVESCO Variable Investment Funds, Inc. (i) technically owned by the life
insurance company, but (ii) beneficially owned by the contract owners. The life
insurance companies communicate directly with contract owners about the
procedures that the life insurance companies follow in seeking instructions and
voting shares under the particular separate accounts. Each share of an
investment portfolio of the INVESCO Variable Investment Funds, Inc. that a
contract owner beneficially owns entitles that contract owner to one vote on
each proposal set forth in this Proxy Statement/Prospectus (a fractional share
has a fractional vote).
All references in this Proxy Statement/Prospectus to "shareholder" or
"shareholders" shall mean the "contract owner/separate account" or the "contract
owners/separate accounts," respectively. All references in this Proxy
Statement/Prospectus to "you" or "your" shall mean the "contract owner/separate
account." All references in this Proxy Statement/Prospectus to "proxy card"
shall mean the "proxy card" or "voting instruction card" you have received from
the Board of Directors of INVESCO Variable Investment Funds, Inc. (the "Board")
or from your applicable life insurance company.
At the Special Meeting, we are asking shareholders of INVESCO VIF -- Growth
Fund (your Fund) to vote on five Proposals. The first Proposal to be voted on is
an
Agreement and Plan of Reorganization (the "Agreement") which provides for the
combination of your Fund, an investment portfolio of INVESCO Variable Investment
Funds, Inc. ("Company"), with AIM V.I. Growth Fund ("Buying Fund"), an
investment portfolio of
AIM Variable Insurance Funds ("Buyer") (the
"Reorganization").
Under the Agreement, all of the assets of your Fund will be transferred to
Buying Fund, Buying Fund will assume the liabilities of your Fund and Buyer will
issue shares of each class of Buying Fund to shareholders of the corresponding
class of shares of your Fund, as set forth on Exhibit A.
The value of your account with Buying Fund immediately after the
Reorganization will be the same as the value of your account with your Fund
immediately prior to the Reorganization. The Reorganization has been structured
as a tax-free transaction. No sales charges will be imposed in connection with
the Reorganization.
The Board has approved the Agreement and the Reorganization as being
advisable and in the best interests of your Fund.
Company and Buyer are both registered open-end management investment
companies that issue their shares in separate series. Your Fund is a series of
Company and Buying Fund is a series of Buyer. INVESCO Funds Group, Inc.
("INVESCO") serves as the investment advisor to your Fund and A I M Advisors,
Inc. ("AIM") serves as the investment advisor to Buying Fund. Both AIM and
INVESCO are wholly owned subsidiaries of AMVESCAP PLC ("AMVESCAP"), an
independent global investment management company.
The investment objective of Buying Fund is similar to that of your Fund.
See "Comparison of Investment Objectives and Principal Strategies."
This Proxy Statement/Prospectus sets forth the information that you should
know before voting on the Agreement and the other Proposals described below. It
is both the Proxy Statement of your Fund and the Prospectus of Buying Fund. You
should read and retain this Proxy Statement/Prospectus for future reference.
The following documents are on file with the Securities and Exchange
Commission (the "SEC"):
- Prospectus of your Fund dated April 30, 2003, as supplemented June 12,
2003, October 21, 2003 and December 16, 2003 (the "Selling Fund
Prospectus"), together with the related Statement of Additional
Information dated April 30, 2003 (The Selling Fund Prospectus is
incorporated by reference into this Proxy Statement/Prospectus;)
- The Prospectus of Buying Fund dated May 1, 2003, as supplemented June 12,
2003, August 18, 2003, August 20, 2003, November 20, 2003, December 12,
2003 and December 16, 2003 (the "Buying Fund Prospectus"); and
- Statement of Additional Information dated May 1, 2003, as revised
September 1, 2003 and as supplemented October 21, 2003, and the Statement
of Additional Information relating to the Reorganization dated February
26, 2004.
- Buying Fund Prospectus is incorporated by reference into this Proxy
Statement/Prospectus and a copy of the Buying Fund Prospectus is attached
as Appendix II to this Proxy Statement/Prospectus; and
- Statement of Additional Information relating to the Reorganization dated
February 26, 2004, also is incorporated by reference into this Proxy
Statement/Prospectus. The SEC maintains a website at xxx.xxx.xxx that
contains the Prospectuses and Statements of Additional Information
described above, material incorporated by reference, and other
information about Company and Buyer.
Copies of the Buying Fund Prospectus and the related Statement of
Additional Information are available without charge by writing to A I M
Distributors, Inc., 00 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000, or
by calling (000) 000-0000. Copies of the Selling Fund Prospectus and the related
Statement of Additional Information are available without charge by writing to
INVESCO Distributors, Inc., 00 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx
00000-0000, or by calling (000) 000-0000.
The remaining four Proposals to be voted on are: the election of 16
directors to the Board of Directors of Company; the approval of a new advisory
agreement with AIM for your Fund; the approval of a new sub-advisory agreement
between AIM and INVESCO Institutional (N.A.), Inc. ("INVESCO Institutional") for
your Fund; and the approval of an
Agreement and Plan of Reorganization (the
"Plan") which provides for the redomestication of each series portfolio of
Company as a new series portfolio of an existing
Delaware statutory trust and,
in connection therewith, the sale of all of Company's assets and the dissolution
of Company as a Maryland corporation. The Board has approved the nomination of
the persons set forth in this Proxy Statement/Prospectus for election as
directors of Company and has approved the new advisory agreement with AIM and
the new sub-advisory agreement between AIM and INVESCO Institutional. Finally,
the Board has approved the Plan as being advisable.
All five Proposals are being submitted to you to implement an integration
initiative undertaken by AMVESCAP with respect to its North American mutual fund
operations, which includes your Fund.
Company has previously sent to shareholders the most recent annual report
for your Fund, including financial statements, and the most recent semiannual
report succeeding the annual report, if any. The financial statements should be
read in conjunction with the disclosures, included in this Proxy
Statement/Prospectus under the heading "Certain Civil Proceedings and Lawsuits."
If you have not received such report(s) or would like to receive an additional
copy, please contact INVESCO Distributors, Inc., 00 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000-0000, or call (000) 000-0000. Such report(s) will be
furnished free of charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
PAGE
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INTRODUCTION................................................ 1
PROPOSAL 1 -- APPROVAL OF THE AGREEMENT TO COMBINE YOUR FUND
AND BUYING FUND........................................... 2
SUMMARY..................................................... 2
The Reorganization........................................ 2
Comparison Fee Table and Expense Example.................. 3
Fee Table................................................. 3
Expense Example........................................... 4
Comparison of Performance of Your Fund and Buying Fund.... 5
INVESCO VIF -- Growth Fund................................ 5
AIM V.I. Growth Fund...................................... 6
Comparison of Principal Service Providers................. 9
Comparison of Multiple Class Structures................... 9
Comparison of Sales Charges............................... 9
Comparison of Distribution and Xxxxxxxx and Redemption
Procedures............................................. 9
The Board's Recommendation on Proposal 1.................. 10
RISK FACTORS................................................ 10
Risks Associated with Buying Fund......................... 10
Comparison of Risks of Buying Fund and Your Fund.......... 10
INFORMATION ABOUT BUYING FUND............................... 11
Description of Buying Fund Shares......................... 11
Management's Discussion of Fund Performance............... 11
Financial Highlights...................................... 11
ADDITIONAL INFORMATION ABOUT THE AGREEMENT.................. 11
Terms of the Reorganization............................... 11
The Reorganization........................................ 11
Board Considerations...................................... 12
Other Terms............................................... 13
Federal Income Tax Consequences........................... 13
Accounting Treatment...................................... 14
RIGHTS OF SHAREHOLDERS...................................... 14
General................................................... 14
Liability of Shareholders................................. 14
Election of Directors/Trustees; Terms..................... 15
Removal of Directors/Trustees............................. 15
Meetings of Shareholders.................................. 15
Liability of Directors/Trustees and Officers;
Indemnification........................................ 16
Dissolution and Termination............................... 16
Voting Rights of Shareholders............................. 17
Dissenters' Rights........................................ 17
Amendments to Organization Documents...................... 17
CAPITALIZATION.............................................. 18
INTERESTS OF CERTAIN PERSONS................................ 18
PAGE
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LEGAL MATTERS............................................... 18
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND...... 18
CERTAIN CIVIL PROCEEDINGS AND LAWSUITS...................... 19
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION................................................ 22
PROPOSAL 2 -- ELECTION OF DIRECTORS......................... 22
Background................................................ 22
Structure of the Board of Directors....................... 22
Nominees for Directors.................................... 22
The Board's Recommendation on Proposal 2.................. 25
Committees of the Board................................... 26
Audit Committee........................................... 26
Governance Committee...................................... 26
Investments Committee..................................... 27
Valuation Committee....................................... 27
Board and Committee Meeting Attendance.................... 28
Shareholder Communications with the Board................. 28
Director's Compensation................................... 28
Retirement Plan for Directors............................. 29
Deferred Compensation Agreements.......................... 30
Officers of Company....................................... 30
Security Ownership of Management.......................... 32
Director Ownership of Your Fund's Shares.................. 32
PROPOSAL 3 -- APPROVAL OF A NEW INVESTMENT ADVISORY
AGREEMENT................................................. 32
Background................................................ 32
Your Fund's Current Investment Advisor.................... 33
The Proposed New Investment Advisor for Your Fund......... 33
Positions with AIM Held by Company's Directors or
Executive Officers..................................... 34
Terms of the Current Advisory Agreement................... 34
Additional Services Provided by INVESCO and its
Affiliates............................................. 36
Advisory Fees Charged by AIM for Similar Funds it
Manages................................................ 36
Terms of the Proposed Advisory Agreement.................. 42
Administrative Services................................... 43
Broker-Dealer Relationships and Affiliated Brokerage...... 44
Securities Lending........................................ 44
Payment of Expenses and Restrictions on Fees Received..... 45
Non-Exclusivity Provisions................................ 45
Delegation................................................ 45
Limitation of Liability of AIM, Company and
Shareholders........................................... 46
State Law Governing the Agreement......................... 46
Factors the Directors Considered in Approving the Advisory
Agreement.............................................. 46
The Board's Recommendation on Proposal 3.................. 48
PROPOSAL 4 -- APPROVAL OF NEW SUB-ADVISORY AGREEMENT........ 48
Background................................................ 48
The Proposed Sub-Advisor for Your Fund.................... 49
ii
PAGE
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Positions with INVESCO Institutional Held by Company's
Directors or Executive Officers..................................... 49
Terms of the Proposed Sub-Advisory Agreement........................... 49
Advisory Fees Charged by INVESCO Institutional for Similar
Types of Accounts for which it Serves as Advisor.................... 50
Factors the Directors Considered in Approving the Proposed
Sub-Advisory Agreement.............................................. 50
The Board's Recommendation on Proposal 4............................... 52
PROPOSAL 5 -- APPROVAL OF THE PLAN TO REDOMESTICATE EACH
SERIES PORTFOLIO OF COMPANY AS A NEW SERIES PORTFOLIO OF
AIM VARIABLE INSURANCE FUNDS........................................... 52
Background............................................................. 52
Reasons for the Proposed Redomestication............................... 52
What the Proposed Redomestication Will Involve......................... 53
The Federal Income Tax Consequences of the
Redomestication..................................................... 54
Appraisal Rights....................................................... 55
The Trust Compared to Company.......................................... 55
The Board's Recommendation on Proposal 5............................... 56
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING......................... 56
Proxy Statement/Prospectus............................................. 56
Time and Place of Special Meeting...................................... 56
Voting in Person....................................................... 56
Voting by Proxy........................................................ 56
Quorum Requirement and Adjournment..................................... 57
Vote Necessary to Approve Each Proposal................................ 57
Proxy Solicitation..................................................... 57
Other Matters.......................................................... 57
Shareholder Proposals.................................................. 58
Ownership of Shares.................................................... 58
INDEPENDENT PUBLIC ACCOUNTANTS........................................... 59
Fees Billed by PwC Related to the Company.............................. 59
Fees Billed by PwC Related to INVESCO and INVESCO
Affiliates.......................................................... 60
EXHIBIT A Classes of Shares of Your Fund and Corresponding Classes of
Shares of Buying Fund......................................... A-1
EXHIBIT B Comparison of Principal Service Providers..................... B-1
EXHIBIT C Financial Highlights of Buying Fund........................... C-1
EXHIBIT D Shares Outstanding of Each Class of Your Fund on Record
Date.......................................................... D-1
EXHIBIT E Ownership of Shares of Your Fund.............................. E-1
EXHIBIT F Ownership of Shares of Buying Fund............................ F-1
APPENDIX I
Agreement and Plan of Reorganization for INVESCO VIF --
Growth Fund............................................... APPENDIX I
APPENDIX II Prospectus of Buying Fund................................. APPENDIX II
APPENDIX III Discussion of Performance of Buying Fund.................. APPENDIX III
APPENDIX IV Governance Committee Charter.............................. APPENDIX IV
APPENDIX V Form of Investment Advisory Agreement with A I M
Advisors, Inc. ........................................... APPENDIX V
APPENDIX VI Form of Sub-Advisory Agreement............................ APPENDIX VI
iii
APPENDIX VII
Agreement and Plan of Reorganization for Your Fund (to
Effect the Redomestication).............................. APPENDIX VII
APPENDIX VIII Pre-Approval of Audit and Non-Audit Services Policies and
Procedures............................................... APPENDIX VIII
THE AIM FAMILY OF FUNDS, AIM AND DESIGN, AIM, AIM FUNDS, AIM FUNDS AND
DESIGN, AIM INVESTOR, AIM LIFETIME AMERICA, AIM LINK, AIM INSTITUTIONAL FUNDS,
XXXXXXXXXXXXXX.XXX, 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 INTERNET CONNECT, AIM PRIVATE ASSET
MANAGEMENT, AIM PRIVATE ASSET MANAGEMENT AND DESIGN, AIM STYLIZED AND/OR DESIGN,
AIM ALTERNATIVE ASSETS AND DESIGN, AIM INVESTMENTS, AIM INVESTMENTS AND DESIGN,
XXXXX.XXX, THE AIM COLLEGE SAVINGS PLAN, AIM SOLO 401(K) AND YOUR GOALS. OUR
SOLUTIONS ARE SERVICE MARKS OF A I M MANAGEMENT GROUP INC. AIM TRIMARK IS A
SERVICE MARK OF A I M MANAGEMENT GROUP INC. AND AIM FUNDS MANAGEMENT INC.
INVESCO, THE OPEN CIRCLE DESIGN, INVESCO FUNDS, INVESCO FUNDS GROUP,
INVESCO -- YOUR GLOBAL INVESTMENT PARTNER AND YOU SHOULD KNOW WHAT INVESCO KNOWS
ARE REGISTERED SERVICE MARKS OF AMVESCAP PLC.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this
Proxy Statement/Prospectus, and you should not rely on such other information or
representations.
iv
INTRODUCTION
Your Fund is one of 13 portfolios advised by INVESCO and Buying Fund is one
of 99 portfolios advised by AIM. Proposals 1 through 5 that you are being asked
to vote on relate to or result from an integration initiative announced on March
27, 2003, by AMVESCAP, the parent company of AIM and INVESCO, with respect to
its North American mutual fund operations. The primary component of AMVESCAP's
integration initiative that you are being asked to vote on in this Proxy
Statement/Prospectus is the:
- Rationalizing and streamlining of the various AIM Funds and INVESCO
Funds. In that regard, AMVESCAP has undertaken an extensive review of
these funds and concluded that it would be appropriate to reduce the
number of smaller and less efficient funds that compete for limited
shareholder assets and to consolidate certain funds having similar
investment objectives and strategies. Reducing both the number of AIM
Funds and INVESCO Funds will allow AIM and INVESCO to concentrate on
managing their core products. The Reorganization of Selling Fund into
Buying Fund is one of a number of fund reorganizations proposed by
AMVESCAP as a result of this review process. AMVESCAP's belief is that the
Reorganization will allow Buying Fund the best available opportunities for
investment management, growth prospects and potential economies of scale.
PROPOSAL 1 RELATES TO THIS COMPONENT OF AMVESCAP'S INTEGRATION INITIATIVE.
- In considering the integration initiative proposed by AMVESCAP, the
directors/trustees of the AIM Funds and the directors of the INVESCO Funds
who are not "interested persons" (as defined in the Investment Company Act
of 1940 (the "1940 Act")) of the Funds or their advisors determined that
the shareholders of both the AIM Funds and the INVESCO Funds would benefit
if one set of directors/trustees was responsible for overseeing the
operation of both the AIM Funds and the INVESCO Funds and the services
provided by AIM, INVESCO and their affiliates. Accordingly, these
directors/trustees agreed to combine the separate boards and create a
unified board of directors/ trustees. PROPOSAL 2 RELATES TO THE ELECTION
OF DIRECTORS OF YOUR FUND.
- Rationalizing the contractual arrangements for the provision of
investment advisory and administrative services to the AIM Funds and the
INVESCO Funds. The idea of this component is to have AIM replace INVESCO
as the AMVESCAP entity primarily responsible for the investment advisory,
administrative, accounting and legal and compliance services for the
INVESCO Funds. In connection with this item, each INVESCO Fund (currently
advised by INVESCO), including Buying Fund, is seeking shareholder
approval to enter into a new investment advisory agreement with AIM. These
changes will simplify AMVESCAP's mutual fund operations in the United
States so that there will be a uniform arrangement for investment
management for both the AIM Funds and the INVESCO Funds. PROPOSALS 3 AND 4
RELATE TO THIS COMPONENT OF AMVESCAP'S INTEGRATION INITIATIVE.
- Simplifying the organizational structure of the AIM Funds and the INVESCO
Funds so that they are all organized as
Delaware statutory trusts, using
as few entities as practicable. To implement this component, each AIM Fund
and each INVESCO Fund that currently is organized as a Maryland
corporation is seeking shareholder approval to redomesticate as a new
Delaware statutory trust, which also should provide these Funds with
greater flexibility in conducting their business operations. In addition,
certain series portfolios of AIM Funds with few portfolios are seeking
shareholder approval to be restructured as new series portfolios of
existing AIM Funds that are organized as
Delaware statutory trusts.
PROPOSAL 5 RELATES TO THIS COMPONENT OF AMVESCAP'S INTEGRATION INITIATIVE.
The following additional series of actions are also being taken in
connection with AMVESCAP's integration initiative. However, you are not being
asked to vote on these items.
- Using a single distributor for all AMVESCAP mutual funds in the United
States. To that end, A I M Distributors, Inc., the distributor for the
retail mutual funds advised by AIM (the "AIM Funds"), replaced INVESCO
Distributors, Inc. as the distributor for the retail mutual funds advised
by INVESCO (the "INVESCO Funds") effective July 1, 2003.
- Integrating back office support and creating a single platform for back
office support of AMVESCAP's mutual fund operations in the United States,
including such support services as transfer agency and information
technology.
YOU ARE BEING ASKED TO APPROVE PROPOSALS 2-5 SO THAT, IN THE EVENT THAT
PROPOSAL 1 IS NOT APPROVED, YOUR FUND WILL STILL BE ABLE TO TAKE ADVANTAGE OF
THESE OTHER BENEFITS OF AMVESCAP'S INTEGRATION. WE WILL BE UNABLE TO DETERMINE
WHETHER PROPOSALS 2-5 SHOULD GO FORWARD UNTIL WE HAVE DETERMINED WHETHER
PROPOSAL 1 HAS BEEN APPROVED. THEREFORE, EVEN IF YOU VOTE IN FAVOR OF PROPOSAL
1, IT IS STILL IMPORTANT THAT YOU VOTE ON PROPOSALS 2-5. FOR INFORMATION ABOUT
THE SPECIAL MEETING AND VOTING ON PROPOSALS 1 THROUGH 5, SEE "INFORMATION ABOUT
THE SPECIAL MEETING AND VOTING." FOR A DESCRIPTION OF THE VOTE NECESSARY TO
APPROVE EACH OF PROPOSALS 1 THROUGH 5, SEE "INFORMATION ABOUT THE SPECIAL
MEETING AND VOTING -- VOTE NECESSARY TO APPROVE EACH PROPOSAL."
PROPOSAL 1 --
APPROVAL OF THE AGREEMENT
TO COMBINE YOUR FUND AND BUYING FUND
SUMMARY
The Board, including the independent directors, has determined that the
Reorganization is advisable and in the best interests of your Fund and that the
interests of the shareholders of your Fund will not be diluted as a result of
the Reorganization. The Board believes that a larger combined fund should be
more viable and have greater market presence and should have greater investment
leverage in that portfolio managers should have broader investment opportunities
and lower trading costs. The Board also believes that a larger combined fund
should result in greater operating efficiencies by providing economies of scale
to the combined fund in that certain fixed costs, such as legal, accounting,
shareholder services and director/trustee expenses, will be spread over the
greater assets of the combined fund. For additional information concerning the
factors the Board considered in approving the Agreement, see "Additional
Information About the Agreement -- Board Considerations."
The following summary discusses some of the key features of the
Reorganization and highlights certain differences between your Fund and Buying
Fund. This summary is not complete and does not contain all of the information
that you should consider before voting on whether to approve the Agreement. For
more complete information, please read this entire Proxy Statement/Prospectus.
THE REORGANIZATION
The Reorganization will result in the combination of your Fund with Buying
Fund. Your Fund is a series of Company, a Maryland corporation. Buying Fund is a
series of Buyer, a
Delaware statutory trust.
If shareholders of your Fund approve the Agreement and other closing
conditions are satisfied, then:
1. all of the assets of your Fund will be transferred to Buying Fund;
2. Buying Fund will assume the liabilities of your Fund; and
3. Buyer will issue shares of each class of Buying Fund to
shareholders of the corresponding class of shares of your Fund, (as shown
on Exhibit A, to this Proxy Statement/Prospectus).
For a description of certain of the closing conditions that must be
satisfied, see "Additional Information About the Agreement -- Other Terms."
The shares of Buying Fund issued in the Reorganization will have an
aggregate net asset value equal to the net value of the assets of your Fund
transferred to Buying Fund. The value of your account with Buying Fund
immediately after the Reorganization will be the same as the value of your
account with your 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."
2
Company and Xxxxx will receive an opinion of Xxxxxxx Xxxxx Xxxxxxx &
Xxxxxxxxx, LLP to the effect that the Reorganization will constitute a tax-free
reorganization for Federal income tax purposes. Thus, shareholders will not have
to pay additional Federal income tax as a result of the Reorganization. See
"Additional Information About the Agreement -- Federal Income Tax Consequences."
No sales charges will be imposed in connection with the Reorganization.
COMPARISON FEE TABLE AND EXPENSE EXAMPLE
FEE TABLE
This table compares the shareholder fees and annual operating expenses,
expressed as a percentage of net assets ("Expense Ratios"), of Series I and
Series II shares of your INVESCO VIF -- Growth Fund ("Selling Fund") and AIM
V.I. Growth Fund ("Buying Fund"). Series II shares of Selling Fund were not
available as of December 31, 2003 and will not be offered for sale prior to the
reorganization of Selling Fund into Buying Fund. Pro Forma Combined Expense
Ratios of Buying Fund giving effect to the reorganization of Selling Fund into
Buying Fund are also provided. The table does not reflect fees associated when a
separate account invests in the Funds or any costs associated with ownership of
a variable annuity or variable life insurance contract for which the Funds are
investment options, and if it did, expenses would be higher.
BUYING FUND
SELLING FUND BUYING FUND PRO FORMA
(12/31/03) (12/31/03) COMBINED
---------------------------- ------------------------ ------------------------
SERIES I SERIES II SERIES I SERIES II SERIES I SERIES II
SHARES SHARES(1) SHARES SHARES SHARES SHARES
-------- --------- -------- --------- -------- ---------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge (Load)
Imposed on Purchase (as a
percentage of offering price)... N/A N/A N/A N/A N/A N/A
Maximum Deferred Sales Charge (as
a percentage of original
purchase price or redemption
proceeds, as applicable)........ N/A N/A N/A N/A N/A N/A
ANNUAL FUND OPERATING EXPENSES(2)
(expenses that are deducted from
fund assets)
Management fees.................. 0.85% 0.85% 0.63% 0.63% 0.63% 0.63%
Distribution and/or Service
(12b-1) Fees.................... None 0.25% None 0.25% None 0.25%
Other Expenses................... 2.25%(3) 2.25%(3)(4) 0.26% 0.26% 0.27% 0.27%
Total Annual Fund Operating
Expenses........................ 3.10% 3.35% 0.89% 1.14% 0.90% 1.15%
Fee Waiver/Expense
Reimbursement................... 1.80%(5)(6) 1.90%(6)(7) -- -- -- --
Net Expense...................... 1.30% 1.45% 0.89% 1.14% 0.90% 1.15%
---------------
"N/A" in the table above means "not applicable."
(1) As of December 31, 2003, Selling Fund offered only one series of shares,
which are referred to in this Proxy Statement/Prospectus as Series I shares.
The numbers for Series II shares reflect Selling Fund's December 31, 2003
amounts, plus a 12b-1 fee of 0.25%.
(2) Except as otherwise noted, figures in the table are for the year ended
December 31, 2003 and are expressed as a percentage of fund average net
assets. This information was prepared before the completion of the fund
audit and is subject to change. There is no guarantee that actual expenses
will be the same as those shown in the table.
(3) Selling Fund has adopted new forms of administrative services and transfer
agency agreements which will be effective May 1, 2004. These new forms of
agreements are the same as those currently in place for Buying Fund. As a
result, Selling Fund's Other Expenses have been restated to reflect the
changes in fees in Selling Fund new agreements. Had Selling Fund not adopted
these new forms of administrative services and transfer agency agreements,
Selling Fund's Other Expenses would have been 1.58% for Series I Shares of
Selling Fund and 1.58% for Series II Shares of Selling Fund. Because Selling
Fund's board of directors has already approved the adoption of these new
forms of agreements to go effective May 1, 2004, your vote on the items
described in this Proxy Statement/Prospectus will have no impact on these
changes.
(4) Other Expenses for Series II shares are based on estimated average net
assets for the current fiscal year.
(5) The Fund's advisor has contractually agreed to waive fees and/or reimburse
expenses of Series I shares to the extent necessary to limit Total Annual
Fund Operating Expenses (excluding certain items discussed below) to 1.30%.
In determining the advisor's obligation to waive fees and/or reimburse
expenses, the
3
following expenses are not taken into account, and could cause the Total
Annual Fund Operating Expenses to exceed the 1.30% cap; (i) interest; (ii)
taxes; (iii) extraordinary items (these are expenses that are not
anticipated to arise from the Fund's day-to-day operations), as defined in
the Financial Accounting Standards Board's Generally Accepted Accounting
Principles or as approved by the Fund's board of trustees; (iv) expense
related to a merger or reorganization, as approved by the Fund's board of
trustees (though the expenses of the reorganization currently under
consideration are being paid by the Fund's advisor); and (v) expenses that
the Fund has incurred but did not actually pay because of an expense offset
arrangement. Currently, the only expense offset arrangement from which the
Fund benefits are in the form of credits that the Fund receives from banks
where the Fund or its transfer agent has deposit accounts in which it holds
uninvested cash. Those credits are used to pay certain expenses incurred by
the Fund. The expense limitation agreement is in effect through April 30,
2005.
(6) Effective June 1, 2002, and ending immediately prior to the consummation of
the merger between Selling Fund and Buying Fund which is expected to be on
April 30, 2004, Selling Fund's advisor is entitled to receive reimbursement
from Selling Fund for fees and expenses paid for by Selling Fund's advisor
pursuant to expense limitation commitments between Selling Fund's advisor
and Selling Fund if such reimbursement does not cause Selling Fund to exceed
its then-current expense limitations and the reimbursement is made within
three years after Xxxxxxx Fund's advisor incurred the expense.
(7) The Fund's advisor and distributor have contractually agreed to waive fees
and/or reimburse expenses of Series II shares to the extent necessary to
limit Total Annual Fund Operating Expenses (excluding certain items
discussed below) to 1.45%. In determining the advisor's and distributor's
obligation to waive fees and/or reimburse expenses, the following expenses
are not taken into account, and could cause the Total Annual Fund Operating
Expenses to exceed the 1.45% cap: (i) interest; (ii) taxes; (iii)
extraordinary items (these are expenses that are not anticipated to arise
from the Fund's day-to-day operations), as defined in the Financial
Accounting Standards Board's Generally Accepted Accounting Principles or as
approved by the Fund's board of trustees; (iv) expenses related to a merger
or reorganization, as approved by the Fund's board of trustees (though the
expenses of the reorganization currently under consideration are being paid
by the Fund's advisor); and (v) expenses that the Fund has incurred but did
not actually pay because of an expense offset arrangement. Currently, the
only expense offset arrangements from which the Fund benefits are in the
form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash. Those
credits are used to pay certain expenses incurred by the Fund. The expense
limitation agreement is in effect through April 30, 2005.
EXPENSE EXAMPLE
This Example is intended to help you compare the costs of investing in
different classes of your Fund and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes
of Buying Fund giving effect to the reorganization of your Fund into Buying Fund
are also provided. All costs are based upon the information set forth in the Fee
Table above. This Example does not reflect fees associated when a separate
account invests in the Funds or any costs associated with the ownership of a
variable annuity contract or variable life insurance contract for which the
Funds are investment options, and if it did, expenses would be higher.
The Example assumes that you invest $10,000 for the time periods indicated
and shows the expenses that you would pay both if you redeem all of your shares
at the end of those periods and if you do not redeem your shares. The Example
also assumes that your investment has a 5% return each year and that the
operating expenses remain the same. The Example reflects fee waivers and/or
expense reimbursements that are contractual, if any, but does not reflect
voluntary fee waivers and/or expense reimbursements. To the extent
4
fees are waived and/or expenses are reimbursed on a voluntary basis, your
expenses will be lower. Although your actual returns and costs may be higher or
lower, based on these assumptions your costs would be:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ------ ------
SELLING FUND
Series I.............................................. $132 $788 $1,468 $3,285
Series II............................................. $148 $853 $1,582 $3,511
BUYING FUND
Series I.............................................. $ 91 $284 $ 493 $1,096
Series II............................................. $116 $362 $ 628 $1,386
BUYING FUND -- PRO FORMA COMBINED
Series I.............................................. $ 92 $287 $ 498 $1,108
Series II............................................. $117 $365 $ 633 $1,398
THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. YOUR FUND'S
AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND
DOES NOT REPRESENT YOUR FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL PERFORMANCE.
THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
COMPARISON OF PERFORMANCE OF YOUR FUND AND BUYING FUND
For more information regarding the total return of your Fund, see the
"Financial Highlights" section of the Selling Fund Prospectus, which has been
made a part of this Proxy Statement/Prospectus by reference. The financial
statements should be read in conjunction with the disclosures, included in this
Proxy Statement/ Prospectus under the heading "Certain Civil Proceedings and
Lawsuits." For more information regarding the total return of Buying Fund, see
"Information About Buying Fund -- Financial Highlights." Past performance cannot
guarantee comparable future results.
INVESCO VIF--GROWTH FUND
The bar chart and table shown below provide an indication of the risks of
investing in your Fund. Your Fund's past performance is not necessarily an
indication of its future performance. All performance shown assumes the
reinvestment of dividends and capital gains. The bar chart and performance table
shown does not reflect charges at the separate account level; if they did, the
performance shown would be lower.
5
(Chart)
1998................................................................... 38.99%
1999................................................................... 29.17%
2000................................................................... -23.24%
2001................................................................... -44.27%
2002................................................................... -38.94%
2003................................................................... 29.87%
During the periods shown in the bar chart, the highest quarterly return was
33.74% (quarter ended December 31, 2001) and the lowest quarterly return was
- 40.41% (quarter ended September 30, 2001).
SINCE INCEPTION
1 YEAR 5 YEARS INCEPTION DATE
------ -------- --------- ---------
INVESCO VIF -- Growth Fund(1).................... 29.87% (15.21)% (6.53)% 8/22/1997
Standard & Poor's 500 Index(3)................... 28.67% (0.57)% 4.93%(2) 8/31/1997
Xxxxxxx 1000 Growth Trust Index(3)............... 29.75% (5.11)% 2.04%(2) 8/31/1997
Lipper Large Cap Growth Index(4)................. 26.96% (5.53)% 1.28%(2) 8/31/1997
---------------
(1) Total return figures include reinvested dividends and capital gain
distributions and the effect of the Fund's expenses.
(2) The Fund commenced investment operations on August 25, 1997. Index
comparisons begin on August 31, 1997.
(3) The Standard & Poor's 500 Index is an unmanaged index considered
representative of the performance of the broad U.S. stock market. The
Xxxxxxx 1000 Growth Index is an unmanaged index that measures the
performance of those Xxxxxxx 1000 companies with higher price-to-book ratios
and lower forecasted growth values. The Xxxxxxx 1000 Growth Index is the
most representative index for the Fund and the Standard & Poor's 500 Index
is included to provide additional comparison information. Please keep in
mind that the indexes do not pay brokerage, management, or administrative
expenses, all of which are paid by the Fund and are reflected in its annual
return.
(4) The Lipper Large-Cap Growth Index is an equally weighted representation of
the 30 largest funds in the Lipper Large-Cap Growth category.
AIM V.I. GROWTH FUND
The bar chart and table shown below provide an indication of the risks of
investing in Buying Fund. Buying Fund's past performance is not necessarily an
indication of its future performance. All performance
6
shown assumes the reinvestment of dividends and capital gains. The bar chart and
performance table shown does not reflect charges at the separate account level;
if they did, the performance shown would be lower.
(AIM VI Growth Series I)
1994................................................................... -2.48%
1995................................................................... 34.77%
1996................................................................... 18.09%
1997................................................................... 26.87%
1998................................................................... 34.12%
1999................................................................... 35.24%
2000................................................................... -20.49%
2001................................................................... -33.88%
2002................................................................... -30.97%
2003................................................................... 31.24%
During the periods shown in the bar chart, the highest quarterly return was
27.80% (quarter ended December 31, 1998) and the lowest quarterly return was
-27.44% (quarter ended March 31, 2001).
INCEPTION
1 YEAR 5 YEARS 10 YEAR DATE
------ -------- ------- ---------
AIM V.I. Growth Series I.............................. 31.24% (8.42)% 5.45% 05/5/1993
AIM V.I. Growth Series II............................. 30.88% (8.65)% 5.20% 05/5/1993
Standard & Poor's 500 Index(1)........................ 28.67% (0.57)% 11.06% 04/30/93
Xxxxxxx 1000 Growth Index(2).......................... 29.75% (5.11)% 9.21% 04/30/93
Lipper Large-Cap Growth Fund Index(3)................. 26.96% (5.53)% 7.77% 04/30/93
---------------
(1) The Standard & Poor's 500 Index is an index of common stocks frequently used
as a general measure of U.S. stock market performance. The fund has also
included the Xxxxxxx 1000--Registered Trademark-- Growth Index, which the
fund believes more closely reflects the performance of the securities in
which the fund invests. In addition, the Lipper Large-Cap Growth Fund Index
(which may or may not include the fund) is included for comparison to a
peer-group.
(2) The Xxxxxxx 1000--Registered Trademark-- Growth Index measures the
performance of those securities in the Xxxxxxx 1000--Registered Trademark--
Index with a greater than average growth orientation. The Xxxxxxx
1000--Registered Trademark-- Index measures the performance of the 1,000
largest companies in the Xxxxxxx 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
(3) The Lipper Large-Cap Growth Index is an equally weighted representation of
the 30 largest funds in the Lipper Large-Cap Growth category. These funds
typically invest in stocks with market capitalizations greater than $5
billion at the time of purchase and have an above-average price-to-earnings
ratio, price-to-book ratio, and a three year sales-per-share growth value,
compared to the S&P 500 Index.
Your Fund and Buying Fund pursue similar investment objectives in that both
seek long-term growth of capital, although your Fund seeks income as a secondary
objective. Your Fund and Buying Fund also invest in similar types of securities.
As a result, the Reorganization is not expected to cause significant portfolio
turnover or transaction expenses from the sale of securities that are
incompatible with the investment objective of Buying Fund. The chart below shows
the similarities and differences in your Fund's and Buying Fund's investment
objective and strategies.
The investment objectives or goals of your Fund are classified as
fundamental, which means that the Board of Directors cannot change them without
shareholder approval. The investment objective of Buying Fund is not classified
as fundamental, which means that the Board of Trustees of Buyer can change it
without shareholder approval. Having the ability to change the investment
objective without shareholder approval allows the Board of Trustees to respond
more quickly and efficiently to changing market conditions and to save Buying
Fund and its shareholders money by eliminating the need to solicit proxies to
obtain shareholder approval to change an investment objective to respond to
changing market conditions.
7
A description of the fundamental and non-fundamental restrictions and
policies applicable to your Fund and Buying Fund can be found in each Fund's
Statement of Additional Information. While your Fund and Buying Fund have
slightly different approaches to disclosing and characterizing these
restrictions and policies, in substance your Fund and Buying Fund operate under
the same general restrictions and are subject to the same general policies.
The chart below provides a summary for comparison purposes of the
investment objectives and principal investment strategies of your Fund and
Buying Fund. You can find more detailed information about the investment
objectives, strategies and other investment policies of your Fund and Buying
Fund in the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
INVESCO VIF -- GROWTH FUND AIM V.I. GROWTH FUND
(YOUR FUND) (BUYING FUND)
-------------------------- --------------------
INVESTMENT OBJECTIVE
- long-term capital growth and current - growth of capital
income
INVESTMENT STRATEGIES
- invests at least 65% of its net assets in - invests in seasoned and better capitalized
common stocks of large companies companies considered to have strong
earnings momentum
- may invest in preferred stocks (which - in complying with the foregoing
generally pay higher dividends than common requirement, portfolio managers focus on
stocks) and debt instruments that are companies that have experienced
convertible into common stocks, as well as above-average growth in earnings and have
in securities of foreign companies excellent prospects for future growth.
- portfolio managers consider whether to
sell a particular security when any of
these factors materially changes.
- defines large companies as companies that - no corresponding strategy
are included in the Xxxxxxx
1000--Registered Trademark-- Growth Index
at the time of purchase, or if not
included in that Index, have market
capitalizations of at least $5 billion at
the time of purchase
- core of its investments have been - no corresponding strategy
concentrated in recent years in the
securities of five or six dozen large
companies
- may invest up to 25% of its assets in - may invest up to 25% of its total assets
securities of non-U.S. issuers (securities in foreign securities
of Canadian issuers and American
Depositary Receipts are not subject to
this 25% limitation)
- INVESCO actively manages and trades the - may engage in active and frequent trading
portfolio
- may invest in companies that have similar - no corresponding strategy
lines of business (for example, financial
services, health, or technology) and are
grouped together in broad categories
called sectors
- invests primarily in equity securities and
equity-related instruments that INVESCO
believes will rise in price faster than
other securities, as well as in options
and other investments whose values are
based upon the values of equity securities
- INVESCO seeks securities that meet the
following standards:
8
INVESCO VIF -- GROWTH FUND AIM V.I. GROWTH FUND
(YOUR FUND) (BUYING FUND)
-------------------------- --------------------
- Exceptional Growth: The markets and
industries they represent are growing
significantly faster than the economy as a
whole
- Leadership: They are leaders, or emerging
leaders, in these markets, securing their
positions through technology, marketing,
distribution, or some other innovative
means
- Financial validation: Their returns, in
the form of sales unit growth, rising
operating margins, internal funding and
other factors, demonstrate exceptional
growth and leadership
- "bottom up" research, focusing on company
fundaments and growth prospects, and
considering dividend payment records or
potential future capacity to pay dividends
- no corresponding strategy - for cash management purposes, may hold a
portion of its assets in cash or cash
equivalents, including shares of
affiliated money market funds
COMPARISON OF PRINCIPAL SERVICE PROVIDERS
A comparison of principal service providers can be found at Exhibit B.
COMPARISON OF MULTIPLE CLASS STRUCTURES
A comparison of the share class of your Fund that is currently available to
investors and the corresponding share class of Buying Fund that shareholders of
your Fund will receive in the Reorganization can be found as Exhibit A. Series
II shares of Buying Fund also currently are available to investors. Series II
shares of your Fund are not currently available and will not be offered for sale
prior to the Reorganization. A registration statement registering the Series II
shares of your Fund is expected to be filed with the SEC on or about February
13, 2004 and will become effective prior to the Reorganization. For information
regarding the features of each of the share classes of your Fund and Buying
Fund, see the Selling Fund Prospectus and the Buying Fund Prospectus,
respectively.
COMPARISON OF SALES CHARGES
No sales charges are applicable to shares of Buying Fund received by
holders of your Fund's shares in connection with the Reorganization. In
addition, no sales charges are applicable to Series I shares of either your Fund
or Buying Fund. (No sales charges will be applicable to Series II shares of
Buying Fund.) There may be, however, sales and additional other expenses, such
as insurance charges and surrender charges, associated with your variable
annuity or variable life contract that uses the Buying Fund, and/or the Selling
Fund, as an underlying investment vehicle.
COMPARISON OF DISTRIBUTION AND PURCHASE AND REDEMPTION PROCEDURES
Shares of your Fund are distributed by INVESCO Distributors, Inc., a
registered broker-dealer and indirect wholly owned subsidiary of AMVESCAP.
Shares of Buying Fund are distributed by A I M Distributors, Inc. ("AIM
Distributors"), a registered broker-dealer and wholly owned subsidiary of AIM.
If Proposal 5 is not approved, AIM Distributors will replace INVESCO
Distributors, Inc. as distributor of your Fund effective April 30, 2004.
Buying Fund has adopted a distribution plan that allows the payment of
distribution and service fees for the sale and distribution of its Series II
shares. Buying Fund has engaged AIM Distributors to provide such services either
directly or through third parties. The Fee Tables on page 3 include comparative
information about the distribution and service fees payable by the Series II
shares of your Fund and Buying Fund. The
9
Series II shares of your Fund will have the same aggregate distribution and
service fees as the Series II shares of Buying Fund. The Series II shares of
your Fund will have the same distribution and/or service (Rule 12b-1) fees as
the Series II shares of the Buying Fund.
The purchase and redemption procedures of your Fund and Buying Fund are
substantially the same. For information regarding the purchase and redemption
procedures of your Fund and Buying Fund, see the Selling Fund Prospectus and the
Buying Fund Prospectus, respectively.
THE BOARD'S RECOMMENDATION ON PROPOSAL 1
Your Board, including the independent directors, unanimously recommends
that you vote "FOR" this Proposal.
RISK FACTORS
RISKS ASSOCIATED WITH BUYING FUND
The following is a discussion of the principal risks associated with Buying
Fund.
There is a risk that you could lose all or a portion of your investment in
Buying Fund. The value of your investment in Buying Fund will go up and down
with the prices of the securities in which Buying 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.
Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these
companies, relatively low market liquidity and the potential lack of strict
financial and accounting controls and standards.
To the extent the Buying Fund holds cash or cash equivalents rather than
equity securities for risk management, the Buying Fund may not achieve its
investment objective.
If the seller of a repurchase agreement in which the Buying Fund invests
defaults on its obligation or declares bankruptcy, the Buying Fund may
experience delays in selling the securities underlying the repurchase agreement.
As a result, the Buying 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 BUYING FUND AND YOUR FUND
The risks associated with an investment in your Fund are similar to those
described above for Buying Fund because of the similarities in their investment
objectives and strategies. Set forth below is a discussion of certain risks that
differ between Buying Fund and your Fund. You can find more detailed
descriptions of specific risks associated with your Fund in the Selling Fund
Prospectus.
Your Fund is less diversified than Buying Fund. As a result, its
performance is affected to a greater extent by the performance of any individual
security it holds than is the performance of Buying Fund.
Your Fund may also focus its investments in one or more sectors, resulting
in the risk that a certain sector may underperform other sectors or the market
as a whole. If the portfolio managers allocate more of your Fund's portfolio
holdings to a particular economic sector, as compared to Buying Fund, your
Fund's overall performance will be more susceptible to the economic, business,
or other developments which generally affect that sector.
10
INFORMATION ABOUT BUYING FUND
DESCRIPTION OF BUYING FUND SHARES
Shares of Buying Fund are redeemable at their net asset value by the
shareholder or by Buyer in certain circumstances. Each share of Buying Fund
represents an equal proportionate interest in Buying Fund with each other share
and is entitled to such dividends and distributions out of the income belonging
to Buying Fund as are declared by the Board of Trustees of Buying Fund. Each
share of Buying Fund generally has the same voting, dividend, liquidation and
other rights; however, each class of shares of Buying Fund is subject to
different class-specific expenses. When issued, share of Buying Fund are fully
paid and nonassessable, which means that shareholders of Buying Fund cannot be
assessed additional funds to cover any liabilities of Buying Fund. Shares of
Buying Fund are freely transferable. Shares of Buying Fund have no preemptive
rights (rights of current shareholders to maintain a proportionate share of
ownership in Buying Fund by purchasing additional shares of Buying Fund),
subscription rights (rights of current shareholders to purchase additional
shares of Buying Fund in an amount proportionate to their current holdings) or
conversion rights (rights of current shareholders to exchange Buying Fund's
shares for another security of Buying Fund at a predetermined conversion rate
during a stated conversion period).
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A discussion of the performance of Buying Fund taken from its annual report
to shareholders for the fiscal year ended December 31, 2002 is set forth in
Appendix III to this Proxy Statement/Prospectus.
FINANCIAL HIGHLIGHTS
For more information about Buying Fund's financial performance, see the
Financial Highlights of Buying Fund at Exhibit C, which is more current than and
should be read in lieu of the "Financial Highlights" section of the Buying Fund
Prospectus that is attached to this Proxy Statement/Prospectus as Appendix II.
The financial statements should be read in conjunction with disclosures,
included in the Proxy Statement/ Prospectus under the heading "Certain Civil
Proceedings and Lawsuits."
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 consummation of the Reorganization (the "Closing") is expected to occur
on April 30, 2004, at 8:00 a.m., Eastern Time (the "Effective Time"). The
Closing will be based on values calculated as of the close of regular trading on
the New York Stock Exchange on April 29, 2004 (the "Valuation Date").
At the Effective Time, all of the assets of your Fund will be delivered to
Xxxxx's custodian for Buying Fund's account in exchange for Buying Fund's
assumption of the liabilities of your Fund. Buyer shall deliver to the
shareholders of your Fund a number of shares of the corresponding class of
Buying Fund having an aggregate net asset value equal to the value of the net
assets of your Fund. Upon delivery of your Fund's assets, Buying Fund will
receive good and marketable title to such assets free and clear of all liens.
In order for your Fund to continue to qualify as a "regulated investment
company" for tax purposes and to eliminate any tax liability of your Fund
arising from undistributed investment company taxable income or net capital
gain, Trust will declare one or more dividends on or before the Valuation Date.
Such dividend will be payable to the shareholders of your Fund.
11
Such dividend, together with all previous such dividends, shall have the
effect of distributing:
- all of your Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended
December 31, 2003 and for the short taxable year beginning on January 1,
2004 and ending on the Closing; and
- all of your Fund's net capital gain recognized in its taxable year ended
December 31, 2003 and in such short taxable year (after reduction for any
capital loss carryover).
Buying Fund will proceed with the Reorganization if the shareholders of
your Fund approve the Agreement.
BOARD CONSIDERATIONS
AMVESCAP initially proposed that the Board consider the Reorganization at
an in-person meeting of the Board held on November 6, 2003, at which preliminary
discussions of the Reorganization took place. The Board determined that the
Reorganization is advisable and in the best interests of your Fund and will not
dilute the interests of your Fund's shareholders, and approved the Agreement and
the Reorganization, at an in-person meeting of the Board held on December 9-10,
2003.
Over the course of the two Board meetings, the Board received from AIM and
INVESCO written materials that contained information concerning your Fund and
Buying Fund, including comparative total return and fee and expense information,
a comparison of investment objectives and strategies of your Fund and Buying
Fund and pro forma expense ratios for Buying Fund. AIM and INVESCO also provided
the Board with written materials concerning the structure of the proposed
Reorganization and the Federal tax consequences of the Reorganization.
- The investment objective and principal investment strategies of your Fund
and Buying Fund, noting that the objective and strategies of Buying Fund
generally were similar to those of your Fund.
- The comparative expenses of your Fund and Buying Fund and the pro forma
expenses of Buying Fund after giving effect to the Reorganization, noting
that, both before and after contractual expense limitations, the expenses
of Buying Fund and the pro forma expenses of Buying Fund were less than
those of your Fund as of June 30, 2003.
- The comparative performance of your Fund and Buying Fund, noting that
Buying Fund generally had superior performance to your Fund.
- The comparative sizes of your Fund and Buying Fund, noting that Buying
Fund was larger.
- The consequences of the Reorganization for Federal income tax purposes,
including the treatment of capital loss carryforwards, if any, available
to offset future capital gains of both your Fund and Buying Fund. In that
regard, the Board noted that tax issues, including the treatment of
capital loss carryforwards, are of less consequence to variable fund
shareholders because their shares are held in tax-deferred accounts and
they are not taxed on fund distributions.
- Any fees and expenses that will be borne directly or indirectly by your
Fund or Buying Fund in connection with the Reorganization
The Board noted that AMVESCAP or one of its subsidiaries, on behalf of
INVESCO, will bear the costs and expenses incurred in connection with the
Reorganization.
The Board also noted that no sales charges or other charges would be
imposed on any of the shares of Buying Fund issued to the shareholders of your
Fund in connection with the Reorganization.
Based on the foregoing and the information presented at the two Board
meetings discussed above, the Board determined that the Reorganization is
advisable and in the best interests of your Fund and will not dilute the
interests of your Fund's shareholders. Therefore, the Board recommends the
approval of the Agreement by the shareholders of your Fund at the Special
Meeting.
12
AMVESCAP initially proposed that the Board of Trustees of Buyer consider
the Reorganization at an in-person meeting of the Board of Trustees held on
November 6, 2003, at which preliminary discussions of the Reorganization took
place. The Board of Trustees of Buyer determined that the Reorganization is in
the best interests of Buying Fund and will not dilute the interests of Buying
Fund shareholders, and approved the Agreement and the Reorganization, at an
in-person meeting of the Board of Trustees held on December 9-10, 2003.
OTHER TERMS
If any amendment is made to the Agreement which would have a material
adverse effect on shareholders, such change will be submitted to the affected
shareholders for their approval. However, the Agreement may be amended without
shareholder approval by mutual agreement of the parties.
Company and Buyer have made representations and warranties in the Agreement
that are customary in matters such as the Reorganization. The obligations of
Company and Buyer pursuant to the Agreement are subject to various conditions,
including the following mutual conditions:
- the assets of your Fund to be acquired by Buying 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 your Fund immediately
prior to the Reorganization;
- Buyer's Registration Statement on Form N-14 under the Securities Act of
1933 (the "1933 Act") shall have been filed with the SEC and 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);
- the shareholders of your Fund shall have approved the Agreement; and
- Company and Xxxxx shall have received an opinion from Xxxxxxx Xxxxx
Xxxxxxx & Xxxxxxxxx, LLP that the consummation of the transactions
contemplated by the Agreement will not result in the recognition of gain
or loss for Federal income tax purposes for your Fund, Buying Fund or
their shareholders.
The Board of Directors of Company and the Board of Trustees of Buyer may
waive without shareholder approval any default by Company or Buyer or any
failure by Company or Buyer to satisfy any of the above conditions as long as
such a waiver is mutual and will not have a material adverse effect on the
benefits intended under the Agreement for the shareholders of your Fund. The
Agreement may be terminated and the Reorganization may be abandoned at any time
by mutual agreement of the parties, or by either party if the shareholders of
your Fund do not approve the Agreement or if the Closing does not occur on or
before June 30, 2004.
FEDERAL INCOME 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 U.S.
Treasury regulations thereunder, current administrative rulings of the Internal
Revenue Service ("IRS") and published 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:
- no gain or loss will be recognized by your Fund upon the transfer of its
assets to Buying Fund solely in exchange for shares of Buying Fund and
Buying Fund's assumption of the liabilities of your Fund or on the
distribution of those shares to your Fund's shareholders;
- no gain or loss will be recognized by Buying Fund on its receipt of
assets of your Fund in exchange for shares of Buying Fund issued directly
to your Fund's shareholders;
13
- no gain or loss will be recognized by any shareholder of your Fund upon
the exchange of shares of your Fund for shares of Buying Fund;
- the tax basis of the shares of Buying Fund to be received by a
shareholder of your Fund will be the same as the shareholder's tax basis
of the shares of your Fund surrendered in exchange therefor;
- the holding period of the shares of Buying Fund to be received by a
shareholder of your Fund will include the period for which such
shareholder held the shares of your Fund exchanged therefor, provided
that such shares of your Fund are capital assets in the hands of such
shareholder as of the Closing; and
- Buying Fund will thereafter succeed to and take into account any capital
loss carryover and certain other tax attributes of your Fund in
determining its taxable income, subject to all relevant conditions and
limitations on the use of such tax benefits.
Neither Trust nor Xxxxx has requested or will request an advance ruling
from the IRS as to the Federal tax consequences of the Reorganization. As a
condition to Closing, Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP will render a
favorable opinion to Trust and Buyer as to the foregoing Federal income tax
consequences of the Reorganization, which opinion will be conditioned upon,
among other things, the accuracy, as of the Effective Time, of certain
representations of Trust and Buyer upon which Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx,
LLP will rely in rendering its opinion. The conclusions reached in that opinion
could be jeopardized if the representations of Trust or Buyer are incorrect in
any material respect.
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 YOUR FUND. YOUR 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
For financial statement purposes, the Reorganization will be accounted for
as a combination of the funds and not as a purchase of the assets of your Fund
at their current fair market values. Accordingly, the book cost of the assets of
your Fund will be recorded on the financial statements of the Buying Fund using
the same book cost of such assets as has been used by your Fund.
RIGHTS OF SHAREHOLDERS
GENERAL
Company is a Maryland corporation. Buyer is a
Delaware statutory trust.
There is much that is similar between Maryland corporations and
Delaware
statutory trusts. For example, the responsibilities, powers and fiduciary duties
of the directors of Company are substantially similar to those of the trustees
of Buyer.
There are, however, certain differences between the two forms of
organization. The operations of Company, as a Maryland corporation, are governed
by its Articles of Incorporation, and any restatements, amendments and
supplements thereto (the "Articles of Incorporation"), and applicable Maryland
law. The operations of Buyer, as a Delaware statutory trust, are governed by its
Amended and Restated Agreement and Declaration of Trust, as amended (the
"Declaration of Trust"), and applicable Delaware law.
LIABILITY OF SHAREHOLDERS
Shareholders of a Maryland corporation generally do not have personal
liability for the corporation's obligations, except that a shareholder may be
liable to the extent that he or she receives any distribution which exceeds the
amount which he or she could properly receive under Maryland law or where such
liability is necessary to prevent fraud.
14
Under Delaware law, shareholders of a Delaware statutory trust are entitled
to the same limitations of liability extended to shareholders of private
for-profit corporations. However, there is a remote possibility that
shareholders of a Delaware statutory trust might be held personally liable for
the trust's obligations. This might occur if the courts of another state that
does not recognize the limited liability granted to shareholders by Delaware law
were to apply the laws of such other state to a controversy involving the
trust's obligations.
The Declaration of Trust provides that shareholders of the Trust are not
subject to any personal liability for acts or obligations of the Trust. The
Declaration of Trust requires that every written agreement, obligation or other
undertaking made by the Trust contain a provision to the effect that
shareholders are not personally liable thereunder. In addition, the Declaration
of Trust provides for indemnification out of the trust's property for any
shareholder held personally liable solely by reason of his or her being or
having been a shareholder.
Therefore, the risk of any shareholder incurring financial loss beyond his
or her investment due to shareholder liability is limited to circumstances in
which the Trust itself is unable to meet its obligations and the express
disclaimer of shareholder liabilities is determined not to be effective. Given
the nature of the assets and operations of the Trust, the possibility of the
Trust being unable to meet its obligations is considered remote. Even if a claim
were brought against the Trust and a court determined that shareholders were
personally liable, it would likely not impose a material obligation on a
shareholder.
ELECTION OF DIRECTORS/TRUSTEES; TERMS
The shareholders of Company have elected a majority of the directors of
Company. Each director serves until a successor is elected, subject to his or
her earlier death, resignation or removal in the manner provided by law (see
below). In the case of a vacancy on the Board of Directors (other than a vacancy
created by removal by the shareholders), a majority of the directors may appoint
a successor to fill such vacancy. The right of the Board of Directors to appoint
directors to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
The shareholders of Buyer have elected a majority of the trustees of Xxxxx.
Such trustees serve for the life of Xxxxx, subject to their earlier death,
incapacitation, resignation, retirement or removal (see below). In the case of
any vacancy on the Board of Trustees, a majority of the trustees may appoint a
successor to fill such vacancy. The right of the Board of Trustees to appoint
trustees to fill vacancies without shareholder approval is subject to the
provisions of the 1940 Act.
REMOVAL OF DIRECTORS/TRUSTEES
A director of Company may be removed by the affirmative vote of a majority
of the holders of a majority of the outstanding shares of Company.
A trustee of Buyer may be removed at any time by a written instrument
signed by at least two-thirds of the trustees or by vote of two-thirds of the
outstanding shares of Buyer.
MEETINGS OF SHAREHOLDERS
Company is not required to hold annual meetings of shareholders and does
not intend to do so unless required by the 1940 Act. The bylaws of Company
provide that a special meeting of shareholders may be called by the president
or, in his or her absence, the vice-president or by a majority of the Board of
Directors or holders of shares entitled to cast at least 10% of the votes
entitled to be cast at the special meeting. Requests for special meetings must,
among other things, state the purpose of such meeting and the matters to be
voted upon. No special meeting need be called to consider any matter previously
voted upon at a special meeting called by the shareholders during the preceding
twelve months, unless requested by a majority of all shares entitled to vote at
such meeting.
Buyer is not required to hold annual meetings of shareholders unless
required by the 1940 Act and does not intend to do so. The bylaws of Buyer
provide that any trustee may call a special meeting of shareholders and the
trustees shall call a special meeting of the shareholders solely for the purpose
of removing one or more trustees upon written request of the holders of not less
than 10% of the outstanding shares of Buyer. Special
15
meetings may be called for the purpose of electing trustees or for any other
action requiring shareholder approval, or for any matter deemed by the trustees
to be necessary or desirable.
LIABILITY OF DIRECTORS/TRUSTEES AND OFFICERS; INDEMNIFICATION
The Articles of Incorporation eliminate director and officer liability to
the fullest extent permitted under Maryland law.
Under Maryland law:
- a corporation is permitted to eliminate liability of its directors and
officers to the corporation or its stockholders, except for liability
arising from receipt of an improper benefit or profit and from active and
deliberate dishonesty;
- indemnification of a corporation's directors and officers is mandatory if
a director or officer has been successful on the merits or otherwise in
the defense of certain proceedings; and
- indemnification of a corporation's directors and officers for other
matters is permitted unless it is established that the act or omission
giving rise to the proceeding was committed in bad faith, a result of
active and deliberate dishonesty, or one in which a director or officer
actually received an improper benefit.
The Declaration of Trust provides:
- that the trustees and officers of Trust are not liable for any act or
omission or any conduct whatsoever in their capacity as trustees, except
for liability to the trust or shareholders due to willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved
in the conduct of the office of trustee; and
- for the indemnification of Trust's trustees and officers to the extent
that such trustees and officers act in good faith and reasonably believe
that their conduct is in the best interests of Trust, except with respect
to any matter in which it has been determined that such trustee acted
with willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties.
Under Delaware law:
- trustees of a statutory trust are not liable to the trust or its
shareholders for acting in good faith reliance on the provisions of its
governing instrument and that the trustee's liabilities may be expanded
or restricted by such instrument; and
- a statutory trust is permitted to indemnify and hold harmless any trustee
or other person against any and all claims and demands.
Generally speaking, and for practical purposes, the impact of the change
from Maryland law to Delaware law on liability of directors/trustees and
officers will be minimized because the 1940 Act applies a certain level of
liability to the directors/trustees and officers of a mutual fund by prohibiting
the governing documents of the Fund from eliminating liability of
directors/trustees and officers for willful misfeasance, bad faith, gross
negligences or reckless disregard of duty.
DISSOLUTION AND TERMINATION
Maryland law provides that Company may be dissolved by the vote of a
majority of the Board of Directors and two-thirds of the shares entitled to vote
on the dissolution; however the Articles of Incorporation reduce the required
shareholder vote from two-thirds to a majority of the shares entitled to vote on
the dissolution.
Pursuant to the Declaration of Trust, Buyer or any series or class of
shares of beneficial interest in Buyer may be terminated by: (1) a majority
shareholder vote of Buyer or the affected series or class, respectively; or (2)
if there are fewer than 100 shareholders of record of Buyer or of such
terminating series or class, the trustees pursuant to written notice to the
shareholders of Buyer or the affected series or class.
16
VOTING RIGHTS OF SHAREHOLDERS
Shareholders of a Maryland corporation such as Company are entitled to vote
on, among other things, those matters which effect fundamental changes in the
corporate structure (such as a merger, consolidation or sale of substantially
all of the assets of the corporation) as provided by Maryland law.
The Declaration of Trust grants shareholders power to vote only with
respect to the following: (i) election of trustees, provided that a meeting of
shareholders has been called for that purpose; (ii) removal of trustees,
provided that a meeting of shareholders has been called for that purpose; (iii)
termination of Buyer or a series or class of its shares of beneficial interest,
provided that a meeting of shareholders has been called for that purpose; (iv)
sale of all or substantially all of the assets of Buyer or one of its investment
portfolios; (v) merger or consolidation of Buyer or any of its investment
portfolios, with certain exceptions; (vi) approval of any amendments to
shareholders' voting rights under the Declaration of Trust; and (vii) approval
of such additional matters as may be required by law or as the trustees, in
their sole discretion, shall determine.
Generally speaking, and for practical purposes, the impact of the change to
Delaware law from Maryland law on shareholder voting rights will be minimized
because the 1940 Act requires that shareholders vote on certain fundamental
matters.
DISSENTERS' RIGHTS
Under Maryland law, shareholders may not demand the fair value of their
shares from the successor company in a transaction involving the transfer of the
corporation's assets and are, therefore, bound by the terms of the transaction
if the stock is that of an open-end investment company registered with the SEC
under the 1940 Act and the value placed on the stock in the transaction is its
net asset value.
Neither Delaware law nor the Declaration of Trust confers upon shareholders
rights of appraisal or dissenters' rights.
AMENDMENTS TO ORGANIZATION DOCUMENTS
Consistent with Maryland law, Company reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation in the
manner prescribed by statute, including any amendment that alters the contract
rights, as expressly set forth in the Articles of Incorporation, of any
outstanding stock, and all rights conferred on shareholders are granted subject
to this reservation. The Board of Directors of Company may approve amendments to
the Articles of Incorporation to classify or reclassify unissued shares of a
class of stock without shareholder approval. Other amendments to the Articles of
Incorporation may be adopted if approved by the affirmative vote of a majority
of all the votes entitled to be cast on the matter. The directors have the power
to alter, amend or repeal the bylaws of Company or adopt new bylaws at any time.
Consistent with Delaware law, the Board of Trustees of Buyer may, without
shareholder approval, amend the Declaration of Trust at any time, except to
eliminate any voting rights pertaining to the shares of Buyer, without approval
of the majority of the shares of Buyer. The trustees have the power to alter,
amend or repeal the bylaws of Buyer or adopt new bylaws at any time.
17
CAPITALIZATION
The following table sets forth, as of June 30, 2003, (i) the capitalization
of each class of shares of your Fund, (ii) the capitalization of each class of
shares of Buying Fund, and (iii) the pro forma capitalization of each class of
shares of Buying Fund as adjusted to give effect to the transactions
contemplated by the Agreement.
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
SERIES I SHARES SERIES I SHARES SERIES I SHARES
--------------- --------------- ---------------
Net Assets................................. $5,512,095 $346,980,717 $352,492,812
Shares Outstanding......................... 1,030,225 26,967,839 27,396,099
Net Asset Value Per Share.................. $ 5.35 $ 12.87 $ 12.87
PRO FORMA
YOUR FUND BUYING FUND BUYING FUND
SERIES II SHARES(1) SERIES II SHARES SERIES II SHARES
------------------- ---------------- ----------------
Net Assets.............................. $0 $4,636,566 $4,636,566
Shares Outstanding...................... 0 361,747 361,747
Net Asset Value Per Share............... $0 $ 12.82 $ 12.82
---------------
(1) There were no shareholders of Series II Shares of your Fund as of June 30,
2003.
INTERESTS OF CERTAIN PERSONS
If the Reorganization is consummated, AIM, as the investment advisor of
Buying Fund, will gain approximately $5.5 million in additional assets under
management (based on your Fund's net assets as of June 30, 2003), upon which AIM
will receive advisory fees. AIM's advisory fees applicable to Buying Fund are
set forth in the Fee Tables on page 3.
LEGAL MATTERS
Certain legal matters concerning the tax consequences of the Reorganization
will be passed upon by Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxxxx, XX 00000-0000.
ADDITIONAL INFORMATION ABOUT BUYING FUND AND YOUR FUND
For more information with respect to Buying Fund concerning the following
topics, please refer to the following sections of the Buying Fund Prospectus,
which has been made a part of this Proxy Statement/ Prospectus by reference and
which is attached to this Proxy Statement/Prospectus as Appendix II: (i) see
"Performance Information" for more information about the performance of Buying
Fund; (ii) see "Fund Management" for more information about the management of
Buying Fund; (iii) see "Other Information" for more information about Buying
Fund's policy with respect to dividends and distributions; and (iv) see "Other
Information" for more information about the pricing, purchase, redemption and
repurchase of shares of Buying Fund, tax consequences to shareholders of various
transactions in shares of Buying Fund, distribution arrangements and the
multiple class structure of Buying Fund.
For more information with respect to your Fund concerning the following
topics, please refer to the following sections of the Selling Fund Prospectus,
which has been made a part of this Proxy Statement/ Prospectus by reference: (i)
see "Fund Performance" for more information about the performance of your Fund;
(ii) see "Fund Management" and "Portfolio Managers" for more information about
the management of your Fund; (iii) see "Share Price" for more information about
the pricing of shares of your Fund; (iv) see "Taxes" for more information about
tax consequences to shareholders of various transactions in shares of your Fund;
and (v) see "Dividends And Capital Gain Distributions" for more information
about your Fund's policy with respect to dividends and distributions.
18
CERTAIN CIVIL PROCEEDINGS AND LAWSUITS
The mutual fund industry as a whole is currently subject to a wide range of
inquiries and litigation related to issues of "market timing" and "late
trading." Both AIM and INVESCO are the subject of a number of such inquiries, as
described below.
REGULATORY ACTIONS AND INQUIRIES CONCERNING INVESCO
On December 2, 2003 each of the SEC and the Office of the Attorney General
of the State of New York ("NYAG") filed civil proceedings against INVESCO and
Xxxxxxx X. Xxxxxxxxxx, in his capacity as the chief executive officer of
INVESCO. Xx. Xxxxxxxxxx currently holds the positions of Chief Operating Officer
and Senior Vice President of A I M Management Group Inc., the parent of AIM, the
position of Senior Vice President of AIM, and the position of Executive Vice
President of IVIF. In addition, on December 2, 2003, the State of Colorado filed
civil proceedings against INVESCO. Neither your Fund nor any of the other AIM or
INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC complaint, filed in the United States District Court for the
District of Colorado [Civil Action No. 03-N-2421 (PAC)], alleges that INVESCO
failed to disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds'
independent directors that INVESCO had entered into certain arrangements
permitting market timing of the INVESCO Funds. The SEC alleges violations of
Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 under that Act, Section 206(1) and 206(2) of
the Investment Advisers Act of 1940, and Sections 34(b) and 36(a) of the 1940
Act. The SEC is seeking injunctions, including permanent injunctions from
serving as an investment advisor, officer or director of an investment company;
an accounting of all market timing as well as certain fees and compensation
received; disgorgement; civil monetary penalties; and other relief.
The NYAG complaint, filed in the Supreme Court of the State of New York
(New York County), is also based on the circumstances described above. The NYAG
complaint alleges violation of Article 23-A (the Xxxxxx Act) and Section 349 of
the General Business Law of the State of New York and Section 63(12) of the
State of New York's Executive Law. The NYAG is seeking injunctions, including
permanent injunctions from directly or indirectly selling or distributing shares
of mutual funds; disgorgement of all profits obtained, including fees collected,
and payment of all restitution and damages caused, directly or indirectly from
the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado complaint, filed in the Colorado District Court, in the City
and County of Denver, Colorado, is also based on the circumstances described
above. The Colorado complaint alleges violations of Section 6-1-105(1) of the
Colorado Consumer Protection Act. The State of Colorado is seeking injunctions;
restitution, disgorgement and other equitable relief; civil monetary penalties;
and other relief.
No relief is being sought against your Fund or any of the other AIM or
INVESCO Funds in any of these complaints.
In addition, INVESCO has received inquiries in the form of subpoenas or
other oral or written requests for information from various regulators
concerning market timing activity, late trading, fair value pricing and related
issues concerning the INVESCO Funds. These regulators include the Florida
Department of Financial Services, the Commissioner of Securities for the State
of Georgia, the Office of the State Auditor for the State of West Virginia, the
Office of the Secretary of State for West Virginia and the Colorado Securities
Division. INVESCO has also received more limited inquiries concerning related
matters from the United States Department of Labor, NASD Inc., and the SEC.
REGULATORY INQUIRIES CONCERNING AIM
AIM has also received inquiries in the form of subpoenas or other oral or
written requests for information from various regulators concerning market
timing activity, late trading, fair value pricing, and related issues concerning
the AIM Funds. AIM has received requests for information and documents
concerning these and related matters from the SEC and the Massachusetts
Secretary of the Commonwealth. In addition, AIM has received subpoenas
concerning these and related matters from the NYAG, the United States Attorney's
19
Office for the District of Massachusetts, the Commissioner of Securities for the
State of Georgia, the Office of the State Auditor for the State of West
Virginia, and the Office of the Secretary of State for West Virginia. AIM has
also received more limited inquiries from the SEC and NASD, Inc. concerning
specific funds, entities and/or individuals, none of which directly bears upon
your Fund.
RESPONSE OF THE INDEPENDENT DIRECTORS/TRUSTEES
The independent directors/trustees (the "independent trustees") of the AIM
and INVESCO Funds have retained their own independent counsel to conduct an
investigation on behalf of the independent trustees into the frequent trading
arrangements and related issues raised by the regulators. The independent
trustees have created a special committee, consisting of four independent
trustees, to oversee the investigation and to formulate recommendations for
further board action. As part of the investigation by the independent trustees,
their independent counsel has been reviewing the examination of INVESCO and AIM
currently being conducted by management's outside counsel.
RESPONSE OF AMVESCAP
AMVESCAP is seeking to resolve both the pending regulatory complaints
against INVESCO alleging market timing and the ongoing market timing
investigations with respect to INVESCO and AIM. AMVESCAP recently found, in its
ongoing review of these matters, that shareholders were not always effectively
protected from the potential adverse impact of market timing and illegal late
trading through intermediaries. These findings were based, in part, on an
extensive economic analysis by outside experts who have been retained by
AMVESCAP to examine the impact of these activities. In light of these findings,
AMVESCAP has publicly stated that any AIM or INVESCO Fund, or any shareholders
thereof, harmed by these activities will receive full restitution. AMVESCAP has
informed regulators of these findings. In addition, AMVESCAP has retained
separate outside counsel to undertake a comprehensive review of AIM's and
INVESCO's policies, procedures and practices, with the objective that they rank
among the most effective in the fund industry.
There can be no assurance that AMVESCAP will be able to reach a
satisfactory settlement with the regulators, or that any such settlement will
not include terms which would have the effect of barring either or both of
INVESCO and AIM, or any other investment advisor directly or indirectly owned by
AMVESCAP, from serving as an investment advisor to any investment company
registered under the Investment Company Act of 1940 (a "registered investment
company"), including your Fund. Your Fund has been informed by AIM and/or
INVESCO that, if AIM or INVESCO is so barred, AIM or INVESCO will seek exemptive
relief from the SEC to permit it to serve as your Fund's investment advisor.
There can be no assurance that such exemptive relief will be granted. Any
settlement with the regulators could also include terms which would bar Xx.
Xxxxxxxxxx from serving as an officer or director of any registered investment
company.
PRIVATE ACTIONS
In addition to the complaints described above, multiple lawsuits, including
purported class action and shareholder derivative suits, have been filed against
various parties (including, depending on the lawsuit, certain INVESCO Funds,
certain AIM Funds, INVESCO, AIM, A I M Management Group Inc., the parent of AIM,
AMVESCAP, certain related entities and certain of their officers, including Xx.
Xxxxxxxxxx). The allegations in the majority of the lawsuits are substantially
similar to the allegations in the regulatory complaints against INVESCO
described above. Such lawsuits allege a variety of theories of recovery,
including but not limited to: (i) violation of various provisions of the Federal
and state securities laws; (ii) violation of various provisions of the Employee
Retirement Income Security Act ("ERISA"); (iii) breach of fiduciary duty; and
(iv) breach of contract. The lawsuits have been filed in both Federal and state
courts and seek such remedies as compensatory damages; restitution; rescission;
accounting for wrongfully gotten gains, profits and compensation; injunctive
relief; disgorgement; equitable relief; various corrective measures under XXXXX;
rescission of certain Funds' advisory agreements with AIM; declaration
20
that the advisory agreement is unenforceable or void; refund of advisory fees;
interest; and attorneys' and experts' fees. The following list identifies such
lawsuits that have been served as of February 23, 2004:
- XXX XXXXXX, DERIVATIVELY ON BEHALF OF NATIONS INTERNATIONAL EQUITY
FUND, V. INVESCO GLOBAL ASSET MANAGEMENT, ET AL., in the Superior
Court Division, State of North Carolina (Civil Action No.
03-CVS-19622), filed on November 14, 2003.
- XXXX XXXXXXX X. INVESCO FUNDS GROUP, INC., ET AL., in the District
Court, City and County of Denver, Colorado (Case Number 03-CV-9268),
filed on December 5, 2003.
- X. XXXXX XXXXXX, DERIVATIVELY ON BEHALF OF INVESCO FUNDS GROUP,
INC. V. AMVESCAP PLC, INVESCO, INC., ET AL., in the United States
District Court, District of Colorado (Civil Action No. 03-MK-2406),
filed on November 28, 2003.
- XXXXXX XXXXXXXX AND XXXXXX XXXXXXXX X. INVESCO ADVANTAGE HEALTH
SCIENCES FUND, ET AL., in the United States District Court, Southern
District of New York (Civil Action No. 03-CV-9634), filed on
December 4, 2003.
- XXXXXXX XXXXX X. INVESCO FUNDS GROUP, INC., ET AL., in the United
States District Court, District of Colorado (Civil Action No.
03-F-2441), filed on December 2, 2003.
- XXXXXX X. XXXXXXX, ET AL., V. INVESCO ADVANTAGE HEALTH SCIENCES
FUND, ET AL., in the United States District Court, District of
Colorado (Civil Action No. 03-N-2559), filed on December 17, 2003.
- XXX X. XXXXXXX AND XXXXXX X. XXXXXXX V. INVESCO FUNDS GROUP, INC.
AND A I M ADVISORS, INC., in the United States District Court,
District of Colorado (Civil Action No. 03-MK-2612), filed on
December 24, 2003.
- XXXX XXXXXXX, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., ET AL., in the United States
District Court, Southern District of New York (Civil Action No.
04-CV-00492), filed on January 21, 2004.
- XXXX X. XXXXXX XXXX AND XXXXXXX X. XXXXXX, ON BEHALF OF THEMSELVES
AND ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., ET
AL., in the United States District Court, District of Colorado
(Civil Action No. 04-CV-812), filed on February 5, 2004.
INVESCO has removed certain of the state court proceedings to Federal
District Court. The Judicial Panel on Multidistrict Litigation recently has
ordered that efficiency will be achieved if all actions alleging market timing
throughout the mutual fund industry are transferred to the District of Maryland
for coordinated pretrial discovery. AIM and INVESCO have informed the AIM and
INVESCO Funds that they anticipate that the Panel will issue orders to transfer
actions pending against them, including the cases identified above, to the
multidistrict litigation as well.
More detailed information regarding each of the cases identified above is
provided in your Fund's statement of additional information. Additional lawsuits
or regulatory actions arising out of these circumstances and presenting similar
allegations and requests for relief may be served or filed against your Fund,
INVESCO, AIM, AMVESCAP and related entities and individuals in the future.
Information about any similar additional lawsuits will be provided in the
statement of additional information.
As a result of these developments, investors in the AIM and INVESCO Funds
might react by redeeming their investments. This might require the Funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the Funds.
21
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 and semiannual reports
which Company and Buyer have 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 of Company's registration statement containing the Selling Fund
Prospectus and related Statement of Additional Information is Registration No.
033-70154. Such Selling Fund Prospectus is incorporated herein by reference. The
SEC file number for Buyer's registration statement containing the Buying Fund
Prospectus and related Statement of Additional Information is Registration No.
033-57340. Such Buying Fund Prospectus is incorporated herein by reference.
Company and Buyer are subject to the informational requirements of the
Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith
file reports and other information with the SEC. Reports, proxy material,
registration statements and other information filed by Company and Buyer
(including the Registration Statement of Buyer relating to Buying Fund on Form
N-14 of which this Proxy Statement/ Prospectus is a part) may be inspected
without charge and copied at the public reference facilities maintained by the
SEC at Room 1014, Judiciary Plaza, 000 Xxxxx Xxxxxx, XX, Xxxxxxxxxx, XX 00000,
and at the following regional office of the SEC: 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx 00000. Copies of such material may also be obtained from
the Public Reference Section of the SEC at 000 Xxxxx Xxxxxx, XX, Xxxxxxxxxx, XX
00000, at the prescribed rates. The SEC maintains a website at xxx.xxx.xxx that
contains information regarding Company and Buyer and other registrants that file
electronically with the SEC.
PROPOSAL 2 --
ELECTION OF DIRECTORS
BACKGROUND
In considering the integration initiative proposed by AMVESCAP, the
independent directors of the INVESCO Funds and the independent
directors/trustees of the AIM Funds determined that the shareholders of all the
AIM Funds and the INVESCO Funds would benefit if a unified board of
directors/trustees was responsible for overseeing the operation of both the AIM
Funds and the INVESCO Funds and the services provided by AIM, INVESCO and their
affiliates. Accordingly, the Boards of Directors of the INVESCO Funds and the
Boards of Directors/Trustees of the AIM Funds agreed to combine the separate
boards and create a unified board of directors/trustees.
You are being asked to approve Proposal 2 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from having
a combined board of directors.
STRUCTURE OF THE BOARD OF DIRECTORS
The Board currently consists of the following five persons: Xxx X. Xxxxx,
Xxxxx X. Xxxxx, Xxxxxx X. Xxxxx, Xxxxx Xxxx, Ph.D. and Xxxx X. Xxxxxxxxxx. Four
of the current directors are "independent," meaning they are not "interested
persons" of Company within the meaning of Section 2(a)(19) of the 1940 Act. One
of the current directors is an "interested person" because of his business and
financial relationships with Company and INVESCO, its investment advisor, and/or
INVESCO's parent, AMVESCAP.
NOMINEES FOR DIRECTORS
Company's Governance Committee (which consists solely of independent
directors) has approved the nomination of each of the five current directors, as
set forth below, each to serve as director until his successor is elected and
qualified. In addition, the Governance Committee has approved the nomination of
11 new nominees, as set forth below, each to serve as director until his or her
successor is elected and qualified. These 11 new nominees were nominated to
effect the proposed combination of the Boards of Directors/Trustees of the AIM
Funds and the Boards of Directors of the INVESCO Funds.
22
Each nominee who is a current director serves as a director of Company,
consisting of a total of 13 portfolios. Each nominee who is a current director
also serves as a director or trustee of 17 of the 19 registered investment
companies mentioned above, consisting of a total of 78 portfolios, that make up
the AIM Funds. The business address of each nominee who is a current director is
00 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000.
Each new nominee who serves as a director or trustee of the 19 AIM Funds a
total of 99 portfolios. The business address of each nominee who is a current
director is 00 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000. Each new
nominee was recommended to Company's Governance Committee by the independent
directors of Company.
If elected, each nominee who is a current director would oversee a total of
18 registered investment companies currently comprising 91 portfolios and each
new nominee would oversee a total of 20 registered investment companies
currently comprising 112 portfolios.
NOMINEES WHO CURRENTLY ARE INDEPENDENT DIRECTORS
DIRECTOR PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH SINCE DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
---------------------- -------- ----------------------- --------------------------
Xxx X. Xxxxx -- 1936
Director.................. 1993 Retired None
Formerly: President and Chief
Executive Officer, AMC Cancer
Research Center, and Chairman and
Chief Executive Officer, First
Columbia Financial Corporation.
Xxxxx X. Xxxxx -- 1942
Director.................. 2000 Co-President and Founder of None
Green, Xxxxxxx & Bunch Ltd.,
(investment banking firm), and
Director, Policy Studies and Xxx
Xxxxxx Insurance Corporation
Xxxxxx X. Xxxxx -- 1933
Director.................. 2000 Chairman, Lawsuit Resolution General Chemical Group, Inc.
Services (San Diego, California)
Formerly Associate Justice of the
California Court of Appeals
Xxxxx Xxxx, Ph.D. -- 1942
Director.................. 1997 Retired. None
23
NOMINEE WHO CURRENTLY IS AN INTERESTED PERSON
DIRECTOR PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIP(S)
NAME, YEAR OF BIRTH SINCE DURING PAST 5 YEARS HELD
------------------- -------- ----------------------- ---------------------
Xxxx X. Xxxxxxxxxx(1) -- 1951.... 1998 Director, President and Chief Executive None
Director, Chairman and Executive Officer, A I M Management Group Inc.
Vice President (financial services holding company);
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director, A I M Capital
Management, Inc. (registered investment
advisor) and A I M Distributors, Inc.
(registered broker dealer); Director
and Chairman, AIM Investment Services,
Inc. (registered transfer agent), and
Fund Management Company (registered
broker dealer); and Chief Executive
Officer, AMVESCAP PLC -- AIM Division
(parent of AIM and a global investment
management firm)
Formerly: Director, Chairman, President
and Chief Executive Officer, INVESCO
Funds, Group, Inc. and INVESCO
Distributors, Inc.; Chief Executive
Officer, AMVESCAP PLC -- Managed
Products; Chairman and Chief Executive
Officer of NationsBank Advisors, Inc.;
and Chairman of NationsBanc
Investments, Inc.
---------------
(1) Xx. Xxxxxxxxxx is considered an interested person of Company because he is
an officer and a director of the advisor to, and a director of the principal
underwriter of, Company.
NEW NOMINEES WHO WILL BE INDEPENDENT DIRECTORS
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
---------------------- ----------------------- --------------------------
Xxxxx X. Xxxxxx -- 1939..... Of Counsel, law firm of Xxxxx & Badgley Funds, Inc. (registered
XxXxxxxx investment company)
Formerly: Partner, law firm of
Xxxxx & XxXxxxxx
Xxxxx X. Xxxxxxxx -- 1944... Chairman, Xxxxxxxx Technology ACE Limited (insurance company);
Associates (technology consulting and Captaris, Inc. (unified
company) messaging provider)
Xxxxxx X. Xxxxxx -- 1941.... Director of a number of public and Cortland Trust, Inc. (Chairman)
private business corporations, (registered investment company);
including the Boss Group Ltd. Annuity and Life Re (Holdings),
(private investment and management) Ltd. (insurance company)
and Magellan Insurance Company
Formerly: Director, President and
Chief Executive Officer, Volvo
Group North America, Inc.; Senior
Vice President, AB Volvo; and
director of various affiliated
Volvo companies
Xxxxxx X. Xxxx,
Xx. -- 1935............... Retired None
Formerly: Chairman, Mercantile
Mortgage Corp.; President and Chief
Operating Officer, Mercantile-Safe
Deposit & Trust Co.; and President,
Mercantile Bankshares Corp.
24
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
---------------------- ----------------------- --------------------------
Xxxx X. Xxxxxx -- 1952...... Chief Executive Officer, Twenty Administaff, Discovery Global
First Century Group, Inc. Education Fund (non-profit)
(government affairs company) and
Xxxxxx Xxxxxx LP (sustainable
forestry company)
Xxxx Xxxxxxxxxx -- 1937..... Partner, law firm of Xxxxxx Xxxxx Xxxxxxxx Trust, Inc. (registered
Naftalis and Xxxxxxx LLP investment company)
Xxxxx
Xxxxxx-Xxxxx -- 1950...... Formerly: Chief Executive Officer, None
YWCA of the USA
Xxxxx X. Xxxxxxx -- 1942.... Partner, law firm of Xxxxxxx & None
Xxxxxx
Xxxx X. Xxxxxxx -- 1935..... Retired None
Xxxxx X. Xxxxx -- 1939...... Executive Vice President, None
Development and Operations Xxxxx
Interests Limited Partnership (real
estate development company)
NEW NOMINEE WHO WILL BE AN INTERESTED PERSON
PRINCIPAL OCCUPATION(S)
NAME AND YEAR OF BIRTH DURING PAST 5 YEARS OTHER DIRECTORSHIP(S) HELD
---------------------- ----------------------- --------------------------
Xxxxxx X. Xxxxxx(1) -- 1946..... Director and Chairman, A I M N/A
President Management Group, Inc.
(financial services holding
company); and Director and Vice
Chairman, AMVESCAP PLC and
Chairman of AMVESCAP PLC -- AIM
Division (parent of AIM and a
global investment management
firm)
Formerly, President and Chief
Executive Officer, A I M
Management Group, Inc. Director,
Chairman and President, A I M
Advisors, Inc. (registered
investment advisor); Director
and Chairman, A I M Capital
Management, Inc. (registered
investment advisor), A I M
Distributors, Inc. (registered
broker dealer), AIM Investment
Services, Inc. (registered
transfer agent), and Fund
Management Company (registered
broker dealer); and Chief
Executive Officer, AMVESCAP
PLC -- Managed Products
---------------
(1) Xx. Xxxxxx will be considered an interested person of Company because he is
a director of AMVESCAP PLC, parent of the advisor to, and principal
underwriter of, Company.
THE BOARD'S RECOMMENDATION ON PROPOSAL 2
Your Board, including the independent directors, unanimously recommends
that you vote "FOR" these 16 nominees.
25
COMMITTEES OF THE BOARD
The Board currently has five standing committees: an Audit Committee, a
Governance Committee, an Investments Committee a Valuation Committee and a
Special Committee Related to Market Timing Issues. These five committees will
remain as part of the combined Board. Prior to November 6, 2003, the Board had
nine committees: an audit committee, an investments and management liaison
committee, a brokerage committee, a derivatives committee, a valuation
committee, a legal committee, a compensation committee, a retirement plan
committee and a nominating committee.
AUDIT COMMITTEE
The Audit Committee is comprised entirely of directors who are not
"interested persons" of Company as defined in Section 2(a)(19) of the 1940 Act.
The current members of Company's Audit Committee are Messrs. Xxxxx, Bunch and
Soll. The Audit Committee is responsible for: (i) the appointment, compensation
and oversight of any independent auditors employed by your Fund (including
monitoring the independence, qualifications and performance of such auditors and
resolution of disagreements between your Fund's management and the auditors
regarding financial reporting) for the purpose of preparing or issuing an audit
report or performing other audit, review or attest services; (ii) overseeing the
financial reporting process of your Fund; (iii) monitoring the process and the
resulting financial statements prepared by management to promote accuracy and
integrity of the financial statements and asset valuation; (iv) to assist the
Board's oversight of your Fund's compliance with legal and regulatory
requirements that relate to your Fund's accounting and financial reporting,
internal control over financial reporting and independent audits; (v) to the
extent required by Section 10A of the Securities Exchange Act of 1934, to
pre-approve all permissible non-audit services that are provided to your Fund by
its independent auditors; (vi) to pre-approve, in accordance with Item
2.01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by your
Fund's independent auditors to your Fund's investment advisor and certain other
affiliated entities; and (vii) to the extent required by Regulation 14A, to
prepare an audit committee report for inclusion in your Fund's annual proxy
statement. The financial statements should be read in conjunction with the
disclosures, included in this Proxy Statement/ Prospectus under the heading
"Certain Civil Proceedings and Lawsuits."
GOVERNANCE COMMITTEE
The Governance Committee is comprised entirely of directors who are not
"interested persons" of Company as defined in Section 2(a)(19) of the 1940 Act.
The current member of Company's Governance Committee is Xx. Xxxxx. The
Governance Committee is responsible for: (i) nominating persons who are not
interested persons of Company for election or appointment: (a) as additions to
the Board, (b) to fill vacancies which, from time to time, may occur in the
Board and (c) for election by shareholders of Company at meetings called for the
election of directors; (ii) nominating persons for appointment as members of
each committee of the Board, including, without limitation, the Audit Committee,
the Governance Committee, the Investments Committee and the Valuation Committee,
and to nominate persons for appointment as chair and vice chair of each such
committee; (iii) reviewing from time to time the compensation payable to the
directors and making recommendations to the Board regarding compensation; (iv)
reviewing and evaluating from time to time the functioning of the Board and the
various committees of the Board; (v) selecting independent legal counsel to the
independent directors and approving the compensation paid to independent legal
counsel; and (vi) approving the compensation paid to independent counsel and
other advisers, if any, to the Audit Committee of Company.
After a determination by the Governance Committee that a person should be
nominated as an additional director who is not an "interested person" of Company
as defined in Section 2(a)(19) of the 1940 Act (a "dis-interested director"), or
as soon as practical after a vacancy occurs or it appears that a vacancy is
about to occur for a dis-interested director position on the Board, the
Governance Committee will nominate a person for appointment by a majority of the
dis-interested directors to add to the Board or to fill the vacancy. Prior to a
meeting of the shareholders of your Fund called for the purpose of electing
dis-interested directors, the Governance Committee will nominate one or more
persons for election as dis-interested directors at such meeting.
26
Evaluation by the Governance Committee of a person as a potential nominee
to serve as a dis-interested director, including a person nominated by a
shareholder, should result in the following findings by the Governance
Committee: (i) upon advice of independent legal counsel to the dis-interested
directors, that the person will qualify as a dis-interested director and that
the person is otherwise qualified under applicable laws and regulations to serve
as a director of Company; (ii) that the person is willing to serve, and willing
and able to commit the time necessary for the performance of the duties of a
dis-interested director; (iii) with respect to potential nominees to serve as
dis-interested director members of the Audit Committee of Company, upon advice
of independent legal counsel to the dis-interested directors, that the person:
(a) is free of any material relationship with your Fund (other than as a
shareholder of your Fund), either directly or as a partner, shareholder or
officer of an organization that has a relationship with your Fund, (b) meets the
requirements regarding the financial literacy or financial expertise of audit
committee members, as set forth from time to time in the New York Stock Exchange
listing standards and in any rules promulgated by the SEC that are applicable to
investment companies whose shares are listed for trading on a national
securities exchange, and (c) meets the director independence requirements for
serving on audit committees as set forth from time to time in the New York Stock
Exchange listing standards (currently, Section 303A.06), and as set forth in
rules promulgated by the SEC under the Securities Exchange Act of 1934, as
amended, that are applicable to investment companies whose shares are listed for
trading on a national securities exchange (currently, Rule 10A-3(b)(1)(iii));
(iv) that the person can make a positive contribution to the Board and your
Fund, with consideration being given to the person's business experience,
education and such other factors as the Governance Committee may consider
relevant; (v) that the person is of good character and high integrity; and (vi)
that the person has desirable personality traits including independence,
leadership and the ability to work with the other members of the Board.
Consistent with the 1940 Act, the Governance Committee can consider
recommendations from management in its evaluation process.
The Governance Committee will consider nominees recommended by a
shareholder to serve as directors, provided: (i) that such person is a
shareholder of record at the time he or she submits such names and is entitled
to vote at the meeting of shareholders at which directors will be elected; and
(ii) that the Governance Committee or the Board, as applicable, shall make the
final determination of persons to be nominated. If a shareholder desires to
nominate a candidate, the shareholder must submit a request in writing to the
chairman of the Governance Committee. The Governance Committee will evaluate
nominees recommended by a shareholder to serve as directors in the same manner
as they evaluate nominees identified by the Governance Committee.
A current copy of the Governance Committee's Charter is set forth in
Appendix IV.
INVESTMENTS COMMITTEE
The current members of Company's Investments Committee are Messrs. Xxxxx,
Xxxxx, Xxxxx and Xxxx. The Investments Committee is responsible for: (i)
overseeing INVESCO's investment-related compliance systems and procedures to
ensure their continued adequacy; and (ii) considering and acting, on an interim
basis between meetings of the full Board, on investment-related matters
requiring Board consideration.
VALUATION COMMITTEE
The current members of Company's Valuation Committee are Messrs. Xxxxx,
Xxxxx, Xxxxx and Xxxx. The Valuation Committee meets on an ad hoc basis to
review matters related to valuation.
SPECIAL COMMITTEE RELATED TO MARKET TIMING ISSUES
The current member of Company's Special Committee Relating to Market Timing
Issues is Xx. Xxxxx. The purpose of the Special Committee Relating to Market
Timing Issues is to remain informed on matters relating to alleged excessive
short term trading in shares of your Fund and the other portfolios of Company
("market timing") and to provide guidance to special counsel for the independent
directors on market timing
27
issues and related matters between meetings of the independent directors. During
the fiscal year ended December 31, 2003 the Special Committee Related to Market
Timing did not meet.
BOARD AND COMMITTEE MEETING ATTENDANCE
During the fiscal year ended December 31, 2003, the Board met 9 times, the
Audit Committee met 1 time, the Governance Committee met 1 time, the Investments
Committee met 1 time, the Valuation Committee and the Special Committees Related
to Market Timing Issues did not meet, the former audit committee met 3 times,
the former investments and management liaison committee met 3 times, the former
brokerage committee met 3 times, the former derivatives committee met 3 times,
the former nominating committee met 2 times, the former legal committee met 2
times, the former compensation committee, and the former executive, valuation
and retirement plan committees did not meet. All of the current directors then
serving attended at least 75% of the meetings of the Board or applicable
Committee during the most recent fiscal year. Company is not required to and
does not hold annual meetings of shareholders. Company's policy regarding Board
member attendance at annual meetings of shareholders, if any, is that directors
are encouraged but not required to attend such annual meetings.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
The Board provides a process for shareholders to send communications to the
Board. If any shareholder wishes to communicate with the Board or with an
individual director, that shareholder should send his, her or its communications
to Xxx X. XxXxxxxx, First Vice President Corporate Communications.
Communications made to Xx. XxXxxxxx may be communicated by telephone, e-mail or
regular mail to the following address: (000) 000-0000,
xxx.xxxxxxxx@xxxxxxxxxxxx.xxx, A I M Management Group Inc., 00 Xxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxx, XX 00000. All shareholder communications received by Xx.
XxXxxxxx shall be promptly forwarded to the individual director of Company to
whom they were addressed or to the full Board, as applicable. Copies of all
shareholder communications will also be distributed to the Chairs of each of
Trust's Audit Committee, Governance Committee, Investments Committee and
Valuation Committee, to counsel for Company and to counsel for the independent
directors of Company. Counsel for Company, upon receipt of their copy of a
shareholder communication, shall work for such Chairs and counsel for the
independent directors to determine whether such shareholder communication should
be distributed to any directors to whom it was not sent and whether and in what
manner the directors should respond to such shareholder communication.
Responses, if any, to shareholder communications shall be coordinated by counsel
for Company, working with the Chairs and counsel for the independent directors.
DIRECTOR'S COMPENSATION
Each director who is independent is compensated for his or her services
according to a fee schedule which recognizes the fact that such director also
serves as a director of other INVESCO Funds. Each such director receives a fee,
allocated among the INVESCO Funds for which he or she serves as a director,
which consists of an annual retainer and a meeting fee component.
Set forth below is information regarding compensation paid or accrued for
each continuing director of Company who was not affiliated with INVESCO during
the year ended December 31, 2003. Directors of Company who are affiliated with
INVESCO are not compensated by Company.
ESTIMATED ANNUAL
AGGREGATE RETIREMENT BENEFITS BENEFITS UPON TOTAL COMPENSATION
COMPENSATION ACCRUED BY ALL RETIREMENT FROM ALL FROM ALL AIM FUNDS AND
NAME OF DIRECTOR FROM COMPANY(1) INVESCO FUNDS(2) INVESCO FUNDS(3) INVESCO FUNDS(4)
---------------- --------------- ------------------- ------------------- ----------------------
Xxx X. Xxxxx......... $16,211 $ 0 $24,131 $154,554
Xxxxx X. Xxxxx....... 15,414 0 0 138,679
Xxxxxx X. Xxxxx...... 15,575 0 0 142,054
Xxxxx Xxxx, Ph.D. ... 15,493 21,545 18,090 140,429
28
---------------
(1)During the period January 1, 2003 through October 21, 2003 the vice chairman
of the Board, the chairs of certain of your Fund's committees who are
independent directors, and the members of your Fund's committees who are
independent directors each received compensation for serving in such
capacities in addition to the compensation paid to all independent directors.
Amounts shown are based on the fiscal year ended December 31, 2003.
(2)Represents estimated benefits accrued with respect to the current retirement
plan and deferred retirement plan account agreement applicable to independent
directors of Company, and not compensation deferred at the election of the
directors. Amounts shown are based on the fiscal year ended December 31,
2003.
(3)These amounts represent the estimated annual benefits payable by the INVESCO
Funds upon the directors' retirement, calculated using the current method of
allocating director compensation among the INVESCO Funds. Xxxxxxx shown
assume each director serves until his normal retirement date of age 72.
(4)As of November 25, 2003, the AIM Funds and the INVESCO Funds are considered
to be part of one fund complex. All directors currently serve as directors or
trustees of 17 registered investment companies advised by AIM and one
registered investment company advised by INVESCO.
RETIREMENT PLAN FOR DIRECTORS
At a meeting held on November 6, 2003, the Boards of Directors of the
INVESCO Funds, including Company, adopted a new retirement plan (the "New
Retirement Plan") for the directors of Company who are not affiliated with
INVESCO, which was effective as of October 21, 2003. The New Retirement Plan
also has been adopted by the Boards of Directors/Trustees of the AIM Funds. The
reason for adoption of the New Retirement Plan is to provide for consistency in
the retirement plans for the Boards of Directors of the INVESCO Funds and the
Boards of Directors/Trustees of the AIM Funds. The retirement plan includes a
retirement policy as well as retirement benefits for independent directors.
The retirement policy permits each independent director to serve until
December 31 of the year in which the director turns 72. A majority of the
directors may extend from time to time the retirement date of a director.
Annual retirement benefits are available to each independent director of
Company and/or the other INVESCO Funds and AIM Funds (each, a "Covered Fund")
who has at least five years of credited service as a director (including service
to a predecessor fund) for a Covered Fund. The retirement benefits will equal
75% of the director's annual retainer paid or accrued by any Covered Fund to
such director during the twelve-month period prior to retirement, including the
amount of any retainer deferred under a separate deferred compensation agreement
between the Covered Fund and the director. The annual retirement benefits will
be payable in quarterly installments for a number of years equal to the lesser
of (i) ten or (ii) the number of such director's credited years of service. A
death benefit also is available under the New Retirement Plan that will provide
a surviving spouse with a quarterly installment of 50% of a deceased director's
retirement benefits for the same length of time that the director would have
received the benefits based on his or her service. A director must have attained
the age of 65 (55 in the event of death or disability) to receive any retirement
benefit. Payment of benefits under the New Retirement Plan is not secured or
funded by Company.
Upon the effectiveness of the New Retirement Plan, the independent
directors ceased to accrue benefits under their prior retirement plan ("Prior
Retirement Plan") and deferred retirement plan account agreement ("Prior Account
Agreement"). Messrs. Xxxxx and Xxxx will not receive any additional benefits
under the Prior Retirement Plan or the Prior Account Agreement, but will be
entitled to amounts which have been previously funded under the Prior Retirement
Plan or the Prior Account Agreement for their benefit. An affiliate of INVESCO
will reimburse Company for any amounts funded by Company for Messrs. Xxxxx and
Xxxx under the Prior Retirement Plan and the Prior Account Agreement.
29
DEFERRED COMPENSATION AGREEMENTS
At a meeting held on November 6, 2003, the Boards of Directors of the
INVESCO Funds, including Company, adopted new deferred compensation agreements,
which are consistent with the deferred compensation agreements adopted by the
Boards of Directors/Trustees of the AIM Funds. Pursuant to the new deferred
compensation agreements ("New Compensation Agreements"), a director has the
option to elect to defer receipt of up to 100% of his or her compensation
payable by Company, and such amounts are placed into a deferral account. The
deferring directors have the option to select various INVESCO Funds and AIM
Funds in which all or part of their deferral account will be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, generally in equal quarterly installments over a period of up to
ten years (depending on the New Compensation Agreement) beginning on the date
selected under the New Compensation Agreement.
The Board, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring directors' retirement
benefits commence under the New Retirement Plan. The Board, in its sole
discretion, also may accelerate or extend the distribution of such deferral
accounts after the deferring directors' termination of service as a director of
Company. If a deferring director dies prior to the distribution of amounts in
his or her deferral account, the balance of the deferral account will be
distributed to his or her designated beneficiary. The New Compensation
Agreements are not funded and, with respect to the payments of amounts held in
the deferral accounts, the deferring directors have the status of unsecured
creditors of Company and of each other INVESCO Fund or AIM Fund from which they
are deferring compensation.
OFFICERS OF COMPANY
The following table provides information with respect to the current
officers of Company. Each officer is elected by the Board and serves until his
or her successor is chosen and qualified or until his or her resignation or
removal by the Board. The business address of all officers of Company is 00
Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000.
NAME, YEAR OF BIRTH OFFICER
AND POSITION(S) HELD WITH COMPANY SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
--------------------------------- ------- -------------------------------------------
Xxxx X. Xxxxxxxxxx -- 1951
Director, Chairman and Executive Vice
President............................... 1998 Director, President and Chief Executive
Officer, A I M Management Group Inc.
(financial services holding company);
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director, A I M Capital
Management, Inc. (registered investment
advisor) and A I M Distributors, Inc.
(registered broker dealer); Director and
Chairman, AIM Investment Services, Inc.
(registered transfer agent), and Fund
Management Company (registered broker
dealer); and Chief Executive Officer,
AMVESCAP PLC -- AIM Division (parent of AIM
and a global investment management firm)
Formerly: Director, Chairman, President and
Chief Executive Officer, INVESCO Funds
Group, Inc. and INVESCO Distributors, Inc.;
Chief Executive Officer, AMVESCAP PLC --
Managed Products; Chairman and Chief
Executive Officer of NationsBanc Advisors,
Inc.; and Chairman of NationsBanc
Investments, Inc.
30
NAME, YEAR OF BIRTH OFFICER
AND POSITION(S) HELD WITH COMPANY SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
--------------------------------- ------- -------------------------------------------
Xxxxxx X. Xxxxxx -- 1946
President............................... 2003 Director and Chairman, A I M Management
Group Inc. (financial services holding
company); and Director and Vice Chairman,
AMVESCAP PLC and Chairman of AMVESCAP
PLC -- AIM Division (parent of AIM and a
global investment management firm)
Formerly: President and Chief Executive
Officer, A I M Management Group Inc.;
Director, Chairman and President, A I M
Advisors, Inc. (registered investment
advisor); Director and Chairman, A I M
Capital Management, Inc. (registered
investment advisor), A I M Distributors,
Inc. (registered broker dealer); AIM
Investment Services, Inc. (registered
transfer agent), and Fund Management
Company (registered broker dealer); and
Chief Executive Officer, AMVESCAP PLC --
Managed Products
Xxxxxxx X. Xxxxxxxxxx -- 1951
Executive Vice President................ 2001 President and Chief Executive Officer,
INVESCO Funds Group, Inc.; Chairman and
President, INVESCO Distributors, Inc.;
Senior Vice President and Chief Operating
Officer, A I M Management Group Inc.;
Senior Vice President, A I M Advisors, Inc.
and AIM Capital Management, Inc., A I M
Distributors, Inc., AIM Investment Services
Inc. and Fund Management Company
Formerly: Chief Operating Officer and
Senior Vice President, INVESCO Funds Group,
Inc. and INVESCO Distributors, Inc.; and
Senior Vice President GT Global -- North
America
Xxxxx X. Xxxxxx -- 1956
Senior Vice President, Chief Legal
Officer and Secretary................... 2003 Director, Senior Vice President, Secretary
and General Counsel, A I M Management Group
Inc. (financial services holding company)
and A I M Advisors, Inc.; and Vice
President, A I M Capital Management, Inc.,
A I M Distributors, Inc. and AIM Investment
Services, Inc; and Director, Vice President
and General Counsel, Fund Management
Company
Formerly: Senior Vice President and General
Counsel, Liberty Financial Companies, Inc.;
and Senior Vice President and General
Counsel, Liberty Funds Group, LLC
Xxxxxx X. Xxxxx -- 1948
Vice President.......................... 2003 Managing Director, Chief Fixed Income
Officer and Senior Investment Officer,
A I M Capital Management, Inc.; and Vice
President, A I M Advisors, Inc.
Xxxxxx X. Xxxx -- 1955
Vice President.......................... 2003 Managing Director and Chief Research
Officer -- Fixed Income, A I M Capital
Management, Inc.; and Vice President, A I M
Advisors, Inc.
31
NAME, YEAR OF BIRTH OFFICER
AND POSITION(S) HELD WITH COMPANY SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
--------------------------------- ------- -------------------------------------------
Xxxxxxxx X. Xxx -- 1943
Vice President.......................... 2003 Vice President and Chief Compliance
Officer, A I M Advisors, Inc. and A I M
Capital Management, Inc; and Vice
President, AIM Investment Services, Inc.
Xxxxxx X. Xxxxxxx -- 1961
Vice President and Treasurer............ 2004 Vice President and Fund Treasurer, A I M
Advisors, Inc.; Senior Vice President, AIM
Investment Services, Inc.; and Vice
President, A I M Distributors, Inc.
Xxxxx Xxxx Xxxxxx -- 1960
Vice President.......................... 2003 Managing Director and Chief Cash Management
Officer, A I M Capital Management, Inc.;
Director and President, Fund Management
Company; and Vice President, A I M
Advisors, Inc.
Xxxxx X. Xxxxxx -- 1940
Vice President.......................... 2003 Vice President, A I M Advisors, Inc.; and
President, Chief Executive Officer and
Chief Investment Officer, A I M Capital
Management, Inc.
SECURITY OWNERSHIP OF MANAGEMENT
To the best knowledge of Company, no directors, nominees and current
executive officers of Company owned shares of common stock of any of the Funds
of Company as of January 9, 2004.
DIRECTOR OWNERSHIP OF YOUR FUND'S SHARES
As of December 31, 2003, no director or nominee beneficially owned
securities in any registered investment companies overseen by the director
within the AIM Funds or the INVESCO Funds complex.
PROPOSAL 3 --
APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT
BACKGROUND
INVESCO currently serves as the investment advisor to your Fund. AMVESCAP
has recommended restructuring the advisory and administrative servicing
arrangements so that AIM is the advisor and administrator for all INVESCO Funds
and AIM Funds. Your Board has approved a new advisory agreement under which AIM
will serve as the investment advisor for your Fund, and a new sub-advisory
agreement under which INVESCO Institutional, an affiliate of INVESCO, will serve
as sub-advisor. The portfolio management team for your Fund will not change as a
result of this restructuring.
You are being asked to approve Proposal 3 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from a new
investment advisory agreement between AIM and Company.
The Board recommends that you approve the new advisory agreement between
AIM and Company for your Fund. The Board is asking you to vote on this new
agreement because Company may enter into a new advisory agreement for your Fund
only with shareholder approval. If approved, this new agreement would replace
the current advisory agreement between INVESCO and Company for your Fund. The
form of Company's proposed Master Investment Advisory Agreement with AIM is at
Appendix V.
Under the new arrangements, the advisory fees paid by your Fund will not
change. If shareholders of your Fund approve Proposal 3, Company will also enter
into a new Master Administrative Services Agreement with
32
AIM that will replace the current Administrative Services Agreement between
Company and INVESCO, and move the provision of certain administrative services
currently provided pursuant to the current advisory agreement between Company
and INVESCO to the Master Administrative Services Agreement with AIM. If the
proposed advisory agreement is approved and these new arrangements are
implemented, the aggregate fees paid by your Fund for advisory and
administrative services will not increase.
Any voluntary or contractual expense limitations and fee waivers that have
been agreed to by INVESCO and Company with respect to your Fund will not be
terminated if the proposed new advisory agreement with AIM is approved. Instead,
AIM will assume INVESCO's obligations with respect to these voluntary and
contractual expense limitations and fee waivers, on the same terms and
conditions.
If INVESCO and Company have entered into voluntary or contractual expense
limitations or fee waivers with respect to your Fund, INVESCO currently is
entitled to reimbursement from a share class of your Fund that has fees and
expenses absorbed pursuant to this arrangement if such reimbursement does not
cause such share class to exceed the expense limitation and the reimbursement is
made within three years after INVESCO incurred the expense. If the proposed new
advisory agreement with AIM is approved, INVESCO will assign to AIM its right to
be reimbursed with respect to fees and expenses absorbed by it. Other than
substituting AIM for INVESCO as the party having the right to be reimbursed,
this assignment will not alter in any way the rights or obligations of your Fund
or its shareholders.
A description of how the proposed advisory agreement differs from the
current advisory agreement is set forth below under "Terms of the Proposed
Advisory Agreement." At an in-person meeting of the Board held on December 9-10,
2003, the Board, including a majority of the independent directors, voted to
recommend that shareholders approve a proposal to adopt the proposed advisory
agreement for your Fund.
YOUR FUND'S CURRENT INVESTMENT ADVISOR
INVESCO, the current investment advisor for your Fund, became the
investment advisor for your Fund under the current advisory agreement on
February 28, 1997. Your Fund's initial shareholder initially approved the
agreement and your Fund's public shareholders have not subsequently voted on the
agreement. The Board, including a majority of the independent directors, last
approved the current advisory agreement on May 15, 2003.
THE PROPOSED NEW INVESTMENT ADVISOR FOR YOUR FUND
AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM
Management"), a holding company with its principal offices at 00 Xxxxxxxx Xxxxx,
Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000. AIM Management is an indirect wholly owned
subsidiary of AMVESCAP, 00 Xxxxxxxx Xxxxxx, Xxxxxx XX0X 0XX, Xxxxxx Xxxxxxx.
AMVESCAP and its subsidiaries are an independent investment management group.
The following table provides information with respect to the principal
executive officer and the directors of AIM. The business address of the
principal executive officer and the directors of AIM is 00 Xxxxxxxx Xxxxx, Xxxxx
000, Xxxxxxx, Xxxxx 00000.
NAME POSITION WITH AIM PRINCIPAL OCCUPATION
---- ----------------- --------------------
Xxxx X. Xxxxxxxxxx.......... Director, Chairman and President Director, President and Chief
Executive Officer, A I M
Management Group Inc.; Director,
Chairman and President, A I M
Advisors, Inc. (registered
investment advisor); Director,
A I M Capital Management, Inc.
and A I M Distributors, Inc.
(registered broker dealer);
Director and Chairman, AIM
Investment Services, Inc. and
Fund Management to Company and
Chief Executive Officer of the
AIM Division of AMVESCAP PLC
33
NAME POSITION WITH AIM PRINCIPAL OCCUPATION
---- ----------------- --------------------
Xxxxx X. Xxxxxx............. Director, Senior Vice President, Director, Senior Vice President,
General Counsel and Secretary Secretary and General Counsel,
A I M Management Group Inc. and
AIM Advisors, Inc.; Vice
President, A I M Capital
Management Inc., A I M
Distributors, Inc. and AIM
Investment Services, Inc., and
Director, Vice President and
General Counsel, Fund Management
Company, formerly, Senior Vice
President and General Counsel,
Liberty Financial Companies,
Inc.; and Senior Vice President
and General Counsel, Liberty
Funds Group LLC
Xxxx X. Xxxxxx.............. Director, Senior Vice President Director, Senior Vice President
and Chief Financial Officer and Chief Financial Officer,
A I M Management Group Inc.; Vice
President and Treasurer, A I M
Capital Management, Inc. and
A I M Distributors, Inc.;
Director, Vice President and
Chief Financial Officer, AIM
Investment Services, Inc.; and
Vice President and Chief
Financial Officer, Fund
Management Company
POSITIONS WITH AIM HELD BY COMPANY'S DIRECTORS OR EXECUTIVE OFFICERS
Xxxx X. Xxxxxxxxxx, who is a director and/or executive officer of Company,
also is a director and/or officer of AIM. He also beneficially owns shares of
AMVESCAP and/or options to purchase shares of AMVESCAP.
TERMS OF THE CURRENT ADVISORY AGREEMENT
Under the terms of the current advisory agreement with INVESCO for your
Fund, INVESCO acts as investment manager and administrator for your Fund. As
investment manager, INVESCO provides a continuous investment program for your
Fund, including investment research and management, with respect to all
securities, investments and cash equivalents of your Fund. INVESCO also makes
recommendations as to the manner in which voting rights, rights to consent to
actions of your Fund and any other rights pertaining to your Fund's securities
shall be exercised, and calculates the net asset value of your Fund, subject to
such procedures established by the Board and based upon information provided by
your Fund, the custodian of your Fund or other source as designated by the
Board. INVESCO provides sub-accounting, recordkeeping and administrative
services to your Fund under an administrative services agreement. Under the
advisory agreement, as administrator, INVESCO is required to provide, at its
expense and at the request of your Fund, executive, statistical, administrative,
internal accounting and clerical services and office space, equipment and
facilities. Pursuant to an Assignment and Assumption Agreement and Consent dated
August 12, 2003, INVESCO has assigned to AIM all of its rights under its
administrative service agreement with Company, and AIM has assumed all of
INVESCO's obligations under such agreement.
Under the terms of the current advisory agreement, INVESCO has no liability
to Company, your Fund or to your Fund's shareholders or creditors, for any error
of judgment, mistake of law, or for any loss arising out of any investment, nor
for any other act or omission, in the performance of its obligations to Company
or your Fund unless such act or omission involves willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations and duties
under the current advisory agreement.
34
The current advisory agreement for your Fund continues in effect from year
to year only if such continuance is specifically approved at least annually by
(i) the Board or the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of your Fund, and (ii) the vote of a majority of the
directors of Company who are not interested persons of INVESCO or Company by
votes cast in person at a meeting called for such purpose. The current advisory
agreement provides that the Board, a majority of the outstanding voting
securities of your Fund or INVESCO may terminate the agreement with respect to
your Fund on 60 days' written notice without penalty. The agreement terminates
automatically in the event of its assignment, unless an order is issued by the
SEC conditionally or unconditionally exempting such assignment from the
applicable provisions of the 1940 Act.
The current advisory agreement for your Fund provides that your Fund will
pay or cause to be paid all of its expenses not assumed by INVESCO, including
without limitation:
- brokerage commissions, issue and transfer taxes and other costs related
to securities transactions;
- fees, charges and expenses related to accounting, custodian, depository,
dividend disbursing agent, dividend reinvestment agent, transfer agent,
registrar, independent pricing services and legal services performed for
your Fund;
- interest on indebtedness incurred by Company or your Fund;
- taxes;
- fees for maintaining the registration and qualification of your Fund or
its shares under federal and state law;
- compensation and expenses of the independent directors;
- costs of printing and distributing reports, notices of shareholders'
meetings, proxy statements, dividend notices, prospectuses, statements of
additional information and other communications to your Fund's
shareholders, including expenses relating to Board and shareholder
meetings;
- costs, fees and other expenses arising in connection with the
organization and filing of Company's Articles of Incorporation,
determinations of tax status of your Fund, initial registration and
qualification of your Fund's securities under federal and state
securities laws and approval of Company's operations by any other federal
or state authority;
- expenses of repurchasing and redeeming shares of your Fund;
- insurance premiums;
- costs of designing, printing and issuing certificates representing shares
of your Fund;
- extraordinary expenses, including fees and disbursements of Company's
counsel, in connection with litigation by or against Company or your
Fund;
- premiums for the fidelity bond maintained by your Fund pursuant to the
1940 Act (except those premiums that may be allocated to INVESCO as an
insured);
- association and institute dues;
- expenses, if any, of distributing shares of your Fund pursuant to a 12b-1
plan of distribution; and
- all other costs and expenses of your Fund's operations and organization
unless otherwise explicitly provided.
The current advisory agreement requires INVESCO to reimburse your Fund
monthly for any salaries paid by your Fund to officers, directors and full-time
employees of your Fund who are also officers, general partners or employees of
INVESCO or its affiliates. Although INVESCO has this obligation under the
current advisory agreement, your Fund does not pay salaries to its officers,
non-independent directors or employees for services rendered to your Fund.
35
If, in any given year, the sum of your Fund's expenses exceed the most
restrictive state-imposed annual expense limitation, INVESCO is required to
promptly reimburse such excess expenses to your Fund pursuant to the current
advisory agreement. Interest, taxes, extraordinary expenses and expenses which
are capitalized are not deemed expenses for purposes of this reimbursement
obligation.
Company pays INVESCO out of the assets of your Fund, as full compensation
for all services rendered, an advisory fee for your Fund set forth below. Such
fee shall be calculated by applying the following annual rate to the average
daily net assets of your Fund for the calendar year, computed in the manner used
for the determination of the net asset value of shares of your Fund.
ANNUAL RATE FISCAL NET FEES PAID TO FEE WAIVERS OR
(BASED ON AVERAGE DAILY NET ASSETS) YEAR TOTAL NET ASSETS INVESCO FUNDS GROUP, INC. EXPENSE REIMBURSEMENTS
----------------------------------- ------ ---------------- ------------------------- ----------------------
0.85% 2003 $6,431,583 $ 0 $49,341
0.85% 2002 $4,558,005 $ 0 $38,742
0.85% 2001 $5,010,034 $2,634 $35,861
ADDITIONAL SERVICES PROVIDED BY INVESCO AND ITS AFFILIATES
INVESCO and its affiliates also provide additional services to Company and
your Fund. INVESCO currently provides or arranges for others to provide
accounting and administrative services to your Fund. Prior to October 1, 2003,
INVESCO served as your Fund's transfer agent. INVESCO Distributors, Inc.
currently serves as the principal underwriter for your Fund. This company is an
indirect wholly owned subsidiary of AMVESCAP, the parent company of INVESCO.
The following chart sets forth the non-advisory fees paid by your Fund
during its most recently completed fiscal year to INVESCO Funds Group, Inc. and
to affiliates of INVESCO Funds Group, Inc.
INVESCO AIM INVESTMENT
FISCAL (ADMINISTRATIVE INVESCO INVESCO SERVICES, INC.
NAME OF FUND YEAR SERVICES)* DISTRIBUTORS, INC.** (TRANSFER AGENCY) (TRANSFER AGENCY)
------------ ------ --------------- -------------------- ----------------- -----------------
INVESCO VIF -- Growth
Fund.................... 2003 $24,248 $ 0 $3,740 $1,260
2002 $21,915 $ 0 $5,000 $ 0
2001 $22,002 $ 0 $5,000 $ 0
---------------
* Fees paid to INVESCO for administrative services for the prior fiscal year
were paid pursuant to an agreement other than the advisory agreement.
** Net amount received from Rule 12b-1 fees. Excluded are amounts reallowed to
broker-dealers, agents and other service providers.
ADVISORY FEES CHARGED BY AIM FOR SIMILAR FUNDS IT MANAGES
The following table provides information with respect to the annual
advisory fee rates paid to A I M Advisors, Inc. by certain funds that have a
similar investment objective as your Fund.
TOTAL NET ASSETS FEE WAIVERS, EXPENSE
ANNUAL RATE FOR THE MOST LIMITATIONS AND/OR EXPENSE
(BASED ON AVERAGE RECENTLY COMPLETED REIMBURSEMENTS FOR THE MOST
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR RECENTLY COMPLETED FISCAL YEAR
------------ ----------------- ------------------ ------------------------------
AIM Aggressive Growth
Fund.................. 0.80% of the first $150 $2,330,530,569 N/A
million; 0.625% of the
excess over $150 million
AIM Capital Development
Fund.................. 0.75% of the first $350 $1,007,592,822 N/A
million; 0.625% of the
excess over $350 million
36
TOTAL NET ASSETS FEE WAIVERS, EXPENSE
ANNUAL RATE FOR THE MOST LIMITATIONS AND/OR EXPENSE
(BASED ON AVERAGE RECENTLY COMPLETED REIMBURSEMENTS FOR THE MOST
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR RECENTLY COMPLETED FISCAL YEAR
------------ ----------------- ------------------ ------------------------------
AIM Charter Fund........ 1.00% of the first $30 $3,326,279,144 Waive 0.025% on each $5
million; 0.75% over $30 billion increment on net
million up to and assets over $5 billion, up to
including $150 million; a maximum waiver of 0.175% on
0.625% of the excess net assets in excess of $35
over $150 million billion
AIM Constellation
Fund.................. 1.00% of the first $30 $7,864,202,517 Waive 0.025% on each $5
million; 0.75% over $30 billion increment on net
million up to and assets over $5 billion, up to
including $150 million; a maximum waiver of 0.175% on
0.625% of the excess net assets in excess of $35
over $150 million billion
AIM Dent Demographic
Trends Fund........... 0.85% of the first $2 $ 560,632,641 N/A
billion; 0.80% of the
excess over $2 billion
AIM Emerging Growth
Fund.................. 0.85% of the first $1 $ 150,250,503 N/A
billion; 0.80% of the
excess over $1 billion
AIM Large Cap Growth
Fund.................. 0.75% of the first $1 $ 322,636,921 N/A
billion; 0.70% over $1
billion up to and
including $2 billion;
0.625% of the excess
over $2 billion
AIM Mid Cap Growth
Fund.................. 0.80% of the first $1 $ 218,885,325 N/A
billion; 0.75% of the
excess over $1 billion
AIM Xxxxxxxxxx Fund..... 1.00% of the first $30 $2,810,450,428 Waive 0.025% on each $5
million; 0.75% over $30 billion increment on net
million up to and assets over $5 billion, up to
including $350 million; a maximum waiver of 0.175% on
0.625% of the excess net assets in excess of $35
over $350 million billion
AIM Global Value Fund... 0.85% of the first $1 $ 19,198,623 Waive advisory fee and/or
billion; 0.80% of the reimburse expenses on Class A,
excess over $1 billion Class B and Class C to extent
necessary to limit Total
Operating Expenses (excluding
interest, taxes, dividends on
short sales, extraordinary
items and increases in
expenses due to expense offset
arrangements, if any) of Class
A shares to 2.00%
37
TOTAL NET ASSETS FEE WAIVERS, EXPENSE
ANNUAL RATE FOR THE MOST LIMITATIONS AND/OR EXPENSE
(BASED ON AVERAGE RECENTLY COMPLETED REIMBURSEMENTS FOR THE MOST
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR RECENTLY COMPLETED FISCAL YEAR
------------ ----------------- ------------------ ------------------------------
AIM Mid Cap Basic Value
Fund.................. 0.80% of the first $1 $ 106,959,173 Waive advisory fee and/or
billion; 0.75% over $1 reimburse expenses on Class A,
billion up to and Class B and Class C to extent
including $5 billion; necessary to limit Total
0.70% of the excess over Operating Expenses (excluding
$5 billion interest, taxes, dividends on
short sales, extraordinary
items and increases in
expenses due to expense offset
arrangements, if any) of Class
A shares to 1.80%
AIM Asia Pacific Growth
Fund.................. 0.95% of the first $500 $ 130,553,990 Waive advisory fee and/or
million; 0.90% of the reimburse expenses on Class A,
excess over $500 million Class B and Class C to extent
necessary to limit Total
Operating Expenses (excluding
interest, taxes, dividends on
short sales, extraordinary
items and increases in
expenses due to expense offset
arrangements, if any) of Class
A shares to 2.25%
AIM European Growth
Fund.................. 0.95% of the first $500 $ 441,950,942 N/A
million; 0.90% of the
excess over $500 million
AIM Global Aggressive
Growth Fund........... 0.90% of the first $1 $ 860,034,856 N/A
billion; 0.85% of the
excess over $1 billion
AIM Global Growth Fund.. 0.85% of the first $1 $ 544,473,894 N/A
billion; 0.80% of the
excess over $1 billion
AIM International Growth
Fund.................. 0.95% of the first $1 $1,593,002,563 Waive 0.05% of advisory fee on
billion; 0.90% of the average net assets in excess
excess over $1 billion of $500 million
38
TOTAL NET ASSETS FEE WAIVERS, EXPENSE
ANNUAL RATE FOR THE MOST LIMITATIONS AND/OR EXPENSE
(BASED ON AVERAGE RECENTLY COMPLETED REIMBURSEMENTS FOR THE MOST
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR RECENTLY COMPLETED FISCAL YEAR
------------ ----------------- ------------------ ------------------------------
AIM European Small
Company Fund.......... 0.95% $ 57,864,326 Waive advisory fee and/or
reimburse expenses on Class A,
Class B and Class C to extent
necessary to limit Total
Operating Expenses (excluding
interest, taxes, dividends on
short sales, extraordinary
items and increases in
expenses due to expense offset
arrangements, if any) of Class
A shares to 2.00%
AIM International
Emerging Growth Fund.. 0.95% $ 113,020,091 Waive advisory fee and/or
reimburse expenses on Class A,
Class B and Class C to extent
necessary to limit Total
Operating Expenses (excluding
interest, taxes, dividends on
short sales, extraordinary
items and increases in
expenses due to expense offset
arrangements, if any) of Class
A shares to 2.00%
AIM Select Equity
Fund.................. 0.80% of the first $150 $ 520,709,171 N/A
million; 0.625% of the
excess over $150 million
AIM Small Cap Equity
Fund.................. 0.85% $ 522,360,452 N/A
AIM V.I. Aggressive
Growth Fund........... 0.80% of first $150 $ 147,184,067 N/A
million; 0.625% of the
excess over $150 million
AIM V.I. Basic Value
Fund.................. 0.725% of the first $500 $ 563,260,317 N/A
million; 0.70% of the
next $500 million;
0.675% of the next $500
million; 0.65% in excess
of $1.5 billion
AIM V.I. Capital
Appreciation Fund..... 0.65% of first $250 $1,009,286,102 N/A
million; 0.60% of the
excess over $250 million
AIM V.I. Capital
Development Fund...... 0.75% of first $350 $ 127,362,829 N/A
million; 0.625% of the
excess over $350 million
39
TOTAL NET ASSETS FEE WAIVERS, EXPENSE
ANNUAL RATE FOR THE MOST LIMITATIONS AND/OR EXPENSE
(BASED ON AVERAGE RECENTLY COMPLETED REIMBURSEMENTS FOR THE MOST
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR RECENTLY COMPLETED FISCAL YEAR
------------ ----------------- ------------------ ------------------------------
AIM V.I. Core Equity
Fund.................. 0.65% of first $250 $1,559,283,137 N/A
million; 0.60% of the
excess over $250 million
AIM V.I. Dent
Demographic Trends
Fund.................. 0.85% of first $2 $ 124,520,653 Waive advisory fees of Series
billion; 0.80% of the I and II shares to the extent
excess over $2 billion necessary to limit the
expenses (excluding 12b-1 plan
fees, if any, interest, taxes,
dividend expense on short
sales, extraordinary items and
increases in expenses due to
expense offset arrangements,
if any) of each Series to
1.30%
AIM V.I. Growth Fund.... 0.65% of first $250 $ 402,336,311 N/A
million; 0.60% of the
excess over $250 million
AIM V.I. International
Growth Fund........... 0.75% of first $250 $ 301,651,602 N/A
million; 0.70% of excess
over $250 million
AIM V.I. Mid Cap Core
Equity Fund........... 0.725% of the first $500 $ 298,035,982 Waive advisory fees of Series
million; 0.70% of the I and II shares to the extent
next $500 million; necessary to limit the
0.675% of the next $500 expenses (excluding 12b-1 plan
million; 0.65% in excess fees, if any, interest, taxes,
of $1.5 billion dividend expense on short
sales, extraordinary items and
increases in expenses due to
expense offset arrangements,
if any) of each Series to
1.30%
AIM V.I. New Technology
Fund.................. 1.00% $ 20,573,564 Waive advisory fees of Series
I and II shares to the extent
necessary to limit the
expenses (excluding 12b-1 plan
fees, if any, interest, taxes,
dividend expense on short
sales, extraordinary items and
increases in expenses due to
expense offset arrangements,
if any) of each Series to
1.30%
40
TOTAL NET ASSETS FEE WAIVERS, EXPENSE
ANNUAL RATE FOR THE MOST LIMITATIONS AND/OR EXPENSE
(BASED ON AVERAGE RECENTLY COMPLETED REIMBURSEMENTS FOR THE MOST
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR RECENTLY COMPLETED FISCAL YEAR
------------ ----------------- ------------------ ------------------------------
AIM Summit Fund......... 1.00% of the first $10 $1,913,954,379 N/A
million; 0.75% of the
next $140 million;
0.625% in excess of $150
million
AIM Opportunities I
Fund.................. Base fee of 1.00%; $ 410,567,659 N/A
maximum annual
performance adjustment
of +/ -- 0.75%
AIM Opportunities II
Fund.................. Base fee of 1.50%; $ 193,904,542 N/A
maximum annual
performance adjustment
of +/ -- 1.00%
AIM Opportunities III
Fund.................. Base fee of 1.50% $ 173,403,937 N/A
maximum annual
performance adjustment
of +/ -- 1.00%
AIM Basic Value Fund.... 0.725% of first $500 $6,440,522,135 Waive advisory fees at the
million; 0.70% of next annual rate of 0.025% for each
$500 million; 0.675% of $5 billion increment, up to a
next $500 million; 0.65% maximum waiver of 0.175% on
of excess over $1.5 net assets in excess of $35
billion billion
AIM Mid Cap Core Equity
Fund.................. 0.725% on first $500 $3,084,306,540 N/A
million; 0.70% on next
$500 million; 0.675% on
next $500 million; 0.65%
on excess over $1.5
billion
AIM Small Cap Growth
Fund.................. 0.725% on first $500 $1,952,600,320 N/A
million; 0.70% on next
$500 million; 0.675% on
next $500 million; 0.65%
of excess over $1.5
billion
AIM Global Health Care
Fund.................. 0.975% on first $500 $ 759,873,816 N/A
million; 0.95% on next
$500 million; 0.925% on
next $500 million; 0.90%
of excess over $1.5
billion
41
TOTAL NET ASSETS FEE WAIVERS, EXPENSE
ANNUAL RATE FOR THE MOST LIMITATIONS AND/OR EXPENSE
(BASED ON AVERAGE RECENTLY COMPLETED REIMBURSEMENTS FOR THE MOST
NAME OF FUND DAILY NET ASSETS) FISCAL YEAR RECENTLY COMPLETED FISCAL YEAR
------------ ----------------- ------------------ ------------------------------
AIM Libra Fund.......... 0.85% of first $1 $ 42,433,154 Expense limitation -- Limit
billion; 0.80% of excess Total Annual Operating
over $1 billion Expenses (excluding interest,
taxes, dividend expense on
short sales, extraordinary
items and increases in
expenses due to expense offset
arrangements, if any): Class
A, 1.80% Class B, 2.45% Class
C, 2.45%
AIM Global Trends Fund.. 0.975% on first $500 $ 181,622,257 Expense limitation -- Limit
million; 0.95% on next Total Annual Operating
$500 million; 0.925% on Expenses (excluding interest,
next $500 million; 0.90% taxes, dividend expense on
of excess over $1.5 short sales, extraordinary
billion items and increases in
expenses due to expense offset
arrangements, if any): Class
A, 2.00% Class B, 2.50% Class
C, 2.50%
TERMS OF THE PROPOSED ADVISORY AGREEMENT
Under the terms of the proposed advisory agreement, AIM would act as
investment manager and administrator for your Fund. As investment manager, AIM
would provide a continuous investment program for your Fund, including
supervision of all aspects of your Funds' operations, including the investment
and reinvestment of cash, securities or other properties comprising your Funds'
assets and investment research and management, subject at all times to the
policies and control of the Board. AIM would also provide administrative
services pursuant to a Master Administrative Services Agreement.
The proposed advisory agreement states that in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties under the agreement on the part of AIM or any of its officers,
directors, or employees, AIM would not be subject to liability to Company or
your Fund or to any shareholders of your Fund for any act or omission in the
course of, or connected with, rendering services under the agreement or for any
losses that may be sustained in the purchase, holding or sale of any security.
The proposed advisory agreement for your Fund would continue in effect from
year to year only if such continuance is specifically approved at least annually
by (i) the Board or the vote of a majority of the outstanding voting securities
(as defined in the 1940 Act) of your Fund, and (ii) the affirmative vote of a
majority of the directors of Company who are not interested persons of AIM or
Company by votes cast in person at a meeting called for such purpose. The
proposed advisory agreement provides that the Board, a majority of the
outstanding voting securities of your Fund or AIM may terminate the agreement
with respect to your Fund on 60 days' written notice without penalty. The
proposed agreement terminates automatically in the event of its "assignment" (as
defined in the 1940 Act).
The proposed advisory agreement for your Fund provides that your Fund will
pay or cause to be paid all of the ordinary business expenses incurred in the
operations of your Fund and the offering of its shares. These expenses borne by
your Fund would include, without limitation, brokerage commissions, taxes,
legal, accounting, auditing, or governmental fees, the cost of preparing share
certificates, custodian, transfer and shareholder service agent costs, expenses
of issue, sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to trustees and shareholder
meetings, the cost of
42
preparing and distributing reports and notices to shareholders, the fees and
other expenses incurred by Company on behalf of your Fund in connection with
membership in investment company organizations and the cost of printing copies
of prospectuses and statements of additional information distributed to your
Fund's shareholders.
The compensation to be paid to AIM under the proposed advisory agreement
would be calculated by applying annual rates to the average daily net assets of
your Fund for each calendar year. The annual advisory fee rate proposed to be
paid to A I M Advisors, Inc. by your Fund under the proposed advisory agreement
is 0.85% of average daily net assets.
If Proposal 3 is approved, Company will be able to take advantage of an
exemptive order obtained from the SEC by AIM and certain of the AIM Funds. This
exemptive order will allow your Fund and each other series portfolio of Company
(each, an "Investing Fund") to invest their uninvested cash in money market
funds that have AIM or an affiliate of AIM as an investment advisor (the
"Affiliated Money Market Funds"), provided that investments in Affiliated Money
Market Funds do not exceed 25% of the total assets of the Investing Fund. AIM
will receive advisory fees from the Affiliated Money Market Fund to the extent
an Investing Fund invests uninvested cash in such Affiliated Money Market Fund.
If the Board approves AIM's use of the exemptive order for Company, AIM intends
to waive a portion of the advisory fees payable by each Investing Fund in an
amount equal to 25% of the advisory fee AIM receives from the Affiliated Money
Market Fund as a result of such Investing Fund's investment of uninvested cash
in such Affiliated Money Market Fund.
The primary differences between the current advisory agreement with INVESCO
and the proposed advisory agreement with AIM that the Board approved are to:
- replace INVESCO with AIM as the investment advisor for your Fund;
- move certain administrative services to an administrative services
agreement with AIM;
- expand provisions regarding broker-dealer relationships that are set
forth in the current advisory agreement to make them consistent with
similar provisions in other AIM advisory agreements;
- add provisions relating to certain functions to be performed by AIM in
connection with your Fund's securities lending program;
- change certain obligations regarding payment of expenses of your Fund;
- revise non-exclusivity provisions that are set forth in the current
advisory agreement;
- amend delegation provisions that are set forth in the current advisory
agreement;
- add to the limitation of liability provisions that are set forth in the
current advisory agreement to, among other things, specifically state the
limitation of liability of Company's shareholders; and
- change the governing state law set forth in the current advisory
agreement.
Although certain terms and provisions in the current advisory agreement
with INVESCO and the proposed advisory agreement with AIM are described slightly
differently, there are few substantive differences between these agreements. The
substantive differences are discussed below.
ADMINISTRATIVE SERVICES
For your Fund, the Board, in approving the proposed advisory agreement with
AIM, has approved removing the provision of certain administrative services that
are covered under the current advisory agreement with INVESCO, and consolidating
those administrative services with your Fund's accounting and recordkeeping
services in a new Master Administrative Services Agreement with AIM. The primary
reason for this change is to make your Fund's agreements consistent with similar
agreements for the AIM Funds. If shareholders approve the proposed advisory
agreement, your Fund will continue to receive substantially the same accounting
and administrative services it currently receives and at the same costs pursuant
to the new Master Administrative Services Agreement. As a result, there would be
no loss of services nor would there be
43
any increase in costs borne by your Fund as a result of the transfer of
administrative duties from the advisory agreement to the Master Administrative
Services Agreement.
BROKER-DEALER RELATIONSHIPS AND AFFILIATED BROKERAGE
The current advisory agreement requires INVESCO, when selecting brokers or
dealers, to first obtain the most favorable execution and price for your Fund;
after fulfilling this primary requirement INVESCO may consider, as secondary
factors whether such firms provide statistical research and other information to
INVESCO. The proposed advisory agreement specifies that AIM's primary
consideration in effecting a security transaction will be to obtain the best
execution. In selecting broker-dealers to execute particular transactions, AIM
will consider the best net price available, the reliability, integrity and
financial condition of the broker-dealer, the size of and difficulty in
executing the order and the value of the expected contribution of the
broker-dealer to the investment performance of Company's portfolio funds on a
continuing basis. Accordingly, the price to your Fund in any transaction may be
less favorable than that available from another broker-dealer if the difference
is reasonably justified by other aspects of the fund execution services offered
by the broker-dealer. The broker-dealer relationship provisions of the current
advisory agreement with INVESCO for your Fund do not specify these factors.
Although AIM does not currently execute trades through brokers or dealers
that are affiliated with AIM, the proposed advisory agreement includes a new
provision that would permit such trades, subject to compliance with applicable
federal securities laws, rules, interpretations and exemptions.
SECURITIES LENDING
If your Fund engages in securities lending, AIM will provide it with
investment advisory services and related administrative services. The proposed
advisory agreement includes a new provision that specifies the administrative
services to be rendered by AIM if your Fund engages in securities lending
activities, as well as the compensation AIM may receive for such administrative
services. Your Fund and its shareholders may benefit from engaging in securities
lending because securities lending can generate additional income for your Fund
in the form of the fee that the third party borrower pays to your Fund for the
use of your Fund's securities. Administrative services to be provided include:
(a) overseeing participation in the securities lending program to ensure
compliance with all applicable regulatory and investment guidelines; (b)
assisting the securities lending agent or principal (the "agent") in determining
which specific securities are available for loans; (c) monitoring the agent to
ensure that securities loans are effected in accordance with AIM's instructions
and with procedures adopted by the Board; (d) preparing appropriate periodic
reports for, and seeking appropriate approvals from, the Board with respect to
securities lending activities; (e) responding to agent inquiries; and (f)
performing such other duties as may be necessary.
In accordance with an exemptive order issued by the SEC, before your Fund
may participate in a securities lending program, the Board must approve such
participation. In addition, the Board must evaluate the securities lending
arrangements annually, and must determine that it is in the best interests of
the shareholders of your Fund to invest in AIM-advised money market funds any
cash collateral your Fund receives as security for the borrower's obligation to
return the loaned securities. If your Fund invests the cash collateral in
AIM-advised money market funds, AIM will receive additional advisory fees from
these money market funds, because the invested cash collateral will increase the
assets of these funds and AIM receives advisory fees based upon the assets of
these funds.
AIM does not receive any additional compensation for advisory services
rendered in connection with securities lending activities. As compensation for
the related administrative services AIM will provide, your Fund will pay AIM a
fee equal to 25% of the net monthly interest or fee income retained or paid to
your Fund from such activities. AIM intends to waive this fee, and has agreed to
seek Board approval prior to its receipt of all or a portion of such fee.
44
PAYMENT OF EXPENSES AND RESTRICTIONS ON FEES RECEIVED
Under the current advisory agreement with INVESCO, INVESCO has the
obligation to reimburse your Fund for any salaries paid by your Fund to
officers, non-independent directors and employees of your Fund. Your Fund does
not currently pay any such salaries. Such provision is not included in the
proposed advisory agreement with AIM.
The current advisory agreement provides that if annual fees exceed the most
restrictive state-imposed annual expense limitation, INVESCO is required to
reimburse any such excess to your Fund. Such state-imposed limitations are no
longer applicable because the National Securities Market Improvements Act of
1996 (NSMIA) preempted state laws under which mutual funds such as your Fund
previously were regulated. Accordingly, under the proposed advisory agreement,
such annual expense limitation has been removed. Removing this state-imposed
annual expense limitation will not result in an increase in fees paid by your
Fund.
NON-EXCLUSIVITY PROVISIONS
The current advisory agreement with INVESCO provides that the services
furnished by INVESCO are not deemed to be exclusive and that INVESCO shall be
entitled to furnish similar services to others, including other investment
companies with similar objectives, and that INVESCO may aggregate orders for its
other customers together with any securities of the same type to be sold or
purchased for your Fund in order to obtain best execution and lower brokerage
commissions. In such event, INVESCO must allocate the securities purchased or
sold and the expenses incurred in the transaction in a manner it considers most
equitable.
AIM has proposed and the Board has agreed that the non-exclusivity
provisions in the proposed advisory agreement with AIM should be divided into
two separate provisions: one dealing with services provided by AIM to other
investment accounts and the other dealing with employees of AIM. Under the new
provisions, AIM will act as investment manager or advisor to fiduciary and other
managed accounts and to other investment companies and accounts, including
off-shore entities or accounts. The proposed advisory agreement states that
whenever your Fund and one or more other investment companies or accounts
advised by AIM have moneys available for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to your Fund and such other companies and accounts. Such allocation
procedure may adversely affect the size of the positions obtainable and the
prices realized by your Fund. The non-exclusivity provisions of the proposed
advisory agreement also explicitly recognize that officers and directors of AIM
may serve as officers or directors of Company, and that officers and directors
of Company may serve as officers or directors of AIM to the extent permitted by
law; and that officers and directors of AIM do not owe an exclusive duty to
Company. As described above, unlike the current advisory agreement, the proposed
advisory agreement does not require AIM to reimburse Company for any salaries
paid by Company to officers, directors and full-time employees of Company who
are also officers, directors or employees of AIM or its affiliates. Your Fund
does not currently pay any such salaries.
DELEGATION
The current advisory agreement provides that INVESCO may, in compliance
with applicable law and with the prior written approval of your Fund, make use
of affiliated companies and their employees in connection with rendering of the
services required of INVESCO. INVESCO must supervise all such services and
remain fully responsible for the services provided.
The proposed advisory agreement expands the extent to which AIM can
delegate its rights, duties and obligations by expressly providing that AIM may
delegate any or all of its rights, duties or obligations under the agreement to
one or more sub-advisors rather than solely certain specified advisory services.
The proposed advisory agreement also provides that AIM may replace sub-advisors
from time to time, in accordance with applicable federal securities laws, rules
and regulations in effect or interpreted from time to time by the SEC or with
exemptive orders or other similar relief. Any such delegation shall require
approval by the applicable Board and the shareholders unless, in accordance with
applicable federal securities laws, rules, interpretations
45
and exemptions, AIM is not required to seek shareholder approval of the
appointment of a sub-advisor. AIM currently intends to appoint INVESCO
Institutional as the sub-advisor to your Fund if the shareholders approve the
proposed sub-advisory agreement described in Proposal 4.
The practical impact of this provision is that the officers and directors
of AIM will not devote their full time to providing services to Company, and
that they are permitted to engage in and devote time and attention to other
businesses or to render services of whatever kind to other entities, including
other AIM Funds.
LIMITATION OF LIABILITY OF AIM, COMPANY AND SHAREHOLDERS
As described above under the descriptions of the terms of the current
advisory agreement and the proposed advisory agreement, respectively, both
agreements provide limitation of liability for the advisor. The limitation of
liability provisions of the 1940 Act also apply to both INVESCO and AIM in their
capacity as advisor. In addition, the proposed advisory agreement states that no
series of Company shall be liable for the obligations of other series of Company
and the liability of AIM to one series of Company shall not automatically render
AIM liable to any other series of Company. Consistent with applicable law, the
proposed advisory agreement would also include a provision stating that AIM's
obligations under the agreement are not binding on any shareholders of Company
individually and that shareholders are entitled to the same limitation on
personal liability as shareholders of private corporations for profit. The
primary reason for this change is to make your Fund's agreement consistent with
similar agreements for the AIM Funds.
STATE LAW GOVERNING THE AGREEMENT
Questions of state law under the current advisory agreement with INVESCO
are governed by the laws of Colorado. Under the proposed advisory agreement with
AIM, Texas law would apply. The Board determined that, because the services
under the proposed advisory agreement with AIM will primarily be provided in
Texas, it was more appropriate to apply Texas law to the proposed advisory
agreement.
FACTORS THE DIRECTORS CONSIDERED IN APPROVING THE ADVISORY AGREEMENT
At the request of AIM, the Board discussed the approval of the proposed
advisory agreement at an in-person meeting held on December 9-10, 2003. The
independent directors also discussed the approval of the proposed advisory
agreement with independent counsel prior to that meeting. In evaluating the
proposed advisory agreement, the Board requested and received information from
AIM to assist in its deliberations.
The Board considered the following factors in determining reasonableness
and fairness of the proposed changes between the current advisory agreement with
INVESCO and the proposed advisory agreement with AIM:
- The qualifications of AIM to provide investment advisory services. The
Board reviewed the credentials and experience of the officers and
employees of AIM who will provide investment advisory services to your
Fund, and noted that the persons providing portfolio management services
to your Fund would not change if Proposals 3 and 4 are approved by
shareholders. In reviewing the qualifications of AIM to provide
investment advisory services, the Board reviewed the qualifications of
AIM's investment personnel and considered such issues as AIM's portfolio
and product review process, AIM's legal and compliance function, AIM's
use of technology, AIM's portfolio administration function, the quality
of AIM's investment research and AIM's equity trading operation. Based on
its review of these and other factors, the Board concluded that AIM was
qualified to provide investment advisory services to your Fund.
- The range of advisory services provided by AIM. The Board reviewed the
services to be provided by AIM under the proposed advisory agreement, and
noted that no material changes in the level or type of services provided
under the current advisory agreement with INVESCO would occur if the
proposed advisory agreement is approved by the shareholders, other than
the provision by AIM of certain administrative services if your Fund
engages in securities lending. Based on its review and comparison of the
terms of the proposed advisory agreement with AIM and the current
advisory agreement with
46
INVESCO, the Board concluded that the range of services to be provided by
AIM under the proposed advisory agreement, including the provision by AIM
of certain administrative services if your Fund engages in securities
lending, was appropriate.
- Qualifications of AIM to provide a range of management and administrative
services. The Board reviewed the general nature of the non-investment
advisory services performed by AIM and its affiliates, such as
administrative, transfer agency and distribution services, and the fees
received by AIM and its affiliates for performing such services. In
addition to reviewing such services, the Board also considered the
organizational structure employed by AIM and its affiliates to provide
those services. The Board reviewed the proposed elimination from the
proposed advisory agreement of the provision of administrative services
to your Fund. The Board also reviewed the proposed form of Master
Administrative Services Agreement, noted that the overall services to be
provided under the existing arrangements and under the proposed Master
Administrative Services Agreements are the same, and concluded that the
overall accounting and administrative services to be provided by AIM
would not change under the combination of the proposed advisory agreement
and the Master Administrative Services Agreement. Based on its review of
these and other factors, the Board concluded that AIM and its affiliates
were qualified to provide non-investment advisory services to your Fund,
including administrative, transfer agency and distribution services.
- The performance record of your Fund. The Board reviewed your Fund's
performance record and determined that AIM has developed the expertise
and resources for managing funds with an investment objective and
strategies similar to those of your Fund and is able, therefore, to
provide advisory and administrative services to your Fund. Although
INVESCO served as your Fund's investment advisor during the period over
which your Fund's performance record was based, the Board compared your
Fund's performance record to the performance records of funds advised by
AIM with an investment objective and strategies similar to those of your
Fund in reaching the conclusion that AIM is able to provide advisory and
administrative services to your Fund.
- Advisory fees and expenses. The Board examined the expense ratio and the
level of advisory fees for your Fund under the current advisory agreement
and compared them with the advisory fees expected to be incurred under
the proposed advisory agreement. The Board concluded that your Fund's
projected expense ratio and advisory fees under the proposed advisory
agreement were fair and reasonable in comparison with those of other
similar funds (including similar funds advised by AIM) and in light of
the investment management services to be provided by AIM under the
proposed advisory agreement. The advisory fee rates that are being
proposed under the proposed advisory agreement, which are set forth on
Exhibit J, are the same as the advisory fee rates paid to INVESCO under
the current advisory agreement. The only changes in fees are the removal
of the reimbursement obligation related to services provided to both your
Fund and AIM by officers and directors, which is not currently
applicable, and the provisions that permit AIM's receipt of fees for
providing administrative services in connection with securities lending
activities. Such fees would be paid only to the extent that your Fund
engages in securities lending. The Board noted that AIM intends to waive
its right to receive any fees under the proposed investment advisory
agreement for the administrative services it provides in connection with
securities lending activities. The Board also noted that AIM has agreed
to seek the Board's approval prior to its receipt of all or a portion of
such fees.
- The profitability of AIM. The Board reviewed information concerning the
profitability of AIM's (and its affiliates') investment advisory and
other activities and its financial condition. The Board noted that,
except as described above, no changes to the advisory fees were being
proposed, other than to permit AIM's receipt of fees for providing
services in connection with securities lending, and further noted that
AIM intends to waive its right to receive any such fees and has agreed to
seek the Board's approval prior to its receipt of all or a portion of
such fees. The Board also noted that, in accordance with an exemptive
order issued by the SEC, before your Fund may participate in a securities
lending program, the Board must approve such participation. In addition,
the Board must evaluate the securities lending arrangements annually and
determine that it is in the best interests of the shareholders of your
Fund to invest in AIM-advised money market funds any cash collateral your
Fund receives as security for the
47
xxxxxxxx's obligation to return the loaned securities. If your Fund
invests the cash collateral in AIM-advised money market funds, AIM will
receive additional advisory fees from these money market funds, because
the invested cash collateral will increase the assets of these funds and
AIM receives advisory fees based upon the assets of these funds. The
Board noted that the cash collateral relates to assets of your Fund that
have already been invested, and the investment of the cash collateral is
intended to benefit your Fund by providing it with additional income. The
Board also noted that an investment of the cash collateral in an
AIM-advised money market fund would have a positive effect on the
profitability of AIM. Based on its review of the profitability of AIM's
and its affiliates' investment advisory and other activities and its
financial condition, the Board concluded that the compensation to be paid
by your Fund to AIM under the proposed advisory agreement was not
excessive.
- The terms of the proposed advisory agreement. The Board reviewed the
terms of the proposed advisory agreement, including changes being made to
clarify or expand non-exclusivity, delegation and liability provisions,
to separate administrative services from advisory services and to have
AIM assist your Fund if it engages in securities lending. The Board
determined that these changes reflect the current environment in which
your Fund operates, and that AIM should have the flexibility to operate
in that environment.
After considering the above factors, the Board concluded that it is in the
best interests of your Fund and its shareholders to approve the proposed
advisory agreement between Company and AIM for your Fund.
The Board reached this conclusion after careful discussion and analysis.
The Board believes that it has carefully and thoroughly examined the pertinent
issues and alternatives. In recommending that you approve the proposed advisory
agreement, the independent directors have taken the action which they believe to
be in your best interests. In so doing, they were advised by independent
counsel, retained by the independent directors and paid for by Company, as to
the nature of the matters to be considered and the standards to be used in
reaching their decision.
If approved, the proposed advisory agreement is expected to become
effective on or about April 30, 2004, and will expire, unless renewed, on or
before June 30, 2005. If shareholders of your Fund do not approve Proposal 3,
the current advisory agreement with INVESCO will continue in effect for your
Fund.
THE BOARD'S RECOMMENDATION ON PROPOSAL 3
The Board, including the independent directors, unanimously recommends that
you vote "FOR" this Proposal.
PROPOSAL 4 --
APPROVAL OF NEW SUB-ADVISORY AGREEMENT
BACKGROUND
INVESCO currently serves as the investment advisor to your Fund. AMVESCAP
has recommended restructuring the advisory and administrative servicing
arrangements so that AIM is the advisor and administrator for all INVESCO Funds
and AIM Funds. Your Board has approved a proposed advisory agreement under which
AIM will serve as the investment advisor for your Fund, and a proposed
sub-advisory agreement under which INVESCO Institutional, an affiliate of
INVESCO, will serve as sub-advisor. The portfolio management team for your Fund
will not change as a result of this restructuring.
You are being asked to approve Proposal 4 so that, in the event that
Proposal 1 is not approved, your Fund will still be able to benefit from the
proposed sub-advisory agreement between AIM and INVESCO Institutional.
The Board recommends that you approve the proposed sub-advisory agreement
between AIM and INVESCO Institutional for your Fund. The Board is asking you to
vote on this proposed sub-advisory
48
agreement because the proposed sub-advisory agreement for your Fund may only be
entered into with shareholder approval. The form of the proposed Master
Intergroup Sub-Advisory Contract for Mutual Funds between AIM and INVESCO
Institutional for your Fund is at Appendix VI.
At an in-person meeting of the Board held on December 9-10, 2003, the
Board, including a majority of the independent directors, voted to recommend
that shareholders approve a proposal to adopt the proposed sub-advisory
agreement for your Fund.
THE PROPOSED SUB-ADVISOR FOR YOUR FUND
INVESCO Institutional is an indirect wholly owned subsidiary of AMVESCAP. A
list of the names, addresses and principal occupations of the principal
executive officer and directors of INVESCO Institutional (N.A.), Inc. all of
whose business address is 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000.
POSITION WITH
NAME AND ADDRESS INVESCO INSTITUTIONAL (N.A.), INC. PRINCIPAL OCCUPATION
---------------- ---------------------------------- --------------------
Xxxx X. Xxxxxx.......... Director, Chairman, President and Chief Executive Officer,
Chief Executive Officer AMVESCAP PLC -- INVESCO
Division
Xxxxx X. Xxxxxxx........ Director and Chief Financial Chief Financial Officer,
Officer INVESCO Division
POSITIONS WITH INVESCO INSTITUTIONAL HELD BY COMPANY'S DIRECTORS OR EXECUTIVE
OFFICERS
None of the directors or executive officers of Company also are directors
and/or officers of INVESCO Institutional.
TERMS OF THE PROPOSED SUB-ADVISORY AGREEMENT
Under the proposed sub-advisory agreement between AIM and INVESCO
Institutional, INVESCO Institutional will provide general investment advice and
portfolio management to your Fund and, subject to the supervision of the
directors of Company and AIM and in conformance with the stated policies of your
Fund, INVESCO Institutional will manage the investment operations of your Fund.
INVESCO Institutional will not only make investment decisions for your Fund, but
will also place the purchase and sale orders for the portfolio transactions of
your Fund. INVESCO Institutional may purchase and sell portfolio securities from
and to brokers and dealers who sell shares of your Fund or provide your Fund,
AIM's other clients or INVESCO Institutional's other clients with research,
analysis, advice and similar services. INVESCO Institutional may pay to brokers
and dealers, in return for such research and analysis, a higher commission or
spread than may be charged by other brokers and dealers, subject to INVESCO
Institutional determining in good faith that such commission or spread is
reasonable in terms either of the particular transaction or of the overall
responsibility of AIM and INVESCO Institutional to your Fund and their other
clients and that the total commissions or spreads paid by each fund will be
reasonable in relation to the benefits to the fund over the long term.
Specifically, INVESCO Institutional will be required to perform the
following services under the proposed sub-advisory agreement:
- To provide a continuous investment program for your Fund, including
investment research and management, with respect to all of your Fund's
assets in conformity with (i) Company's Articles of Incorporation, bylaws
and registration statement, and (ii) the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations;
- To determine what securities and other investments are to be purchased or
sold for your Fund and the brokers and dealers through whom trades will
be executed;
49
- Whenever INVESCO Institutional simultaneously places orders to purchase
or sell the same security on behalf of your Fund and one or more accounts
advised by INVESCO Institutional, to allocate as to price and amount
among all such accounts in a manner believed to be equitable to each
account; and
- To maintain all books and records with respect to the securities
transactions of your Fund in compliance with the requirements of the 1940
Act and to furnish the Board and AIM with periodic and special reports as
the Board or AIM reasonably may request.
The proposed sub-advisory agreement will continue from year to year for
your Fund only if such continuance is specifically approved at least annually by
(i) the Board or the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of your Fund, and (ii) the vote of a majority of
independent directors cast at a meeting called for such purpose. The proposed
sub-advisory agreement is terminable on 60 days' written notice by either party
thereto, by the Board, or by a vote of a majority of the outstanding voting
securities of your Fund, and will terminate automatically if assigned.
AIM proposes to pay INVESCO Institutional as full compensation for all
investment advisory services rendered to your Fund, a sub-advisory fee. Such fee
shall be computed daily and paid monthly, at the rate of 40% of AIM's
compensation on the sub-advised assets per year, on or before the last day of
the next succeeding calendar month.
ADVISORY FEES CHARGED BY INVESCO INSTITUTIONAL FOR SIMILAR TYPES OF ACCOUNTS FOR
WHICH IT SERVES AS ADVISOR
The following table provides information with respect to the annual
advisory fee rates paid to INVESCO Institutional (N.A.), Inc. by certain types
of accounts that have a similar investment objective as your Fund.
INVESCO National Asset
Management Division
("NAM").................... NAM Division's basic annual fee is as follows:
For Core Multiple Attribute Equity, Growth
Multiple Attribute Equity, and Premier Growth
Multiple Attribute Equity accounts, .75 of 1%
of the market value of assets up to $10
million, .50 of 1% of the market value of
assets on the next $40 million, .40 of 1% of
the market value of assets on the next $50
million, and .25 of 1% of the market value of
assets above $100 million. For Mid Cap Multiple
Attribute Equity and Growth Mid Cap Multiple
Attribute Equity accounts, .85 of 1% of the
market value of assets up to $10 million, .60
of 1% of the market value of assets on the next
$40 million, .50 of 1% of the market value of
assets on the next $50 million, and .35 of 1%
of the market value of assets above $100
million. For balances accounts, .65 of 1% of
the market value of assets up to $10 million,
.40 of 1% of the market value of assets on the
next $40 million, .30 of 1% of the market value
of assets on the next $50 million, and .20 of
1% of the market value of assets above $100
million. The NAM Division reserves the right to
negotiate fees from the above schedules.
The NAM Groups serve as an advisor or
sub-advisor to mutual funds. The fees for such
services are negotiated separately.
FACTORS THE DIRECTORS CONSIDERED IN APPROVING THE PROPOSED SUB-ADVISORY
AGREEMENT
At the request of AIM and INVESCO Institutional, the Board discussed the
approval of the proposed sub-advisory agreement at an in-person meeting held on
December 9-10, 2003. The independent directors also discussed the approval of
the proposed sub-advisory agreement with independent counsel prior to that
meeting. In evaluating the proposed sub-advisory agreement, the Board requested
and received information from AIM to assist in its deliberations.
50
The Board considered the following factors in determining the
reasonableness and fairness of the proposed sub-advisory agreement between AIM
and INVESCO Institutional for your Fund:
- The range of sub-advisory services provided by INVESCO
Institutional. The Board reviewed the services to be provided by INVESCO
Institutional under the proposed sub-advisory agreement, and noted that,
if the proposed sub-advisory agreement is approved by shareholders, the
level and type of investment advisory services under the proposed
sub-advisory agreement will be comparable to those currently provided by
INVESCO under Company's current advisory agreement with INVESCO. Based on
its review and comparison of the terms of the proposed sub-advisory
agreement with INVESCO Institutional and the current advisory agreement
with INVESCO, the Board concluded that the range of services to be
provided by INVESCO Institutional under the proposed sub-advisory
agreement was appropriate.
- The fees payable to INVESCO Institutional for its services. The Board
noted that if the proposed sub-advisory agreement is approved, INVESCO
Institutional will receive compensation based on that portion of the
assets of your Fund that it manages (the sub-advised assets). In
addition, the fees paid would be a percentage of the advisory fees that
AIM receives on the sub-advised assets. The Board noted that these fees
had been agreed to by AIM and INVESCO Institutional, as well as by
AMVESCAP, the indirect parent of AIM and INVESCO Institutional. The Board
also noted that the proposed changes to the compensation to INVESCO
Institutional would have no effect on your Fund, since the fees are
payable by AIM. The Board concluded that the sub-advisory fees under the
proposed sub-advisory agreement, which are set forth on Exhibit L, were
fair and reasonable in light of the sub-advisory services to be provided
by INVESCO Institutional under the proposed sub-advisory agreement.
- The performance record of your Fund. The Board reviewed the performance
record of your Fund and noted that the same portfolio management team
will be providing investment advisory services to your Fund under the
proposed sub-advisory agreement. The Board determined that such portfolio
management team had provided satisfactory services with respect to your
Fund, after considering performance information that it received during
the past year from INVESCO.
- The profitability of INVESCO Institutional. The Board considered
information concerning the profitability of INVESCO Institutional's (and
its affiliates') investment advisory and other activities and its
financial condition. The Board noted that INVESCO Institutional would
receive an annual fee equal to a percentage of AIM's compensation on the
sub-advised assets. The Board noted that the proposed sub-advisory fees
are less than the advisory fees currently received by INVESCO under the
current advisory agreement, but that INVESCO Institutional assured the
Board that such reduction would not affect the nature or quality of the
services provided by it to your Fund. Based on its review of the
profitability of INVESCO Institutional's and its affiliates' investment
advisory and other activities and its financial condition, the Board
concluded that the compensation to be paid by your Fund to INVESCO
Institutional under the proposed sub-advisory agreement was not
excessive.
- The terms of the proposed agreement. The Board reviewed the terms of the
proposed agreement. The Board determined that this new agreement reflects
the current environment in which your Fund operates, and that INVESCO
Institutional should have the flexibility to operate in that environment.
After considering the above factors, the Board concluded that it is in the
best interests of your Fund and its shareholders to approve the proposed
sub-advisory agreement between AIM and INVESCO Institutional for your Fund.
The Board reached this conclusion after careful discussion and analysis.
The Board believes that it has carefully and thoroughly examined the pertinent
issues and alternatives. In recommending that you approve the proposed
sub-advisory agreement, the independent directors have taken the action which
they believe to be in your best interests. In so doing, they were advised by
independent counsel, retained by the independent directors and paid for by
Company, as to the nature of the matters to be considered and the standards to
be used in reaching their decision.
51
If approved, the proposed sub-advisory agreement is expected to become
effective on or about April 30, 2004, and will expire, unless renewed, on or
before June 30, 2005. If shareholders of your Fund do not approve both Proposals
3 and 4, the current advisory agreement with INVESCO will continue in effect for
your Fund and AIM and INVESCO Institutional will not enter into the proposed
sub-advisory agreement for your Fund.
THE BOARD'S RECOMMENDATION ON PROPOSAL 4
The Board, including the independent directors, unanimously recommends that
you vote "FOR" this Proposal.
PROPOSAL 5 --
APPROVAL OF THE PLAN TO REDOMESTICATE EACH SERIES PORTFOLIO OF COMPANY
AS A NEW SERIES PORTFOLIO OF
AIM VARIABLE INSURANCE FUNDS
BACKGROUND
Company currently is organized as a Maryland corporation. AMVESCAP has
identified each series portfolio of Company as appropriate to be redomesticated
as a new series portfolio of AIM Variable Insurance Funds, an existing open-end
management investment company organized as a statutory trust under the Delaware
Statutory Trust Act (the "Trust").
If Proposal 1 is approved by the shareholders of your Fund, your Fund will
be combined with Buying Fund and will not be redomesticated as a new series
portfolio of the Trust. You are being asked to approve Proposal 5 so that, in
the event that Proposal 1 is not approved, your Fund will still be able to
benefit from redomesticating as a new series portfolio of the Trust.
The Board has approved the Plan, which provides for a series of
transactions to convert your Fund and each other series portfolio of Company
(each, a "Current Fund") to a corresponding series (a "New Fund") of the Trust.
Under the Plan, each Current Fund will transfer all its assets to a
corresponding New Fund in exchange solely for voting shares of beneficial
interest in the New Fund and the New Fund's assumption of all the Current Fund's
liabilities (collectively, the "Redomestication"). A form of the Plan relating
to the proposed Redomestication is set forth in Appendix VII.
Approval of the Plan requires the affirmative vote of a majority of the
issued and outstanding shares of Company. The Board is soliciting the proxies of
the shareholders of your Fund to vote on the Plan with this Proxy
Statement/Prospectus. The Board is soliciting the proxies of the shareholders of
Company's other series portfolios to vote on the Plan with a separate proxy
statement.
The Redomestication is being proposed primarily to provide Company with
greater flexibility in conducting its business operations. The operations of
each New Fund following the Redomestication will be substantially similar to
those of its predecessor Current Fund. As described below, the Trust's
Declaration of Trust differs from Company's Articles of Incorporation in certain
respects that are expected to improve Company's and each Current Fund's
operations. The Trust, like Company, operates as an open-end management
investment company registered with the SEC under the 1940 Act. If Proposal 5 is
not approved by Company's shareholders, Company will continue to operate as a
Maryland corporation.
REASONS FOR THE PROPOSED REDOMESTICATION
The Redomestication is being proposed because, as noted above, INVESCO and
the Board believe that the Delaware statutory trust organizational form offers a
number of advantages over the Maryland corporate organizational form. As a
result of these advantages, the Delaware statutory trust organizational form has
been increasingly used by mutual funds, including the majority of the AIM Funds.
The Delaware statutory trust organizational form offers greater flexibility
than the Maryland corporate form. A Maryland corporation is governed by the
detailed requirements imposed by Maryland corporate law and by the terms of its
Articles of Incorporation. A Delaware statutory trust is subject to fewer
statutory
52
requirements. The Trust is governed primarily by the terms of its Declaration of
Trust. In particular, the Trust has greater flexibility to conduct business
without the necessity of engaging in expensive proxy solicitations to
shareholders. For example, under Maryland corporate law, amendments to Company's
Articles of Incorporation would typically require shareholder approval. Under
Delaware law, unless the Declaration of Trust of a Delaware statutory trust
provides otherwise, amendments to it may be made without first obtaining
shareholder approval. In addition, unlike Maryland corporate law, which
restricts the delegation of a board of directors' functions, Delaware law
permits the board of trustees of a Delaware statutory trust to delegate certain
of its responsibilities. For example, the board of trustees of a Delaware
statutory trust may delegate the responsibility of declaring dividends to duly
empowered committees of the board or to appropriate officers. Finally, Delaware
law permits the trustees to adapt a Delaware statutory trust to future
contingencies. For example, the trustees may, without a shareholder vote, change
a Delaware statutory trust's domicile or organizational form. In contrast, under
Maryland corporate law, a company's board of directors would be required to
obtain shareholder approval prior to changing domicile or organizational form.
The Redomestication will also have certain other effects on Company, its
shareholders and management, which are described below under the heading "The
Trust Compared to Company."
WHAT THE PROPOSED REDOMESTICATION WILL INVOLVE
To accomplish the Redomestication, each New Fund has been established as a
series portfolio of the Trust. On the closing date, each Current Fund will
transfer all of its assets to the corresponding classes of the corresponding New
Fund in exchange solely for a number of full and fractional classes of shares of
the New Fund equal to the number of full and fractional shares of common stock
of the corresponding classes of the Current Fund then outstanding and the New
Fund's assumption of the Current Fund's liabilities. Immediately thereafter,
each Current Fund will distribute those New Fund shares to its shareholders in
complete liquidation of such Current Fund. Upon completion of the
Redomestication, each shareholder of each Current Fund will be the owner of full
and fractional shares of the corresponding New Fund equal in number and
aggregate net asset value to the shares he or she held in the Current Fund. As
soon as practicable after the consummation of the Redomestication, each Current
Fund will be terminated and Company will be dissolved as a Maryland corporation.
The obligations of Company and the Trust under the Plan are subject to
various conditions stated therein. To provide against unforeseen events, the
Plan may be terminated or amended at any time prior to the closing of the
Redomestication by action of the Board, notwithstanding the approval of the Plan
by the shareholders of any Current Fund. However, no amendments may be made that
would materially adversely affect the interests of shareholders of any Current
Fund. Company and the Trust may at any time waive compliance with any condition
contained in the Plan, provided that the waiver does not materially adversely
affect the interests of shareholders of any Current Fund.
The Plan authorizes Company to acquire one share of each class of each New
Fund and, as the sole shareholder of each New Fund prior to the Redomestication,
to do each of the following:
- Approve with respect to each New Fund a new investment advisory agreement
with AIM with an effective date of the closing date of the
Redomestication that will be substantially identical to that described in
Proposal 3. Information on the new advisory agreement, including a
description of the differences between it and Company's current advisory
agreement, is set forth above under Proposal 3. If Proposal 3 is not
approved by shareholders of a Current Fund, Company will approve for the
corresponding New Fund an investment advisory agreement with INVESCO that
is substantially identical to such Current Fund's existing investment
advisory agreement with INVESCO.
- Approve with respect to each New Fund a new sub-advisory agreement
between AIM and INVESCO with an effective date of the closing date of the
Redomestication that will be substantially identical to that described in
Proposal 4. Information on the new sub-advisory agreement is set forth
above under Proposal 4. If Proposal 3 is not approved by shareholders of
a Current Fund, Company will not approve a sub-advisory agreement between
AIM and INVESCO for the corresponding New Fund.
53
- Assuming that Proposal 3 is approved by shareholders, approve with
respect to each New Fund a new administrative services agreement with AIM
with an effective date of the closing date of the Redomestication that
will be substantially identical to the new administrative services
agreement with AIM that will be entered into by Company if shareholders
approve Proposal 3. If Proposal 3 is not approved by shareholders of a
Current Fund, Company will approve for the corresponding New Fund an
administrative services agreement with AIM that is substantially
identical to such Current Fund's existing administrative services
agreement with INVESCO.
- Approve with respect to each New Fund a distribution agreement with AIM
Distributors. The proposed distribution agreement will provide for
substantially identical distribution services as currently provided to
each corresponding Current Fund by INVESCO Distributors, Inc.
- Approve a distribution plan pursuant to Rule 12b-1 under the 1940 Act
with respect to the Series II Shares of each New Fund that will be
substantially identical to the corresponding Current Fund's distribution
plan for the Series II Shares.
- Approve with respect to each New Fund a custodian agreement with State
Street Bank and Trust Company and a transfer agency and servicing
agreement with AIM Investment Services, Inc., each of which currently
provides such services to the corresponding Current Fund, and a multiple
class plan pursuant to Rule 18f-3 of the 1940 Act which will be
substantially identical to the multiple class plan that has been approved
by the Board for the corresponding Current Fund and which is expected to
become effective prior to the consummation of the Redomestication.
- Ratify the selection of PricewaterhouseCoopers LLP, the accountants for
each Current Fund, as the independent public accountants for each New
Fund. The financial statements should be read in conjunction with the
disclosures, included in this Proxy Statement/Prospectus under the
heading "Certain Civil Proceedings and Lawsuits."
- Approve such other agreements and plans as are necessary for each New
Fund's operation as a series of an open-end management investment
company.
The Trust's transfer agent will establish for each shareholder an account
containing the appropriate number of shares of each class of each New Fund. Such
accounts will be identical in all respects to the accounts currently maintained
by Company's transfer agent for each shareholder of the Current Funds. Shares
held in the Current Fund accounts will automatically be designated as shares of
the New Funds. Certificates for Current Fund shares issued before the
Redomestication will represent shares of the corresponding New Fund after the
Redomestication. Shareholders of the New Funds will not have the right to demand
or require the Trust to issue share certificates. Any account options or
privileges on accounts of shareholders under the Current Funds will be
replicated on the New Fund account. No sales charges will be imposed in
connection with the Redomestication.
Assuming your approval of Proposal 5, Company currently contemplates that
the Redomestication will be consummated on or about April 30, 2004.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE REDOMESTICATION
Company and the Trust will receive an opinion of Xxxxxxx Xxxxx Xxxxxxx &
Xxxxxxxxx, LLP to the effect that the Redomestication will qualify as a
"reorganization" within the meaning of Section 368(a) of the Code. Accordingly,
the Current Funds, the New Funds and the shareholders of the New Funds will
recognize no gain or loss for Federal income tax purposes as a result of the
Redomestication. Shareholders of the Current Funds should consult their tax
advisers regarding the effect, if any, of the Redomestication in light of their
individual circumstances and as to state and local consequences, if any, of the
Redomestication.
54
APPRAISAL RIGHTS
Appraisal rights are not available to shareholders. However, shareholders
retain the right to redeem their shares of the Current Funds or the New Funds,
as the case may be, at any time before or after the Redomestication.
THE TRUST COMPARED TO COMPANY
STRUCTURE OF THE TRUST
The Trust has been established under the laws of the State of Delaware by
the filing of a certificate of trust in the office of the Secretary of State of
Delaware. The Trust has established series corresponding to and having identical
designations as the series portfolios of Company. The Trust has also established
classes with respect to each New Fund corresponding to and having identical
designations as the classes of each Current Fund. Each New Fund will have the
same investment objectives, policies, and restrictions as its predecessor
Current Fund. The Trust's fiscal year is the same as that of Company. The New
Funds will not have any operations prior to the Redomestication. Initially,
Company will be the sole shareholder of the New Funds.
As a Delaware statutory trust, the Trust's operations are governed by its
Declaration of Trust and Amended and Restated Bylaws and applicable Delaware law
rather than by Company's Articles of Incorporation and Amended and Restated
Bylaws and applicable Maryland law. Certain differences between the two
domiciles and organizational forms are summarized below. The operations of the
Trust will continue to be subject to the provisions of the 1940 Act and the
rules and regulations thereunder.
TRUSTEES OF THE TRUST
Subject to the provisions of the Declaration of Trust, the business of the
Trust is managed by its trustees, who have all powers necessary or convenient to
carry out their responsibilities. The responsibilities, powers, and fiduciary
duties of the trustees of the Trust are substantially the same as those of the
directors of Company.
SHARES OF THE TRUST
The beneficial interests in the New Funds will be represented by
transferable shares, par value $0.001 per share. Shareholders do not have the
right to demand or require the Trust to issue share certificates. The trustees
have the power under the Declaration of Trust to establish new series and
classes of shares; Company's directors currently have a similar right. The
Declaration of Trust permits the trustees to issue an unlimited number of shares
of each class and series. Company is authorized to issue only the number of
shares specified in the Articles of Incorporation and may issue additional
shares only with Board approval and after payment of a fee to the State of
Maryland on any additional shares authorized.
Your Fund currently has the classes of shares set forth in Exhibit A. The
Trust has established for each New Fund the classes that currently exist for its
predecessor Current Fund. Except as discussed in this Proxy
Statement/Prospectus, shares of each class of each New Fund will have rights,
privileges, and terms substantially similar to those of the corresponding class
of the Current Fund.
For a discussion of certain differences between and among Company's
Articles of Incorporation and Amended and Restated Bylaws and Maryland law and
the Trust's Declaration of Trust and Amended and Restated Bylaws and Delaware
law, see "Rights of Shareholders" in Proposal 1 above. The foregoing discussion
and the discussion under the caption "Rights of Shareholders" in Proposal 1
above is only a summary of certain differences and is not a complete description
of all the differences. Shareholders should refer to the provisions of the
governing documents of Company and Trust and state law directly for a more
thorough comparison. Copies of the Articles of Incorporation and Amended and
Restated Bylaws of Company and of the Declaration of Trust and the Trust's
Amended and Restated Bylaws are available to shareholders without charge upon
written request to Company.
55
THE BOARD'S RECOMMENDATION ON PROPOSAL 5
Your Board, including the independent directors, unanimously recommends
that you vote "FOR" this Proposal.
INFORMATION ABOUT THE SPECIAL MEETING AND VOTING
PROXY STATEMENT/PROSPECTUS
We are sending you this Proxy Statement/Prospectus and the enclosed proxy
card because the Board is soliciting your proxy to vote at the Special Meeting
and at any adjournments of the Special Meeting. This Proxy Statement/Prospectus
gives you information about the business to be conducted at the Special Meeting.
However, you do not need to attend the Special Meeting to vote your shares.
Instead, you may simply complete, sign and return the enclosed proxy card or
vote by telephone or through a website established for that purpose.
Company intends to mail this Proxy Statement/Prospectus, the enclosed
Notice of Special Meeting of Shareholders and the enclosed proxy card on or
about February 26, 2004 to all shareholders entitled to vote. Shareholders of
record as of the close of business on January 9, 2004 (the "Record Date") are
entitled to vote at the Special Meeting. The number of shares outstanding of
each class of shares of your Fund on the Record Date can be found at Exhibit D.
Each share is entitled to one vote for each full share held, and a
fractional vote for a fractional share held.
TIME AND PLACE OF SPECIAL MEETING
We are holding the Special Meeting at 00 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000-1173 on April 2, 2004, at 3:00 p.m., Central Time.
VOTING IN PERSON
If you do attend the Special Meeting and wish to vote in person, you must
bring a letter from the insurance company that issued your variable annuity or
variable life contract indicating that you are the beneficial owner of the
shares on the Record Date and authorizing you to vote. Please call Company at
(000) 000-0000 if you plan to attend the Special Meeting.
VOTING BY PROXY
Whether you plan to attend the Special Meeting or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Special Meeting and vote.
If you properly fill in and sign your proxy card and send it to us in time
to vote at the Special Meeting, your "proxy" (the individual named on your proxy
card) will vote your shares as you have directed. If you sign your proxy card
but do not make specific choices, your proxy will vote your shares as
recommended by the Board as follows and in accordance with management's
recommendation on other matters:
- FOR the proposal to approve the Agreement.
- FOR the election of all 16 nominees for director.
- FOR the proposal to approve a new investment advisory agreement with AIM
for your Fund.
- FOR the proposal to approve a new sub-advisory agreement between AIM and
INVESCO Institutional for your Fund.
- FOR the proposal to approve the Plan.
Your proxy will have the authority to vote and act on your behalf at any
adjournment of the Special Meeting.
If you have given voting instructions you may revoke them only through and
in accordance with the procedures of the applicable life insurance company prior
to the date of the Special Meeting. In addition, although merely attending the
Special Meeting will not revoke your proxy, if you are present at the Special
56
Meeting you may withdraw your 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.
QUORUM REQUIREMENT AND ADJOURNMENT
A quorum of shareholders is necessary to hold a valid meeting. A quorum
will exist for Proposals 1, 3 and 4 if shareholders entitled to vote one-third
of the issued and outstanding shares of your Fund on the Record Date are present
at the Special Meeting in person or by proxy. A quorum will exist for Proposals
2 and 5 if shareholders entitled to vote one-third of the issued and outstanding
shares of Company on the Record Date are present at the Special Meeting in
person or by proxy.
Abstentions will count as shares present at the Special Meeting for
purposes of establishing a quorum.
If a quorum is not present at the Special Meeting or a quorum is present
but sufficient votes to approve a Proposal are not received, the persons named
as proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies. Any such adjournment will require the
affirmative vote of a majority of the votes cast at the Special Meeting in
person or by proxy. The persons named as proxies will vote those proxies that
they are entitled to vote FOR a Proposal in favor of such an adjournment and
will vote those proxies required to be voted AGAINST such Proposal against such
adjournment. A shareholder vote may be taken on a Proposal in this Proxy
Statement/Prospectus prior to any such adjournment if sufficient votes have been
received and it is otherwise appropriate.
VOTE NECESSARY TO APPROVE EACH PROPOSAL
Proposals 1, 3 and 4. Approval of Proposals 1, 3 and 4 requires the lesser
of (a) the affirmative vote of 67% or more of the voting securities of your Fund
present or represented by proxy at the Special Meeting, if the holders of more
than 50% of the outstanding voting securities of your Fund are present or
represented by proxy, or (b) the affirmative vote of more than 50% of the
outstanding voting securities of your Fund. Abstentions are counted as present
but are not considered votes cast at the Special Meeting. As a result, they have
the same effect as a vote against Proposals 1, 3 and 4 because approval of
Proposals 1, 3 and 4 requires the affirmative vote of a percentage of the voting
securities present or represented by proxy or a percentage of the outstanding
voting securities.
Proposal 2. The affirmative vote of a plurality of votes cast at the
Special Meeting is necessary to elect directors, meaning that the director
nominee with the most affirmative votes for a particular slot is elected for
that slot. Since the election for directors is uncontested, the plurality
requirement is not a factor. In other words, each nominee needs just one vote to
be elected director. Abstentions will not count as votes cast and will have no
effect on the outcome of this proposal.
Proposal 5. Approval of Proposal 5 requires the affirmative vote of a
majority of the issued and outstanding shares of Company. Abstentions are
counted as present but are not considered votes cast at the Special Meeting. As
a result, they have the same effect as a vote against the Plan because approval
of the Plan requires the affirmative vote of a percentage of the outstanding
voting securities.
PROXY SOLICITATION
Company will solicit proxies for the Special Meeting. Company expects to
solicit proxies principally by mail, but Company may also solicit proxies by
telephone, facsimile or personal interview. Company's officers will not receive
any additional or special compensation for any such solicitation. AMVESCAP or
one of its subsidiaries, on behalf of INVESCO, will bear the costs and expenses
incurred in connection with the Reorganization, including solicitation costs.
OTHER MATTERS
Management does not know of any matters to be presented at the Special
Meeting other than those discussed in this Proxy Statement/Prospectus. If any
other matters properly come before the Special Meeting, the shares represented
by proxies will be voted with respect thereto in accordance with management's
recommendation.
57
SHAREHOLDER PROPOSALS
As a general matter, your Fund does not hold regular meetings of
shareholders. If you wish to submit a proposal for consideration at a meeting of
shareholders of your Fund, you should send such proposal to Company at the
address set forth on the first page of this Proxy Statement/Prospectus. To be
considered for presentation at a meeting of shareholders, Company must receive
proposals a reasonable time before proxy materials are prepared for the meeting.
Your proposal also must comply with applicable law.
For a discussion of procedures that you must follow if you want to propose
an individual for nomination as a director, please refer to the section of this
Proxy Statement/Prospectus entitled "Proposal 2 -- Committees of the
Board -- Governance Committee."
OWNERSHIP OF SHARES
A list of the name, address and percent ownership of each person who, as of
January 9, 2004, to the knowledge of Company owned 5% or more of any class of
the outstanding shares of your Fund can be found at Exhibit E.
A list of the name, address and percent ownership of each person who, as of
January 9, 2004, to the knowledge of Buyer owned 5% or more of any class of the
outstanding shares of Buying Fund can be found at Exhibit F.
58
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Company has appointed
PricewaterhouseCoopers LLP ("PwC") as Company's independent public accountants
for the fiscal year ending December 31, 2004. The financial statements should be
read in conjunction with the disclosure in this Proxy Statement under the
heading "Certain Civil Proceedings and Lawsuits." A representative of PwC is
expected to be available at the Special Meeting and to have the opportunity to
make a statement and respond to appropriate questions from the shareholders. The
Audit Committee has considered whether the provision of the services below is
compatible with maintaining PwC's independence. The Audit Committee also has
considered whether the provision of non-audit services that were rendered to
INVESCO, and any entity controlling, controlled by or under common control with
INVESCO that provides ongoing services to Company ("INVESCO Affiliates"), that
were not required to be pre-approved pursuant to SEC regulations is compatible
with maintaining PwC's independence. A copy of the Audit Committee's
Pre-Approval of Audit and Non-Audit Services Policies and Procedures is at
Appendix VIII.
FEES BILLED BY PWC RELATED TO THE COMPANY
PwC billed Company aggregate fees for services rendered to Company for the
last two fiscal years as follows:
PERCENTAGE OF FEES PERCENTAGE OF FEES
BILLED APPLICABLE TO BILLED APPLICABLE TO
NON-AUDIT SERVICES NON-AUDIT SERVICES
FEES BILLED FOR PROVIDED IN 2003 FEES BILLED FOR PROVIDED IN 2002
SERVICES RENDERED PURSUANT TO WAIVER SERVICES RENDERED PURSUANT TO WAIVER
TO THE COMPANY OF PRE-APPROVAL TO THE COMPANY OF PRE-APPROVAL
IN 2003 REQUIREMENT(1)(2) IN 2002 REQUIREMENT(1)(2)
----------------- -------------------- ----------------- --------------------
Audit Fees................... $240,566 N/A $196,700 N/A
Audit-Related Fees(3)........ $ 0 0% $ 508 N/A
Tax Fees(4).................. $ 37,700 0% $ 33,180 N/A
All Other Fees(5)............ $ 0 0% $ 811 N/A
-------- --------
Total Fees................... $278,266 N/A $231,199 N/A
PwC billed Company aggregate non-audit fees of $37,700 for the fiscal year
ended 2003, and $34,499 for the fiscal year ended 2002, for non-audit services
rendered to Company.
---------------
(1) Prior to May 6, 2003, Company's Audit Committee was not required to
pre-approve non-audit services. Therefore, the percentage of fees shown in
this column only represents fees billed for non-audit services rendered
after May 6, 2003, pursuant to a waiver of the pre-approval requirement.
(2) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by Company at the time of
engagement, (ii) the aggregate amount of all such services provided is no
more than 5% of the aggregate audit and non-audit fees billed to Company
during a fiscal year; and (iii) such services are promptly approved by
Company's Audit Committee prior to the completion of the audit by the Audit
Committee.
(3) Audit-Related Fees for the fiscal year ended December 31, 2003 includes fees
billed for completing agreed upon procedures to report on inter-fund
lending.
(4) Tax Fees for the fiscal year ended December 31, 2003 includes fees billed
for reviewing tax returns. Tax fees for the fiscal year ended December 31,
2002 includes fees billed for reviewing tax returns and consultation
services.
(5) All Other Fees for the fiscal year ended December 31, 2002 includes fees
billed for services requested by the Company's Board related to service fees
paid to affiliates.
59
FEES BILLED BY PWC RELATED TO INVESCO AND INVESCO AFFILIATES
PwC billed INVESCO and INVESCO Affiliates aggregate fees for pre-approved
non-audit services rendered to INVESCO and INVESCO Affiliates for the last two
fiscal years as follows:
FEES BILLED FOR NON- FEES BILLED FOR NON-
AUDIT SERVICES AUDIT SERVICES
RENDERED TO INVESCO PERCENTAGE OF FEES RENDERED TO INVESCO PERCENTAGE OF FEES
AND INVESCO BILLED APPLICABLE TO AND INVESCO BILLED APPLICABLE TO
AFFILIATES IN 2003 THAT NON-AUDIT SERVICES AFFILIATES IN 2002 THAT NON-AUDIT SERVICES
WERE REQUIRED TO BE PROVIDED IN 2003 WERE REQUIRED TO BE PROVIDED IN 2002
PRE-APPROVED BY PURSUANT TO WAIVER PRE-APPROVED BY PURSUANT TO WAIVER
COMPANY'S AUDIT OF PRE-APPROVAL COMPANY'S AUDIT OF PRE-APPROVAL
COMMITTEE(1) REQUIREMENT(2)(3) COMMITTEE(1) REQUIREMENT(2)(3)
----------------------- -------------------- ----------------------- --------------------
Audit-Related Fees... $ 0 0% N/A N/A
Tax Fees............. $ 0 0% N/A N/A
All Other Fees....... $ 0 0% N/A N/A
--------
Total Fees........... $ 0 N/A N/A N/A
PwC billed INVESCO and INVESCO Affiliates aggregate non-audit fees of $0
for the fiscal year ended 2003, and $31,500 for the fiscal year ended 2002, for
non-audit services rendered to INVESCO and INVESCO Affiliates.
The Audit Committee also has considered whether the provision of non-audit
services that were rendered to INVESCO, and any entity controlling, controlled
by or under common control with INVESCO that provides ongoing services to the
Registrant ("INVESCO Affiliates"), that were not required to be pre-approved
pursuant to SEC regulations is compatible with maintaining PwC's independence.
The Audit Committee determined that the provision of such services is compatible
with PwC maintaining independence with respect the Registrant.
---------------
(1) Prior to May 6, 2003, Company's Audit Committee was not required to
pre-approve non-audit services. Therefore, the fees billed for non-audit
services shown in this column only represents fees for pre-approved
non-audit services rendered after May 6, 2003, to INVESCO and INVESCO
Affiliates.
(2) Prior to May 6, 2003, Company's Audit Committee was not required to
pre-approve non-audit services. Therefore, the percentage of fees shown in
this column only represents fees billed for non-audit services rendered
after May 6, 2003, pursuant to a waiver of the pre-approval requirement.
(3) With respect to the provision of non-audit services, the pre-approval
requirement is waived pursuant to a de minimis exception if (i) such
services were not recognized as non-audit services by Company at the time of
engagement, (ii) the aggregate amount of all such services provided is no
more than 5% of the aggregate audit and non-audit fees billed to Company
during a fiscal year; and (iii) such services are promptly approved by
Company's Audit Committee prior to the completion of the audit by the Audit
Committee.
60
EXHIBIT A
CLASSES OF SHARES OF YOUR FUND AND
CORRESPONDING CLASSES OF SHARES OF BUYING FUND
CORRESPONDING
CLASSES OF SHARES
CLASSES OF SHARES OF YOUR FUND OF BUYING FUND
------------------------------ -----------------
Series I Shares Series I Shares
A-1
EXHIBIT B
COMPARISON OF PRINCIPAL SERVICE PROVIDERS
The following is a list of the current principal service providers for your
Fund and Buying Fund.
SERVICE PROVIDERS
----------------------------------------------------------------------
INVESCO VIF -- GROWTH FUND AIM V.I. GROWTH FUND
SERVICE (YOUR FUND) (BUYING FUND)
------- ------------------------------------- -------------------------------
Investment Advisor INVESCO Funds Group, Inc. A I M Advisors, Inc. ("AIM")
("INVESCO")* 00 Xxxxxxxx Xxxxx, Xxxxx 000
00 Xxxxxxxx Xxxxx, Xxxxx 000 Xxxxxxx, Xxxxx 00000-0000
Xxxxxxx, Xxxxx 00000-1173
Distributor INVESCO Distributors, Inc.** A I M Distributors, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 000 00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000 Xxxxxxx, Xxxxx 00000-1173
Administrator INVESCO Funds Group, Inc.*** A I M Advisors, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 000 00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000 Xxxxxxx, Xxxxx 00000-1173
Custodian State Street Bank and Trust Company State Street Bank and Trust
Company
Transfer Agent and Dividend AIM Investment Services, Inc.**** AIM Investment Services, Inc.
Disbursing Agent
Independent Auditors PricewaterhouseCoopers LLP Xxxx, Xxxxxx & Xxxxx
---------------
* If the shareholders of Buying Fund approve a new investment advisory
agreement with AIM, AIM will replace INVESCO as investment advisor for your
Fund effective on or about April 30, 2004.
** If shareholders of Buyer do not approve the redomestication of Buyer's
series portfolios as new series portfolios of Trust, A I M Distributors,
Inc. will replace INVESCO Distributors, Inc. as distributor of your Fund
effective April 30, 2004.
*** Pursuant to an Assignment and Assumption Agreement and Consent dated August
12, 2003, INVESCO has assigned to AIM all of its rights under its
administrative service agreement with Company, and AIM has assumed all of
INVESCO's obligations under such agreement. If the shareholders of Buying
Fund approve a new investment advisory agreement with AIM, AIM will replace
INVESCO as administrator for Buying Fund effective on or about April 30,
2004.
**** AIM Investment Services, Inc. replaced INVESCO as transfer agent and
dividend disbursing agent for your Fund effective October 1, 2003.
B-1
EXHIBIT C
FINANCIAL HIGHLIGHTS OF BUYING FUND
FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the
Fund outstanding throughout the periods indicated. The financial statements
should be read in conjunction with the disclosures, included in this Proxy
Statement/Prospectus under the heading "Certain Civil Proceedings and Lawsuits."
Total returns do not reflect charges at the separate account level which if
included would reduce total returns for all periods shown.
The financial highlights table is intended to help you understand the
financial performance of the Fund for the past five years. Certain information
reflects the financial results for a single Fund share. The total returns in the
table represent the annual percentages that an investor would have earned (or
lost) on an investment in a share of the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Xxxx, Xxxxxx
& Xxxxx, independent accountants, whose report, along with the financial
statements, is included in AIM Variable Insurance Fund's 2002 Annual Report to
Shareholders, which is incorporated by reference into the Statement of
Additional Information. This Report is available without charge by contacting
AIM Distributors at the address or telephone number on the back cover of this
document.
SERIES I
--------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------------------
2003 2002 2001 2000 1999 1998
---------- -------- -------- -------- -------- --------
Net asset value, beginning of
period........................... $ 11.30 $ 16.37 $ 24.81 $ 32.25 $ 24.80 $ 19.83
-------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss)..... (0.01) (0.03)(a) (0.03)(a) 0.03 0.01(a) 0.08
-------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and
unrealized).................... 1.58 (5.04) (8.37) (6.60) 8.63 6.57
======== ======== ======== ======== ======== ========
Total from investment
operations................... 1.57 (5.07) (8.40) (6.57) 8.64 6.65
======== ======== ======== ======== ======== ========
Less distributions:
Dividends from net investment
income......................... -- -- (0.04) (0.00) (0.06) (0.09)
-------- -------- -------- -------- -------- --------
Distributions from net realized
gains.......................... -- -- -- (0.87) (1.13) (1.59)
======== ======== ======== ======== ======== ========
Total distributions............ -- -- (0.04) (0.87) (1.19) (1.68)
======== ======== ======== ======== ======== ========
Net asset value, end of period..... $ 12.87 $ 11.30 $ 16.37 $ 24.81 $ 32.25 $ 24.80
======== ======== ======== ======== ======== ========
Total return(b).................... 13.89% (30.97)% (33.86)% (20.49)% 35.24% 34.12%
======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted)......................... $346,981 $361,259 $601,648 $879,182 $704,096 $371,915
======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets........................... 0.89%(c) 0.91% 0.88% 0.83% 0.73% 0.72%
======== ======== ======== ======== ======== ========
Ratio of net investment income
(loss) to average net assets..... (0.14)%(c) (0.21)% (0.17)% 0.11% 0.04% 0.41%
======== ======== ======== ======== ======== ========
Portfolio turnover rate(d)......... 58% 195% 239% 162% 101% 133%
======== ======== ======== ======== ======== ========
---------------
(a) Calculated using average shares outstanding.
C-1
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and is not annualized for periods
less than one year. Total returns do not reflect charges at the separate
account level which if included would reduce total returns for all periods
shown.
(c) Ratios are annualized and based on average daily net assets of
$344,155,659.
(d) Not annualized for periods less than one year.
C-2
EXHIBIT D
SHARES OUTSTANDING OF EACH CLASS OF YOUR FUND ON RECORD DATE
As of January 9, 2004, there were the following number of shares
outstanding of each class of your Fund:
INVESCO VIF -- Growth Fund.................................. 1,044,928.20
D-1
EXHIBIT E
OWNERSHIP OF SHARES OF YOUR FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of January 9, 2004, to the best knowledge of Company owned 5% or more of any
class of the outstanding shares of your Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of your Fund is presumed
to "control" your Fund as defined in the 1940 Act. Such control may affect the
voting rights of other shareholders.
INVESCO VIF GROWTH FUND
NAME AND ADDRESS OF NUMBER OF SHARES PERCENTAGE OWNED
PRINCIPAL HOLDER OWNED OF RECORD OF RECORD*
------------------- ---------------- ----------------
NATIONWIDE INSURANCE CO..................................... 538,456.37 51.53%**
IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
WESTERN RESERVE LIFE ASSURANCE.............................. 375,273.59 35.91%**
ATTN FMG ACCOUNTING MS 4410
0000 XXXXXXXX XX XX
XXXXX XXXXXX XX 00000-0000
SAGE LIFE ASSURANCE OF AMERICA.............................. 120,104.81 11.49%
VARIABLE ANNUITY
000 XXXX XXXXX XX XXX 000
XXXXXXXX XX 00000-0000
---------------
* Company has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
** Presumed to be a control person because of beneficial ownership of 25% or
more of the Fund.
E-1
EXHIBIT F
OWNERSHIP OF SHARES OF BUYING FUND
SIGNIFICANT HOLDERS
Listed below is the name, address and percent ownership of each person who,
as of January 9, 2004, to the best knowledge of Buyer owned 5% or more of any
class of the outstanding shares of Buying Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of Buying Fund is
presumed to "control" Buying Fund as defined in the 1940 Act. Such control may
affect the voting rights of other shareholders.
AIM V.I. GROWTH FUND
SERIES I SERIES II SERIES I SERIES II
SHARES SHARES SHARES SHARES
------------ ------------ ---------- ----------
NUMBER OF NUMBER OF PERCENTAGE PERCENTAGE
SHARES OWNED SHARES OWNED OWNED OF OWNED OF
NAME AND ADDRESS OF PRINCIPAL HOLDER OF RECORD OF RECORD RECORD* RECORD*
------------------------------------ ------------ ------------ ---------- ----------
ALLSTATE LIFE INSURANCE CO
ATTN FINANCIAL CONTROL -- CIGNA
P.O. BOX 94200
PALATINE IL 60094-4200...................... 3,170,696.64 N/A 12.00% N/A
GLENBROOK LIFE & ANNUITY CO
PROPRIETARY ACCOUNT
P.O. BOX 94200
PALATINE IL 60094-4200...................... 3,084,545.39 N/A 11.68% N/A
GLENBROOK LIFE & ANNUITY CO
VA 1 AND SPVL ACCOUNT
P.O. BOX 94200
PALATINE IL 60094-4200...................... 1,776,998.34 N/A 6.73% N/A
ING USA ANNUITY AND LIFE INS CO
0000 XXXXXXXX XXXXX
XXXX XXXXXXX XX 00000-1478.................. N/A 198,866.65 N/A 29.23%
ING LIFE INSURANCE AND ANNUITY CO
CONVEYOR TN41
000 XXXXXXXXXX XXX
XXXXXXXX XX 00000-0000...................... 3,703,553.14 N/A 14.02% N/A
LINCOLN LIFE
FLEXIBLE PREMIUM VARIABLE LIFE ACCT
M/VUL-1 SA-M
ATTN XXXXX XXXXX
0000 XXXXXXX XX
XXXX XXXX 0XX0
XXXX XXXXX XX 00000-3518.................... 3,530,338.62 N/A 13.37% N/A
SUN LIFE FINANCIAL
RETIREMENT PRODUCTS & SERVICES
PO BOX 9134
WELLESLEY HILLS, MA 02481-9134.............. 2,475,578.68 N/A 9.37% N/A
SUN LIFE FINANCIAL
P.O. BOX 9137
WELLESLEY HILLS MA 02481-9137............... N/A 37,957.01 N/A 5.58%
F-1
SERIES I SERIES II SERIES I SERIES II
SHARES SHARES SHARES SHARES
------------ ------------ ---------- ----------
NUMBER OF NUMBER OF PERCENTAGE PERCENTAGE
SHARES OWNED SHARES OWNED OWNED OF OWNED OF
NAME AND ADDRESS OF PRINCIPAL HOLDER OF RECORD OF RECORD RECORD* RECORD*
------------------------------------ ------------ ------------ ---------- ----------
THE LINCOLN NATIONAL LIFE INS CO
ATTN XXXXXXX XXXXX
0000 XXXXX XXXXXXX XXXXXX
XXXX XXXXX XX 00000-3506.................... N/A 327,988.89 N/A 48.20%
PRINCIPAL LIFE INSURANCE COMPANY
ATTN: XXXX XXXXXXX G-008-N20
000 XXXX XXXXXX
XXX XXXXXX, XX 00000-0002................... 1,370,661.72 N/A 5.18% N/A
THE GUARDIAN LIFE INS. CO.
XXXX XXXX XXXXXXXX
0000 XXXXXXX XXXXX
XXXXXX XXXXXXXXXX 0-S
BETHLEHEM PA 18017-9097..................... N/A 43,722.15 N/A 6.43%
---------------
* Buyer has no knowledge of whether all or any portion of the shares owned of
record are also owned beneficially.
F-2
APPENDIX I
AGREEMENT
AND
PLAN OF REORGANIZATION
FOR
INVESCO VIF -- GROWTH FUND
A SEPARATE PORTFOLIO OF
INVESCO VARIABLE INVESTMENT FUNDS, INC.
DECEMBER 10, 2003
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 DEFINITIONS................................................. I-1
Section 1.1. Definitions................................................. I-1
ARTICLE 2 TRANSFER OF ASSETS.......................................... I-4
Section 2.1. Reorganization of Selling Fund.............................. I-4
Section 2.2. Computation of Net Asset Value.............................. I-4
Section 2.3. Valuation Date.............................................. I-4
Section 2.4. Delivery.................................................... I-4
Section 2.5. Termination of Series and Redemption of Selling Fund I-5
Shares......................................................
Section 2.6. Issuance of Buying Fund Shares.............................. I-5
Section 2.7. Investment Securities....................................... I-5
Section 2.8. Liabilities................................................. I-5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.................... I-6
Section 3.1. Organization; Authority..................................... I-6
Section 3.2. Registration and Regulation of Seller....................... I-6
Section 3.3. Financial Statements........................................ I-6
Section 3.4. No Material Adverse Changes; Contingent Liabilities......... I-6
Section 3.5. Selling Fund Shares; Business Operations.................... I-6
Section 3.6. Accountants................................................. I-7
Section 3.7. Binding Obligation.......................................... I-7
Section 3.8. No Breaches or Defaults..................................... I-7
Section 3.9. Authorizations or Consents.................................. I-7
Section 3.10. Permits..................................................... I-8
Section 3.11. No Actions, Suits or Proceedings............................ I-8
Section 3.12. Contracts................................................... I-8
Section 3.13. Properties and Assets....................................... I-8
Section 3.14. Taxes....................................................... I-8
Section 3.15. Benefit and Employment Obligations.......................... I-9
Section 3.16. Brokers..................................................... I-9
Section 3.17. Voting Requirements......................................... I-9
Section 3.18. State Takeover Statutes..................................... I-9
Section 3.19. Books and Records........................................... I-9
Section 3.20. Prospectus and Statement of Additional Information.......... I-9
Section 3.21. No Distribution............................................. I-9
Section 3.22. Liabilities of Selling Fund................................. I-9
Section 3.23. Value of Shares............................................. I-10
Section 3.24. Shareholder Expenses........................................ I-10
Section 3.25. Intercompany Indebtedness; Consideration.................... I-10
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER..................... I-10
Section 4.1. Organization; Authority..................................... I-10
Section 4.2. Registration and Regulation of Buyer........................ I-10
Section 4.3. Financial Statements........................................ I-10
Section 4.4. No Material Adverse Changes; Contingent Liabilities......... I-10
I-i
PAGE
----
Section 4.5. Registration of Buying Fund Shares.......................... I-11
Section 4.6. Accountants................................................. I-11
Section 4.7. Binding Obligation.......................................... I-11
Section 4.8. No Breaches or Defaults..................................... I-11
Section 4.9. Authorizations or Consents.................................. I-12
Section 4.10. Permits..................................................... I-12
Section 4.11. No Actions, Suits or Proceedings............................ I-12
Section 4.12. Taxes....................................................... I-12
Section 4.13. Brokers..................................................... I-13
Section 4.14. Representations Concerning the Reorganization............... I-13
Section 4.15. Prospectus and Statement of Additional Information.......... I-13
Section 4.16. Value of Shares............................................. I-13
Section 4.17. Intercompany Indebtedness; Consideration.................... I-14
ARTICLE 5 COVENANTS................................................... I-14
Section 5.1. Conduct of Business......................................... I-14
Section 5.2. Announcements............................................... I-14
Section 5.3. Expenses.................................................... I-14
Section 5.4. Further Assurances.......................................... I-14
Section 5.5. Notice of Events............................................ I-14
Section 5.6. Access to Information....................................... I-15
Section 5.7. Consents, Approvals and Filings............................. I-15
Section 5.8. Submission of Agreement to Shareholders..................... I-15
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION.................. I-15
Section 6.1. Conditions Precedent of Buyer............................... I-15
Section 6.2. Mutual Conditions........................................... I-16
Section 6.3. Conditions Precedent of Seller.............................. I-17
ARTICLE 7 TERMINATION OF AGREEMENT.................................... I-17
Section 7.1. Termination................................................. I-17
Section 7.2. Survival After Termination.................................. I-17
ARTICLE 8 MISCELLANEOUS............................................... I-17
Section 8.1. Survival of Representations, Warranties and Covenants....... I-17
Section 8.2. Governing Law............................................... I-18
Section 8.3. Binding Effect, Persons Benefiting, No Assignment........... I-18
Section 8.4. Obligations of Buyer and Seller............................. I-18
Section 8.5. Amendments.................................................. I-18
Section 8.6. Enforcement................................................. I-18
Section 8.7. Interpretation.............................................. I-18
Section 8.8. Counterparts................................................ I-18
Section 8.9. Entire Agreement; Exhibits and Schedules.................... I-18
Section 8.10. Notices..................................................... I-19
Section 8.11. Representations by Seller Investment Adviser................ I-19
Section 8.12. Representations by Buyer Investment Adviser................. I-19
Section 8.13. Successors and Assigns; Assignment.......................... I-19
I-ii
Exhibit A Excluded Liabilities of Selling Fund
Schedule 2.1 Classes of Shares of Selling Fund and Corresponding Classes
of Shares of Buying Fund
Schedule 3.4 Certain Contingent Liabilities of Selling Fund
Schedule 3.5(d) Permitted Redomestications of Funds
Schedule 4.4 Certain Contingent Liabilities of Buying Fund
Schedule 4.5(a) Portfolios of Buyer
Schedule 4.5(b) Classes of Shares of Buying Fund and Number of Shares of
Each Class Buyer is Authorized to Issue
Schedule 5.1 Permitted Combinations of Funds
Schedule 6.2(g) Tax Opinions
I-iii
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of December 10, 2003 (this
"Agreement"), by and among INVESCO Variable Investment Funds, Inc., a Maryland
corporation ("Seller"), acting on behalf of INVESCO VIF -- Growth Fund ("Selling
Fund"), a separate series of Seller, AIM Variable Insurance Funds, a Delaware
statutory trust ("Buyer"), acting on behalf of AIM V.I. Growth Fund ("Buying
Fund"), a separate series of Buyer, A I M Advisors, Inc., a Delaware
corporation, and INVESCO Funds Group, Inc., a Delaware corporation.
WITNESSETH
WHEREAS, Seller is a management investment company registered with the SEC
(as defined below) under the Investment Company Act (as defined below) that
offers separate series of its shares representing interests in its investment
portfolios, including Selling Fund, 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, Buyer is a management investment company registered with the SEC
under the Investment Company Act that offers separate series of its shares
representing interests in investment portfolios, including Buying Fund, 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, Buyer Investment Adviser (as defined below) provides investment
advisory services to Buyer; and
WHEREAS, Seller Investment Adviser (as defined below) provides investment
advisory services to Seller; and
WHEREAS, Selling Fund desires to provide for its reorganization through the
transfer of all of its assets to Buying Fund in exchange for the assumption by
Buying Fund of all of the Liabilities (as defined below) of Selling Fund and the
issuance by Buyer of shares of Buying Fund in the manner set forth in this
Agreement; and
WHEREAS, this Agreement is intended to be and is adopted by the parties
hereto as a Plan of Reorganization within the meaning of the regulations under
Section 368(a) of the Code (as defined below).
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements and undertakings contained in this Agreement, Seller, Xxxxx, Buyer
Investment Adviser and Seller Investment Adviser 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):
"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 exhibits and schedules attached hereto and all amendments hereto
and thereof.
"Applicable Law" means the applicable laws of the state in which each
of Buyer and Seller has been organized and shall include, as applicable,
the Maryland General Corporation Law and the Delaware Statutory Trust Act.
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"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 Seller
on behalf of Selling Fund, or otherwise providing benefits to any current
or former employee, officer or director/trustee of Seller.
"Buyer" means AIM Variable Insurance Funds, a Delaware statutory
trust.
"Buyer Counsel" means Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP.
"Buyer Custodian" means State Street Bank and Trust Company acting in
its capacity as custodian for the assets of Buying Fund.
"Buyer Investment Adviser" means A I M Advisors, Inc.
"Buyer Registration Statement" means the registration statement on
Form N-1A of Buyer, as amended, 1940 Act Registration No. 033-57340.
"Buying Fund" means AIM V.I. Growth Fund, a separate series of Buyer.
"Buying Fund Auditors" means Xxxx, Xxxxxx & Xxxxx.
"Buying Fund Financial Statements" means the audited financial
statements of Buying Fund for the fiscal year ended December 31, 2003.
"Buying Fund Shares" means shares of each class of Buying Fund issued
pursuant to Section 2.6 of this Agreement.
"Closing" means the transfer of the assets of Selling Fund to Buying
Fund, the assumption of all of Selling Fund's Liabilities by Buying Fund
and the issuance of Buying Fund Shares directly to Selling Fund
Shareholders as described in Section 2.1 of this Agreement.
"Closing Date" means April 30, 2004, or such other date as the parties
may mutually agree upon.
"Code" means the Internal Revenue Code of 1986, as amended, and all
rules and regulations adopted pursuant thereto.
"corresponding" means, when used with respect to a class of shares of
Selling Fund or Buying Fund, the classes of their shares set forth opposite
each other on Schedule 2.1.
"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.
"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.
"Governing Documents" means the organic documents which govern the
business and operations of each of Buyer and Seller and shall include, as
applicable, the Charter, Amended and Restated Agreement and Declaration of
Trust, Amended and Restated Bylaws and Bylaws.
"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 the NASD Regulation, 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.
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"Liabilities" means all of the liabilities of any kind of Selling
Fund, including without limitation all liabilities included in the
calculation of the net asset value per share of each class of Selling Fund
Shares on the Closing Date, but not including the excluded liabilities set
forth on Exhibit A.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"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.
"Permits" shall have the meaning set forth in Section 3.10 of this
Agreement.
"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 Selling Fund
by Buying Fund in consideration of the assumption by Buying Fund of all of
the Liabilities of Selling Fund and the issuance by Buyer of Buying Fund
Shares directly to Selling Fund Shareholders as described in this
Agreement, and the termination of Selling Fund's status as a designated
series of shares of Seller.
"Required Shareholder Vote" means the lesser of (a) the affirmative
vote of 67% or more of the voting securities of Selling Fund present or
represented by proxy at the Shareholders Meeting, if the holders of more
than 50% of the outstanding voting securities of Selling Fund are present
or represented by proxy, or (b) the affirmative vote of more than 50% of
the outstanding voting securities of Selling Fund.
"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.
"Seller" means INVESCO Variable Investment Funds, Inc., a Maryland
corporation.
"Seller Custodian" means State Street Bank and Trust Company acting in
its capacity as custodian for the assets of Selling Fund.
"Seller Investment Adviser" means INVESCO Funds Group, Inc.
"Seller Registration Statement" means the registration statement on
Form N-1A of Seller, as amended, 1940 Act Registration No. 033-70154.
"Selling Fund" means INVESCO VIF -- Growth Fund, a separate series of
Seller.
"Selling Fund Auditors" means PricewaterhouseCoopers LLP.
"Selling Fund Financial Statements" means the audited financial
statements of Selling Fund for the fiscal year ended December 31, 2003.
"Selling Fund Shareholders" means the holders of record of the
outstanding shares of each class of Selling Fund as of the close of regular
trading on the NYSE on the Valuation Date.
"Selling Fund Shares" means the outstanding shares of each class of
Selling Fund.
"Shareholders Meeting" means a meeting of the shareholders of Selling
Fund convened in accordance with Applicable Law and the Governing Documents
of Seller to consider and vote upon the approval of this Agreement.
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"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.
"Termination Date" means June 30, 2004, or such later date as the
parties may mutually agree upon.
"Treasury Regulations" means the Federal income tax regulations
adopted pursuant to the Code.
"Valuation Date" shall have the meaning set forth in Section 2.2 of
this Agreement.
ARTICLE 2
TRANSFER OF ASSETS
SECTION 2.1. Reorganization of Selling Fund. At the Effective Time, all
of the assets of Selling Fund shall be delivered to Buyer Custodian for the
account of Buying Fund in exchange for the assumption by Buying Fund of all of
the Liabilities of Selling Fund and delivery by Buyer directly to the holders of
record as of the Effective Time of the issued and outstanding shares of each
class of Selling Fund of a number of shares of each corresponding class of
Buying Fund, as set forth on Schedule 2.1 (including, if applicable, fractional
shares rounded to the nearest thousandth), having an aggregate net asset value
equal to the value of the net assets of Selling Fund so transferred, assigned
and delivered, all determined and adjusted as provided in Section 2.2 below.
Upon delivery of such assets, Buying 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 per share of each class of Buying Fund Shares, and
the value of the assets and the amount of the Liabilities of Selling Fund,
shall, in each case, be determined as of the close of regular trading on the
NYSE on the business day next preceding the Closing Date (the "Valuation Date").
(b) The net asset value per share of each class of Buying Fund Shares shall
be computed in accordance with the policies and procedures of Buying Fund as
described in the Buyer Registration Statement.
(c) The value of the assets and the amount of the Liabilities of Selling
Fund to be transferred to Buying Fund pursuant to this Agreement shall be
computed in accordance with the policies and procedures of Selling Fund as
described in the Seller Registration Statement.
(d) Subject to Sections 2.2(b) and (c) above, all computations of value
regarding the assets and Liabilities of Selling Fund and the net asset value per
share of each class of Buying Fund Shares to be issued pursuant to this
Agreement shall be made by agreement of Seller and Buyer. The parties agree 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 Date. The share transfer books of Selling Fund
will be permanently closed as of the close of business on the Valuation Date and
only requests for the redemption of shares of Selling Fund received in proper
form prior to the close of regular trading on the NYSE on the Valuation Date
shall be accepted by Selling Fund. Redemption requests thereafter received by
Selling Fund shall be deemed to be redemption requests for Buying Fund Shares of
the corresponding class (assuming that the transactions contemplated by this
Agreement have been consummated), to be distributed to Selling Fund Shareholders
under this Agreement.
SECTION 2.4. Delivery.
(a) No later than three (3) business days preceding the Closing Date,
Seller shall instruct Seller Custodian to transfer all assets held by Selling
Fund to the account of Buying Fund maintained at Buyer
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Custodian. Such assets shall be delivered by Seller to Buyer Custodian on the
Closing Date. 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 Selling 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 Buying Fund at Buyer Custodian.
(b) If, on the Closing Date, Selling Fund is unable to make delivery in the
manner contemplated by Section 2.4(a) of securities held by Selling Fund for the
reason that any of such securities purchased prior to the Closing Date have not
yet been delivered to Selling Fund or its broker, then Buyer shall waive the
delivery requirements of Section 2.4(a) with respect to said undelivered
securities if Selling Fund has delivered to Buyer Custodian by or on the Closing
Date, and with respect to said undelivered securities, executed copies of an
agreement of assignment and escrow and due bills executed on behalf of said
broker or brokers, together with such other documents as may be required by
Xxxxx or Buyer Custodian, including brokers' confirmation slips.
SECTION 2.5. Termination of Series and Redemption of Selling Fund
Shares. Following receipt of the Required Shareholder Vote and as soon as
reasonably practicable after the Closing Date, the status of Selling Fund as a
designated series of Seller shall be terminated and Seller shall redeem the
outstanding shares of Selling Fund from Selling Fund Shareholders in accordance
with its Charter and the Maryland General Corporation Law; provided, however,
that the termination of Selling Fund as a designated series of Seller and the
redemption of the outstanding shares of Selling Fund shall not be required if
the Reorganization shall not have been consummated.
SECTION 2.6. Issuance of Buying Fund Shares. At the Effective Time,
Selling Fund Shareholders holding shares of a class of Selling Fund shall be
issued that number of full and fractional shares of the corresponding class of
Buying Fund having a net asset value equal to the net asset value of such shares
of such class of Selling Fund held by Selling Fund Shareholders on the Valuation
Date. All issued and outstanding shares of Selling Fund shall thereupon be
canceled on the books of Seller. Seller shall provide instructions to the
transfer agent of Buyer with respect to the shares of each class of Buying Fund
to be issued to Selling Fund Shareholders. Buyer shall have no obligation to
inquire as to the validity, propriety or correctness of any such instruction,
but shall, in each case, assume that such instruction is valid, proper and
correct. Buyer shall record on its books the ownership of the shares of each
class of Buying Fund by Selling Fund Shareholders and shall forward a
confirmation of such ownership to Selling Fund Shareholders. No redemption or
repurchase of such shares credited to former Selling Fund Shareholders in
respect of Selling Fund Shares represented by unsurrendered share certificates
shall be permitted until such certificates have been surrendered to Buyer for
cancellation, or if such certificates are lost or misplaced, until lost
certificate affidavits have been executed and delivered to Buyer.
SECTION 2.7. Investment Securities. On or prior to the Valuation Date,
Seller shall deliver a list setting forth the securities Selling Fund then owned
together with the respective Federal income tax bases thereof and holding
periods therefor. Seller shall provide to Buyer on or before the Valuation Date
detailed tax basis accounting records for each security to be transferred to it
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 Buying Fund hereunder. Such records shall be made
available by Seller prior to the Valuation Date for inspection by the Treasurer
(or his or her designee) or Buying Fund Auditors upon reasonable request.
SECTION 2.8. Liabilities. Selling Fund shall use reasonable best efforts
to discharge all of its known liabilities, so far as may be possible, prior to
the Closing Date.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller, on behalf of Selling Fund, represents and warrants to Buyer as
follows:
SECTION 3.1. Organization; Authority. Seller is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 3.2. Registration and Regulation of Seller. Seller is duly
registered with the SEC as an investment company under the Investment Company
Act and all Selling 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 Seller to
revoke or rescind any such registration or qualification. Selling 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.
Selling Fund is in compliance in all material respects with the investment
policies and restrictions applicable to it set forth in the Seller Registration
Statement. The value of the net assets of Selling 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 Selling Fund and
all purchases and redemptions of Selling Fund Shares have been effected at the
net asset value per share calculated in such manner.
Section 3.3. Financial Statements. The books of account and related
records of Selling 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 Selling Fund Financial
Statements previously delivered to Buyer present fairly in all material respects
the financial position of Selling Fund as of the date(s) indicated and the
results of operations and changes in net assets for the period(s) then ended in
accordance with generally accepted accounting principles applied on a consistent
basis for the period(s) then ended.
SECTION 3.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Selling Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Selling
Fund or the status of Selling 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
Selling Fund or occurring in the ordinary course of business of Selling Fund or
Seller. Except as set forth on Schedule 3.4, there are no contingent liabilities
of Selling Fund not disclosed in the Selling Fund Financial Statements and no
contingent liabilities of Selling Fund have arisen since the date of the most
recent financial statements included in the Selling Fund Financial Statements.
SECTION 3.5. Selling Fund Shares; Business Operations.
(a) Selling Fund Shares have been duly authorized and validly issued and
are fully paid and non-assessable.
(b) During the five-year period ending on the date of the Reorganization,
neither Selling Fund nor any person related to Selling Fund (as defined in
Section 1.368-1(e)(3) of the Treasury Regulations without regard to Section
1.368-1(e)(3)(i)(A)) will have directly or through any transaction, agreement,
or arrangement with any other person, (i) acquired shares of Selling Fund for
consideration other than shares of Selling Fund, except for shares redeemed in
the ordinary course of Selling Fund's business as an open-end investment company
as required by the Investment Company Act, or (ii) made distributions with
respect to Selling Fund's shares, except for (a) distributions necessary to
satisfy the requirements of Sections 852 and 4982 of the Code for qualification
as a regulated investment company and avoidance of excise tax liability and (b)
additional distributions, to the extent such additional distributions do not
exceed 50 percent of the value (without giving effect to such distributions) of
the proprietary interest in Selling Fund on the Effective Date.
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(c) At the time of its Reorganization, Selling Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Selling Fund Shares, except for
the right of investors to acquire Selling 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,
Selling Fund will have conducted its historic business within the meaning of
Section 1.368-1(d)(2) of the Treasury Regulations in a substantially unchanged
manner. In anticipation of its Reorganization, Selling 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)(3) of the
Treasury Regulations) being transferred to Buying Fund; provided, however, that
this Section 3.5(d) shall not preclude any of the redomestications of funds set
forth on Schedule 3.5(d).
(e) Seller 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.
SECTION 3.6. Accountants. Selling Fund Auditors, which have reported upon
the Selling Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Selling Fund Financial Statements 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 Seller on behalf of Selling Fund and, assuming this
Agreement has been duly executed and delivered by Buyer and approved by the
shareholders of Selling Fund, constitutes the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its terms
from and with respect to the revenues and assets of Selling 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 Seller on behalf of Selling Fund and performance by Seller of its
obligations hereunder has been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Seller, other than approval by the
shareholders of Selling Fund, and (i) do not, and on the Closing Date will not,
result in any violation of the Governing Documents of Seller 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 Selling 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 Seller is a
party or by which it may be bound and which relates to the assets of Selling
Fund or to which any property of Selling 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 Seller or
any property of Selling Fund. Seller 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 Seller in
connection with the due execution and delivery by Seller of this Agreement and
the consummation by Seller of the transactions contemplated hereby.
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SECTION 3.10. Permits. Seller 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
Selling 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 Seller 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 3.11. No Actions, Suits or Proceedings.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of Seller, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Seller 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 Seller, threatened in
writing or, if probable of assertion, orally, against Seller affecting any
property, asset, interest or right of Selling Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Selling 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 any Governmental Authority
relating to Seller's conduct of the business of Selling Fund affecting in any
significant respect the conduct of such business. Seller is not, and has not
been, to the knowledge of Seller, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Selling Fund.
SECTION 3.12. Contracts. Seller is not 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 Selling Fund,
by which the assets, business, or operations of Selling Fund may be bound or
affected, or under which it or the assets, business or operations of Selling
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 Seller 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. Selling Fund has good and marketable
title to all properties and assets reflected in the Selling Fund Financial
Statements as owned by it, free and clear of all Liens, except as described in
the Selling Fund Financial Statements.
SECTION 3.14. Taxes.
(a) Selling Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Selling Fund has qualified for treatment as a
regulated investment company for each taxable year since inception 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. Selling 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) ensure continued qualification of Selling Fund for treatment as a
"regulated investment company" for tax purposes and (ii) eliminate any tax
liability of Selling Fund arising by reason of undistributed investment company
taxable income or net capital gain, Seller will declare on or prior to the
Valuation Date to the shareholders of Selling Fund a dividend or dividends that,
together with all previous such dividends, shall have the effect of distributing
(A) all of Selling Fund's investment company taxable income (determined without
regard to any deductions for dividends paid) for the taxable year ended December
31, 2003 and for the short taxable year beginning on January 1, 2004 and ending
on the Closing Date and (B) all of Selling Fund's net capital gain recognized in
its taxable year ended December 31, 2003 and in such short taxable year (after
reduction for any capital loss carryover).
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(b) Selling 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 Selling Fund Financial Statements for all Taxes in respect of all periods
ended 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 Selling 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 Selling 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.
(c) Selling Fund is aware of no information that would indicate that (i)
Selling Fund has, or ever had, any shareholder that is not a segregated asset
account within the meaning of Section 1.817-5(f)(2)(i)(A) of the Treasury
Regulations, or any entity referred to in (and holding its shares in compliance
with the terms of) Section 1.817-5(f)(3)(i), (ii) or (iii) of the Treasury
Regulations; (ii) any public investor is participating or has ever participated
in Selling Fund through such a segregated asset account other than through the
purchase of variable contract within the meaning of Section 1.817-5(f)(2)(i)(B)
of the Treasury Regulations; and (iii) Selling Fund satisfies, and at all times
during its existence has satisfied, the percentage diversification tests
contained in Section 1.817-5(b)(1)(i) and (ii) of the Treasury Regulations.
SECTION 3.15. Benefit and Employment Obligations. As of the Closing Date,
Selling 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 will 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 Seller 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 Seller or any action taken by it.
SECTION 3.17. Voting Requirements. The Required Shareholder Vote is the
only vote of the holders of any class of shares of Selling Fund necessary to
approve this Agreement.
SECTION 3.18. State Takeover Statutes. No state takeover statute or
similar statute or regulation applies or purports to apply to this Agreement or
any of the transactions contemplated by this Agreement.
SECTION 3.19. Books and Records. The books and records of Seller relating
to Selling Fund, reflecting, among other things, the purchase and sale of
Selling Fund Shares, the number of issued and outstanding shares owned by each
Selling Fund Shareholder and the state or other jurisdiction in which such
shares were offered and sold, are complete and accurate in all material
respects.
SECTION 3.20. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Selling Fund as
of the date on which they were 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. Buying 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 Selling Fund. The Liabilities of Selling
Fund that are to be assumed by Buying Fund in connection with the
Reorganization, or to which the assets of Selling Fund to be transferred in the
Reorganization are subject, were incurred by Selling Fund in the ordinary course
of its business. The fair market value of the assets of Selling Fund to be
transferred to Buying Fund in the Reorganization will equal or exceed the sum of
the Liabilities to be assumed by Buying Fund, plus the amount of liabilities, if
any, to which
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such transferred assets will be subject. The total adjusted basis of the assets
of Selling Fund to be transferred to Buying Fund in the Reorganization will
equal or exceed the sum of the Liabilities to be assumed by Buying 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 shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
SECTION 3.24. Shareholder Expenses. Selling Fund Shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.
SECTION 3.25. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for this purpose any liabilities to which the assets of Selling Fund are
subject) will be given in exchange for the assets of Selling Fund acquired by
Buying Fund in connection with the Reorganization.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Xxxxx, on behalf of Buying Fund, represents and warrants to Seller as
follows:
SECTION 4.1. Organization; Authority. Buyer is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and
perform its obligations hereunder.
SECTION 4.2. Registration and Regulation of Buyer. Buyer is duly
registered with the SEC as an investment company under the Investment Company
Act. Buying 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. Buying Fund is in compliance in all material respects with the
applicable investment policies and restrictions set forth in the Buyer
Registration Statement. The value of the net assets of Buying 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 Buying Fund and
all purchases and redemptions of Buying 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 Buying 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 Buying Fund Financial
Statements previously delivered to Seller present fairly in all material
respects the financial position of Buying Fund as of the date(s) indicated and
the results of operations and changes in net assets for the period(s) then ended
in accordance with generally accepted accounting principles applied on a
consistent basis for the period(s) then ended.
SECTION 4.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the most recent financial statements included in the Buying Fund
Financial Statements, no material adverse change has occurred in the financial
condition, results of operations, business, assets or liabilities of Buying Fund
or the status of Buying 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
Buying Fund or occurring in the ordinary course of business of Buying Fund or
Buyer. There are no contingent liabilities of Buying Fund not disclosed in the
Buying Fund Financial Statements which are required to be disclosed in
accordance with generally accepted accounting principles. Except as set forth on
Schedule 4.4, no contingent liabilities of Buying Fund have arisen since the
date of the most recent financial statements included in the Buying Fund
Financial Statements which are required to be disclosed in accordance with
generally accepted accounting principles.
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SECTION 4.5. Registration of Buying Fund Shares.
(a) The shares of Buyer are divided into those portfolios, including Buying
Fund, that are set forth on Schedule 4.5(a).
(b) Buying Fund currently has those classes of shares that are set forth on
Schedule 4.5(b). Under its Governing Documents, Buyer is authorized to issue the
number of shares of each such class that is set forth on Schedule 4.5(b).
(c) Buying 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 Buyer then in effect.
(d) Buying 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, Buying Fund shall not have outstanding any warrants, options,
convertible securities or any other type of right pursuant to which any Person
could acquire shares of Buying Fund, except for the right of investors to
acquire shares of Buying Fund 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.
(e) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus"), which forms a part of Buyer's Registration Statement on
Form N-14, shall be furnished to the shareholders of Selling Fund entitled to
vote at the Shareholders Meeting. The Combined Proxy Statement/Prospectus and
related Statement of Additional Information of Buying 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, provided, however, that no
representation or warranty is made with respect to written information provided
by Seller for inclusion in the Combined Proxy Statement/Prospectus.
(f) The shares of Buying Fund which have been or are being offered for sale
(other than the Buying Fund Shares to be issued in connection with the
Reorganization) have been duly registered under the Securities Act by the Buyer
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 Buyer to revoke or rescind any such registration
or qualification.
SECTION 4.6. Accountants. Buying Fund Auditors, which have reported upon
the Buying Fund Financial Statements for the fiscal year or period, as
applicable, ended on the date of the most recent financial statements included
in the Buying Fund Financial Statements 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 Xxxxx on behalf of Buying Fund and, assuming this
Agreement has been duly executed and delivered by Seller, constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms from and with respect to the revenues and assets of Buying 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 or 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 Xxxxx on behalf of Buying Fund and performance by Xxxxx of its
obligations hereunder have been duly authorized by all necessary corporate or
trust action, as applicable, on the part of Buyer and (i) do not, and on the
Closing Date will not, result in any violation of the Governing Documents of
Buyer 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
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of any Lien upon any property or assets of Buying 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 Buyer is a party or by which it may be bound and which relates to the
assets of Buying Fund or to which any properties of Buying 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 Buyer or
any property of Buying Fund. Buyer 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 Buyer in connection with
the due execution and delivery by Buyer of this Agreement and the consummation
by Buyer of the transactions contemplated hereby.
SECTION 4.10. Permits. Buyer has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
Buying 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 Buyer 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 Buyer, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against Buyer before any Governmental Authority which
questions the validity or legality of this Agreement or of the 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 Buyer, threatened in
writing or, if probable of assertion, orally, against Buyer, affecting any
property, asset, interest or right of Buying Fund, that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to Buying 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 any Governmental Authority
relating to Buyer's conduct of the business of Buying Fund affecting in any
significant respect the conduct of such business. Buyer is not, and has not
been, to the knowledge of Buyer, the target of any investigation by the SEC or
any state securities administrator with respect to its conduct of the business
of Buying Fund.
SECTION 4.12. Taxes.
(a) Buying Fund has elected to be a regulated investment company under
Subchapter M of the Code and is a fund that is treated as a separate corporation
under Section 851(g) of the Code. Buying Fund has qualified for treatment as a
regulated investment company 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. Buying 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) Buying 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 Buying 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 Buying Fund, and no deficiency has been
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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 Buying
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 Buyer 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 Buyer or any action taken by it.
SECTION 4.14. Representations Concerning the Reorganization.
(a) Buyer has no plan or intention to reacquire any Buying Fund Shares
issued in the Reorganization, except to the extent that Buying 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.
(b) Buying Fund has no plan or intention to sell or otherwise dispose of
any of the assets of Selling 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; provided, however,
that this Section 4.14(b) shall not preclude any of the redomestications of
funds set forth on Schedule 3.5(d).
(c) Following the Reorganization, Buying Fund will continue an "historic
business" of Selling Fund or use a significant portion of Selling Fund's
"historic business assets" in a business. For purposes of this representation,
the terms "historic business" and "historic business assets" shall have the
meanings ascribed to them in Section 1.368-1(d) of the Treasury Regulations;
provided, however, that this Section 4.14(c) shall not preclude any of the
redomestications of funds set forth on Schedule 3.5(d).
(d) Prior to or in the Reorganization, neither Buying Fund nor any person
related to Buying Fund (for purposes of this paragraph as defined in Section
1.368-1(e)(3) of the Treasury Regulations) will have acquired directly or
through any transaction, agreement or arrangement with any other person, shares
of Selling Fund with consideration other than shares of Buying Fund. There is no
plan or intention by Buying Fund or any person related to Buying Fund to acquire
or redeem any of the Buying Fund Shares issued in the Reorganization either
directly or through any transaction, agreement, or arrangement with any other
person, other than redemptions in the ordinary course of Buying Fund's business
as an open-end investment company as required by the Investment Company Act.
(e) Buying Fund is aware of no information that would indicate that (i)
Buying Fund has, or ever had, any shareholder that it not a segregated asset
account within the meaning of Section 1.817-5(f)(2)(i)(A) of the Treasury
Regulations, or any entity referred to in (and holding its shares in compliance
with the terms of) Section 1.817-5(f)(3)(i), (ii) or (iii) of the Treasury
Regulations; (ii) any public investor is participating or has ever participated
in Buying Fund through such a segregated asset account other than through the
purchase of a variable contract within the meaning of Section
1.817-5(f)(2)(i)(B) of the Treasury Regulations; and (iii) Buying Fund
satisfies, and at all times during its existence has satisfied, the percentage
diversification tests contained in Section 1.817-5(b)(1)(i) and (ii) of Treasury
Regulations.
SECTION 4.15. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which it was issued does not contain, and as supplemented by any
supplement thereto dated prior to or on the Closing Date does 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 shares of
each class of Buying Fund received by Selling Fund Shareholders in the
Reorganization will be approximately equal to the fair market value of the
shares of each corresponding class of Selling Fund constructively surrendered in
exchange therefor.
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SECTION 4.17. Intercompany Indebtedness; Consideration. There is no
intercompany indebtedness between Seller and Buyer that was issued or acquired,
or will be settled, at a discount. No consideration other than Buying Fund
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including
for this purpose any liabilities to which the assets of Selling Fund are
subject) will be given in exchange for the assets of Selling Fund acquired by
Buying Fund in connection with the Reorganization. The fair market value of the
assets of Selling Fund transferred to Buying Fund in the Reorganization will
equal or exceed the sum of the Liabilities assumed by Buying 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), Seller shall conduct the business of Selling 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 operations of Selling Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(a) shall not preclude any of the redomestications of funds set forth on
Schedule 3.5(d) or any of the combinations of funds set forth on Schedule 5.1.
(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), Buyer shall conduct the business of Buying 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 operations of Buying Fund in the
ordinary course in all material respects; provided, however, that this Section
5.1(b) shall not preclude any of the redomestications of funds set forth on
Schedule 3.5(d) or any of the combinations of funds set forth on Schedule 5.1.
SECTION 5.2. Announcements. Seller and Xxxxx shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement and the transactions contemplated by this
Agreement, and neither Seller nor Buyer shall issue any such press release or
make any public statement without the prior written approval of the other party
to this Agreement, such approval not to be unreasonably withheld, except as may
be required by law.
SECTION 5.3. Expenses. AMVESCAP PLC or one of its subsidiaries, on behalf
of either Buyer Investment Adviser or Seller Investment Adviser, shall bear the
costs and expenses incurred in connection with this Agreement and the
Reorganization and other transactions contemplated hereby; provided that any
such expenses incurred by or on behalf of Buying Fund or Selling Fund shall not
be reimbursed or paid for by another Person unless those expenses are solely and
directly related to the Reorganization.
SECTION 5.4. 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 5.5. Notice of Events. Buyer shall give prompt notice to Seller,
and Seller shall give prompt notice to Buyer, of (a) the occurrence or
non-occurrence of any event which to the knowledge of Buyer or to the knowledge
of Seller, the occurrence or non-occurrence of which would be likely to result
in any of the conditions specified in (i) in the case of Seller, Sections 6.1
and 6.2 or (ii) in the case of Buyer, Sections 6.2
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and 6.3, not being satisfied so as to permit the consummation of the
Reorganization and (b) any material failure on its part, or on the part of the
other party hereto of which it has knowledge, 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) Seller will, during regular business hours and on reasonable prior
notice, allow Buyer and its authorized representatives reasonable access to the
books and records of Seller pertaining to the assets of Selling Fund and to
officers of Seller knowledgeable thereof; provided, however, that any such
access shall not significantly interfere with the business or operations of
Seller.
(b) Buyer will, during regular business hours and on reasonable prior
notice, allow Seller and its authorized representatives reasonable access to the
books and records of Buyer pertaining to the assets of Buying Fund and to
officers of Buyer knowledgeable thereof; provided, however, that any such access
shall not significantly interfere with the business or operations of Buyer.
SECTION 5.7. Consents, Approvals and Filings. Each of Seller and Buyer
shall make all necessary filings, as soon as reasonably practicable, including,
without limitation, those required under the Maryland General Corporation Law,
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, each of
Seller and Buyer shall use its reasonable best efforts, and shall cooperate
fully with each other (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. Each of Seller and Buyer 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. Seller shall take
all action necessary in accordance with applicable law and its Governing
Documents to convene the Shareholders Meeting. Seller shall, through its Board
of Directors/Trustees, recommend to the shareholders of Selling Fund approval of
this Agreement. Seller shall use its reasonable best efforts to hold a
Shareholders Meeting as soon as practicable after the date hereof.
ARTICLE 6
CONDITIONS PRECEDENT TO THE REORGANIZATION
SECTION 6.1. Conditions Precedent of Buyer. The obligation of Buyer 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 Xxxxx.
(a) The representations and warranties of Seller on behalf of Selling Fund
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) Seller shall have complied with and satisfied in all material respects
all agreements and conditions relating to Selling Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Buyer shall have received at the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Seller, in such individual's capacity
as an officer of Seller and not as an individual, to the effect that the
conditions specified in Sections 6.1(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Seller certifying as to the accuracy and completeness of the
attached Governing Documents of Seller, and resolutions, consents and
authorizations of
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or regarding Seller with respect to the execution and delivery of this Agreement
and the transactions contemplated hereby.
(d) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
(e) Buyer shall have received from Seller confirmations or other adequate
evidence as to the tax costs and holding periods of the assets and property of
Selling Fund transferred to Buying Fund in accordance with the terms of this
Agreement.
(f) To the extent applicable, Seller Investment Adviser shall have
terminated or waived, in either case in writing, any rights to reimbursement
from Selling Fund to which it is entitled for fees and expenses absorbed by
Seller Investment Adviser pursuant to voluntary and contractual fee waiver or
expense limitation commitments between Seller Investment Adviser and Selling
Fund.
SECTION 6.2. Mutual Conditions. The obligations of Seller and Buyer 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 of
which may be waived in writing by Seller and Buyer, but only if and to the
extent that such waiver is mutual.
(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 Seller and Buyer 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 Selling Fund and related matters
shall have been approved and adopted at the Shareholders Meeting by the
shareholders of Selling Fund on the record date by the Required Shareholder
Vote.
(c) The assets of Selling Fund to be acquired by Buying 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 Selling Fund
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by Selling 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
Selling 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 Selling
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 Buyer with respect to
Buying Fund Shares to be issued to Selling Fund Shareholders in connection with
the Reorganization shall have become 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) Each of Buying Fund and Selling 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 Selling
Fund ending on the Closing Date and taxable quarter of Buying Fund that includes
the Closing Date.
(g) Seller and Buyer shall have received on or before the Closing Date an
opinion of Buyer Counsel in form and substance reasonably acceptable to Seller
and Buyer, as to the matters set forth on Schedule 6.2(g).
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In rendering such opinion, Buyer Counsel may request and rely upon
representations contained in certificates of officers of Seller, Xxxxx and
others, and the officers of Seller and Buyer shall use their best efforts to
make available such truthful certificates.
SECTION 6.3. Conditions Precedent of Seller. The obligation of Seller 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 Seller.
(a) The representations and warranties of Buyer on behalf of Buying Fund
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) Buyer shall have complied with and satisfied in all material respects
all agreements and conditions relating to Buying Fund set forth herein on its
part to be performed or satisfied at or prior to the Closing Date.
(c) Seller shall have received on the Closing Date (i) a certificate, dated
as of the Closing Date, from an officer of Buyer, in such individual's capacity
as an officer of Buyer and not as an individual, to the effect that the
conditions specified in Sections 6.3(a) and (b) have been satisfied and (ii) a
certificate, dated as of the Closing Date, from the Secretary or Assistant
Secretary of Buyer certifying as to the accuracy and completeness of the
attached Governing Documents of Buyer and resolutions, consents and
authorizations of or regarding Buyer with respect to the execution and delivery
of this Agreement and the transactions contemplated hereby.
ARTICLE 7
TERMINATION OF AGREEMENT
SECTION 7.1. Termination. This Agreement may be terminated on or prior to
the Closing Date as follows:
(a) by mutual written consent of Xxxxxx and Xxxxx; or
(b) at the election of Seller or Buyer, to be effectuated by the
delivery by the terminating party to the other party of a written notice of
such termination:
(i) if the Closing Date shall not be on or before the Termination
Date, unless the failure to consummate the Reorganization is the result
of a willful and material breach of this Agreement by the party seeking
to terminate this Agreement;
(ii) if, upon a vote at the Shareholders Meeting or any final
adjournment thereof, the Required Shareholder Vote shall not have been
obtained as contemplated by Section 5.8; or
(iii) if 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.
SECTION 7.2. Survival After Termination. If this Agreement is terminated
in accordance with Section 7.1 hereof and the Reorganization of Selling Fund is
not consummated, this Agreement shall become void and of no further force and
effect with respect to the Reorganization and Selling Fund, except for the
provisions of Section 5.3.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement, and the covenants in this
Agreement that are required to be performed at or prior to the Closing Date,
shall terminate upon the consummation of the transactions contemplated
hereunder. The covenants in this Agreement that are required to be performed in
whole or in part subsequent to the
I-17
Closing Date 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 Buyer and Seller.
(a) Xxxxxx and Xxxxx hereby acknowledge and agree that Buying Fund is a
separate investment portfolio of Buyer, that Buyer is executing this Agreement
on behalf of Buying Fund, and that any amounts payable by Buyer under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Buying Fund. Xxxxxx further acknowledges and agrees that this
Agreement has been executed by a duly authorized officer of Buyer in his or her
capacity as an officer of Buyer intending to bind Xxxxx as provided herein, and
that no officer, trustee or shareholder of Buyer shall be personally liable for
the liabilities or obligations of Buyer incurred hereunder. Finally, Seller
acknowledges and agrees that the liabilities and obligations of Buying Fund
pursuant to this Agreement shall be enforceable against the assets of Buying
Fund only and not against the assets of Buyer generally or assets belonging to
any other series of Buyer.
(b) Xxxxxx and Buyer hereby acknowledge and agree that Selling Fund is a
separate investment portfolio of Seller, that Seller is executing this Agreement
on behalf of Selling Fund and that any amounts payable by Seller under or in
connection with this Agreement shall be payable solely from the revenues and
assets of Selling Fund.
SECTION 8.5. Amendments. This Agreement may not be amended, altered or
modified except by a written instrument executed by Xxxxxx and Xxxxx.
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, Exhibit or Schedule, such reference shall be to a Section of, or
an Exhibit 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; Exhibits and Schedules. This Agreement,
including the Exhibits, 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.
I-18
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 Seller:
INVESCO Variable Investment Funds, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxx
with a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-7599
Attn: Xxxxxx X. Xxxx
(b) If to Buyer:
AIM Variable Insurance Funds
00 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxx
with a copy to:
Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP
0000 Xxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-7599
Attn: Xxxxxx X. Xxxx
SECTION 8.11. Representations by Seller Investment Adviser. In its
capacity as investment adviser to Seller, Seller Investment Adviser represents
to Buyer that to the best of its knowledge the representations and warranties of
Seller and Selling 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 Seller
Investment Adviser who have substantive responsibility for the provision of
investment advisory services to Seller do not have actual knowledge to the
contrary after due inquiry.
SECTION 8.12. Representations by Buyer Investment Adviser. In its
capacity as investment adviser to Buyer, Buyer Investment Adviser represents to
Seller that to the best of its knowledge the representations and warranties of
Buyer and Buying Fund contained in this Agreement are true and correct as of the
date of this Agreement. For purposes of this Section 8.12, the best knowledge
standard shall be deemed to mean that the officers of Buyer Investment Adviser
who have substantive responsibility for the provision of investment advisory
services to Buyer do not have actual knowledge to the contrary after due
inquiry.
SECTION 8.13. Successors and Assigns; Assignment. This Agreement shall be
binding upon and inure to the benefit of Seller, on behalf of Selling Fund, and
Xxxxx, on behalf of Buying Fund, and their respective successors and assigns.
The parties hereto expressly acknowledge and agree that this Agreement shall be
binding upon and inure to the benefit of those Delaware statutory trusts that
are the resulting entities in the permitted redomestications of funds set forth
on Schedule 3.5(d).
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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.
INVESCO VARIABLE INVESTMENT FUNDS,
INC.,
acting on behalf of INVESCO
VIF -- GROWTH FUND
By:
------------------------------------
AIM VARIABLE INSURANCE FUNDS, acting
on
behalf of AIM V.I. GROWTH FUND
By:
------------------------------------
A I M ADVISORS, INC.
By:
------------------------------------
INVESCO FUNDS GROUP, INC.
By:
------------------------------------
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EXHIBIT A
EXCLUDED LIABILITIES OF SELLING FUND
None.
SCHEDULE 2.1
CLASSES OF SHARES OF SELLING FUND AND
CORRESPONDING CLASSES OF SHARES OF BUYING FUND
CLASSES OF SHARES OF SELLING FUND CORRESPONDING CLASSES OF SHARES OF BUYING FUND
--------------------------------- ----------------------------------------------
INVESCO VIF -- Growth Fund AIM V.I. Growth Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
SCHEDULE 3.4
CERTAIN CONTINGENT LIABILITIES OF SELLING FUND
None.
SCHEDULE 3.5(d)
PERMITTED REDOMESTICATIONS OF FUNDS
SERIES OF INVESCO VARIABLE INVESTMENT FUNDS, INC. CORRESPONDING SERIES OF AIM VARIABLE INSURANCE FUNDS
(EACH A "CURRENT FUND") (EACH A "NEW FUND")
------------------------------------------------- ----------------------------------------------------
INVESCO VIF -- Core Equity Fund INVESCO VIF -- Core Equity Fund
INVESCO VIF -- Dynamics Fund INVESCO VIF -- Dynamics Fund
INVESCO VIF -- Financial Services Fund INVESCO VIF -- Financial Services Fund
INVESCO VIF -- Growth Fund INVESCO VIF -- Growth Fund
INVESCO VIF -- Health Sciences Fund INVESCO VIF -- Health Sciences Fund
INVESCO VIF -- High Yield Fund INVESCO VIF -- High Yield Fund
INVESCO VIF -- Leisure Fund INVESCO VIF -- Leisure Fund
INVESCO VIF -- Real Estate Opportunity Fund INVESCO VIF -- Real Estate Opportunity Fund
INVESCO VIF -- Small Company Growth Fund INVESCO VIF -- Small Company Growth Fund
INVESCO VIF -- Technology Fund INVESCO VIF -- Technology Fund
INVESCO VIF -- Telecommunications Fund INVESCO VIF -- Telecommunications Fund
INVESCO VIF -- Total Return Fund INVESCO VIF -- Total Return Fund
INVESCO VIF -- Utilities Fund INVESCO VIF -- Utilities Fund
SCHEDULE 4.4
CERTAIN CONTINGENT LIABILITIES OF BUYING FUND
None.
SCHEDULE 4.5(a)
PORTFOLIOS OF BUYER
AIM V.I. Aggressive Growth Fund
AIM V.I. Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Blue Chip Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Dent Demographic Trends Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Utilities Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth Fund
AIM V.I. High Yield Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. New Technology Fund
AIM V.I. Premier Equity Fund
AIM V.I. Small Cap Equity Fund
SCHEDULE 4.5(b)
CLASSES OF SHARES OF BUYING FUND AND NUMBER OF SHARES OF
EACH CLASS BUYER IS AUTHORIZED TO ISSUE
NUMBER OF SHARES OF EACH CLASS
CLASSES OF SHARES OF BUYING FUND BUYER IS AUTHORIZED TO ISSUE
-------------------------------- ------------------------------
AIM V.I. -- Growth Fund
Series I Shares........................................... Unlimited
Series II Shares.......................................... Unlimited
SCHEDULE 5.1
PERMITTED COMBINATIONS OF FUNDS
AIM V.I. Global Utilities Fund into INVESCO VIF -- Utilities Fund
AIM V.I. New Technology Fund into INVESCO VIF -- Technology Fund
INVESCO VIF -- Telecommunications Fund into INVESCO VIF -- Technology Fund
INVESCO VIF -- Growth Fund into AIM V.I. Growth Fund
INVESCO VIF -- High Yield Fund into AIM V.I. High Yield Fund
LSA Basic Value Fund into AIM V.I. Basic Value Fund
SCHEDULE 6.2(g)
TAX OPINIONS
(i) The transfer of the assets of Selling Fund to Buying Fund in exchange
solely for Buying Fund Shares distributed directly to Selling Fund Shareholders
and Buying Fund's assumption of the Liabilities, as provided in the Agreement,
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code and Selling Fund and Buying Fund will be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
(ii) In accordance with Section 361(a) and Section 361(c)(1) of the Code,
no gain or loss will be recognized by Selling Fund on the transfer of its assets
to Buying Fund solely in exchange for Buying Fund Shares and Buying Fund's
assumption of the Liabilities or on the distribution of Buying Fund Shares to
Selling Fund Shareholders; provided that, no opinion is expressed as to the
effect of the Reorganization on Selling Fund or any Selling Fund Shareholder
with respect to any asset as to which any unrealized gain or loss is required to
be recognized for Federal income tax purposes at the end of a taxable year (or
on the termination or transfer of a taxpayer's rights (or obligations) with
respect to such asset) under a mark-to-market system of accounting.
(iii) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange
for Buying Fund Shares issued directly to Selling Fund Shareholders.
(iv) accordance with Section 354(a)(1) of the Code, no gain or loss will be
recognized by Selling Fund Shareholders on the receipt of Buying Fund Shares in
exchange for Selling Fund Shares.
(v) In accordance with Section 362(b) of the Code, the basis to Buying Fund
of the assets of Selling Fund will be the same as the basis of such assets in
the hands of Selling Fund immediately prior to the Reorganization.
(vi) In accordance with Section 358(a) of the Code, a Selling Fund
Shareholder's basis for Buying Fund Shares received by the Selling Fund
Shareholder will be the same as his or her basis for Selling Fund Shares
exchanged therefor.
(vii) In accordance with Section 1223(1) of the Code, a Selling Fund
Shareholder's holding period for Buying Fund Shares will be determined by
including such Selling Fund Shareholder's holding period for Selling Fund Shares
exchanged therefor, provided that such Selling Fund Shareholder held such
Selling Fund Shares as a capital asset.
(viii) In accordance with Section 1223(2) of the Code, the holding period
with respect to the assets of Selling Fund transferred to Buying Fund in the
Reorganization will include the holding period for such assets in the hands of
Selling Fund.
(ix) In accordance with Section 381(a)(2) of the Code, Buying Fund will
succeed to and take into account the items of Selling Fund described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381 through 384 of the Code and the Treasury Regulations thereunder.
APPENDIX II
AIM VARIABLE INSURANCE FUNDS
AIM V.I. GROWTH FUND
(SERIES I SHARES)
Supplement dated January 16, 2004
to the Prospectus dated May 1, 2003
as supplemented December 5, 2003 and December 16, 2003
This supplement provides additional information concerning the matters discussed
in the supplement dated December 16, 2003 (the "Prior Supplement").
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM"), is an indirect
wholly owned subsidiary of AMVESCAP PLC ("AMVESCAP"). Another indirect wholly
owned subsidiary of AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, prior
to November 25, 2003, the investment advisor to the INVESCO Funds.
As discussed in the Prior Supplement, on December 2, 2003 each of the Securities
Exchange Commission ("SEC") and the Office of the Attorney General of the State
of New York ("NYAG") filed civil proceedings against INVESCO and Xxxxxxx X.
Xxxxxxxxxx, in his capacity as the chief executive officer of INVESCO, and on
December 2, 2003 the State of Colorado filed civil proceedings against INVESCO.
The civil proceedings allege that INVESCO failed to disclose in the INVESCO
Funds' prospectuses and to the INVESCO Funds' independent directors that INVESCO
had entered into certain arrangements permitting market timing of the INVESCO
Funds.
In addition to these civil proceedings, the SEC and NYAG have issued subpoenas
and requested information from AIM relating to market timing activity by certain
investors in the AIM Funds.
The independent trustees of the AIM/INVESCO Funds have retained their own
independent counsel to conduct an investigation on behalf of the independent
trustees into the frequent trading arrangements and related issues raised by the
regulators. The independent trustees have created a special committee,
consisting of four independent trustees, to oversee the investigation and to
formulate recommendations for further board action. As part of the investigation
by the independent trustees, their independent counsel has been reviewing the
examination of INVESCO and AIM currently being conducted by management's outside
counsel.
AMVESCAP recently found, in its ongoing review, situations in which the
procedures designed to guard against the potential adverse impact of frequent
trading and illegal late trading through intermediaries were not completely
effective. These findings were based, in part, on an extensive economic analysis
by outside experts who examined the impact of these activities.
In light of these findings, AMVESCAP has agreed that any AIM or INVESCO Fund
harmed by the activities of accommodated market timers will receive full
restitution. In addition, AMVESCAP has retained outside counsel to undertake a
comprehensive review of AIM's and INVESCO's policies, procedures and practices,
with the objective that they rank among the most effective in the fund industry.
AMVESCAP has informed regulators of its most recent findings and is seeking to
resolve both the pending enforcement actions against INVESCO and the ongoing
investigations with respect to AIM.
The Prior Supplement identifies multiple lawsuits that have been filed against
certain INVESCO Funds, AIM Funds, INVESCO, A I M Management Group Inc., the
parent of AIM, AMVESCAP and certain related parties, primarily based upon the
allegations in the complaints described above, and that have been served as of
December 16, 2003. The following list identifies additional lawsuits that have
been served as of January 15, 2004:
o Xxxxxx X. Xxxxxxx, et al., v. INVESCO Advantage Health
Sciences Fund, et al., in the United States District Court,
District of Colorado (Civil Action No. 03-N-2559), filed on
December 17, 2003.
o Xxxxxx X. Xxxxx, Individually and On Behalf of All Others
Similarly Situated, v. INVESCO Advantage Health Sciences Fund,
et al., in the United States District Court, Southern District
of New York (Civil Action No. 03-CV-10045), filed on December
18, 2003.
o Xxxxxx Xxxxxxxx, Individually and On Behalf of All Others
Similarly Situated, v. AMVESCAP, PLC, et al., in the United
States District Court, District of Colorado (Civil Action No.
03-M-2604), filed on December 24, 2003.
o Xxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx v. INVESCO Funds Group,
Inc. and A I M Advisors, Inc., in the United States District
Court, District of Colorado (Civil Action No. 03-MK-2612),
filed on December 24, 2003.
The Xxxxxxx and Xxxxxxx lawsuits allege a variety of theories of recovery and
seek a variety of remedies, which are generally identified in the Prior
Supplement. The Xxxxxxxx lawsuit alleges as a theory of recovery the violation
of various provisions of the Employee Retirement Income Security Act ("ERISA")
and seeks as a remedy various corrective measures under XXXXX, among other
remedies identified in the Prior Supplement. The Xxxxxxx lawsuit seeks as a
remedy that the advisory agreement with AIM be rescinded and/or declared
unenforceable or void and that all advisory fees received during the past year
be refunded, among other remedies identified in the Prior Supplement.
More detailed information regarding each of the cases identified above is
provided in each fund's statement of additional information. Additional lawsuits
arising out of these circumstances and presenting similar allegations and
requests for relief may be filed against the funds, INVESCO, AIM, AMVESCAP and
related parties in the future. Information about any similar additional lawsuits
will be provided in the statement of additional information.
AIM VARIABLE INSURANCE FUNDS
AIM V.I. GROWTH FUND
(SERIES I SHARES)
Supplement dated December 16, 2003
to the Prospectus dated May 1, 2003
as supplemented December 5, 2003
This supplement supercedes and replaces in its entirety, the supplement dated
December 5, 2003.
The Board of Trustees of AIM Variable Insurance Funds ("AVIF"), on behalf of AIM
V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Basic Value Fund,
AIM V.I. Blue Chip Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. Capital
Development Fund, AIM V.I. Core Equity Fund, AIM V.I. Dent Demographic Trends
Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Utilities Fund, AIM V.I.
Government Securities Fund, AIM V.I. Growth Fund, AIM V.I. High Yield Fund, AIM
V.I. International Growth Fund, AIM V.I. Large Cap Growth Fund, AIM V.I. Mid Cap
Core Equity Fund, AIM V.I. Money Market Fund, AIM V.I. New Technology Fund, AIM
V.I. Premier Equity Fund and AIM V.I. Small Cap Equity Fund (the "AVIF Funds"),
voted to request shareholders to approve the following items that will affect
one or more of the AVIF Funds:
- The Election of sixteen trustees to the Board of Trustees of AVIF; and
- To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
An Agreement and Plan of Reorganization which provides for the redomestication
of each series of the INVESCO Variable Investment Funds, Inc. as funds of AVIF
(the "Redomestication") has been approved by the Board of Trustees of AVIF. The
proposed Redomestication relates to an integration initiative announced on March
27, 2003, by AMVESCAP PLC ("AMVESCAP"), the parent company of both AIM and
INVESCO Funds Group, Inc., with respect to its North American mutual fund
operations. AMVESCAP has recommended simplifying the organizational structure of
the funds within The AIM Family of Funds--Registered Trademark-- (the "AIM
Funds") and the INVESCO Family of Funds (the "INVESCO Funds") so that they are
all organized as Delaware statutory trusts, using as few entities as
practicable. This change should provide these Funds with greater flexibility in
conducting their business operations.
The Board of Trustees of AVIF has called a meeting of AVIF's shareholders to be
held on or about March 26, 2004 to vote on these and other proposals. Only
shareholders of record as of the close of business on January 9, 2004 are
entitled to vote at the meeting. Proposals that are approved are expected to
become effective on or about April 30, 2004.
Your Fund's investment advisor, A I M Advisors, Inc. ("AIM") is an indirect
wholly owned subsidiary of AMVESCAP. Another indirect wholly owned subsidiary of
AMVESCAP, INVESCO Funds Group, Inc. ("INVESCO"), was, until recently, the
investment advisor to the INVESCO Funds.
On December 2, 2003 each of the Securities and Exchange Commission ("SEC") and
the Office of the Attorney General of the State of New York ("NYAG") filed civil
proceedings against INVESCO and Xxxxxxx X. Xxxxxxxxxx, in his capacity as the
chief executive officer of INVESCO. In addition, on December 2, 2003, the State
of Colorado filed civil proceedings against INVESCO. Neither your Fund nor any
of the INVESCO Funds has been named as a defendant in any of these proceedings.
The SEC proceeding, filed in the United States District Court for the District
of Colorado [Civil Action No. 03-N-2421 (PAC)], alleges that INVESCO failed to
disclose in the INVESCO Funds' prospectuses and to the INVESCO Funds'
independent directors that INVESCO had entered into certain arrangements
permitting market timing of the INVESCO Funds. The SEC alleges violations of
Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 under that
Act, Section 206(1) and 206(2) of the Investment Advisers act of 1940, and
Sections 34(b) and 36(a) of the Investment Company Act of 1940. The SEC is
seeking injunctions, including permanent injunctions from serving as an
investment advisor, officer or director of an investment company; an accounting
of all market timing as well as certain fees and compensation received;
disgorgement; civil monetary penalties; and other relief.
The NYAG proceeding, filed in the Supreme Court of the State of New York (New
York County), is also based on the circumstances described above. The NYAG
proceeding alleges violation of Article 23-A (the "Xxxxxx Act") and Section 349
of the General Business Law of the State of New York and Section 63(12) of the
State of New York's Executive Law. The NYAG is seeking injunctions, including
permanent injunctions from directly or indirectly selling or distributing shares
of mutual funds; disgorgement of all profits obtained, including fees collected,
and payment of all restitution and damages caused, directly or indirectly from
the alleged illegal activities; civil monetary penalties; and other relief.
The Colorado proceeding, filed in the Colorado District Court, in the City and
County of Denver, Colorado, is also based on the circumstances described above.
The Colorado proceeding alleges violations of Section 6-1-105(1) of the Colorado
Consumer Protection Act. The State of Colorado is seeking injunctions;
restitution, disgorgement and other equitable relief; civil monetary penalties;
and other relief.
No relief is being sought against either your Fund or any of the INVESCO Funds
in any of these proceedings.
If INVESCO is unsuccessful in its defense of these proceedings, it could be
barred from serving as an investment advisor for any investment company
registered under the Investment Company Act of 1940, as amended (a "registered
investment company"). Similarly, if Xx. Xxxxxxxxxx is unsuccessful in his
defense of these proceedings, he could be barred from serving as an officer or
director of any registered investment company. Such results could also affect
the ability of AIM, or any other investment advisor directly or indirectly owned
by AMVESCAP, from serving as an investment advisor to any registered investment
company, including your Fund. Your Fund has been informed by AIM that, if either
of these results occurs, AIM will seek exemptive relief from the SEC to permit
it to continue to serve as your Fund's investment advisor. There can be no
assurance that such exemptive relief will be granted.
In addition to the complaints described above, multiple lawsuits, including
class action and shareholder derivative suits, have been filed against certain
INVESCO Funds, AIM Funds, INVESCO, AMVESCAP and certain related parties,
primarily based upon the allegations in the complaints described above. Such
lawsuits allege a variety of theories for recovery including, but not limited
to: (i) violation of various provisions of the Federal securities laws; (ii)
breach of fiduciary duty; and (iii) breach of contract. The lawsuits have been
filed in both Federal and state courts and seek such remedies as compensatory
damages; restitution, rescission; accounting for wrongfully gotten gains,
profits and compensation; injunctive relief; disgorgement; equitable relief;
interest and the payment of attorneys' and experts' fees. The following list
identifies such lawsuits that have been served as of the date of this
supplement:
o XXXXX XXXXXX, CUSTODIAN FOR XXXXX XXXXXX V. INVESCO ADVANTAGE
HEALTH SCIENCES FUND, ET AL., in the United States District Court,
District of Colorado (Civil Action Number 03-F-2456), filed on
December 4, 2003.
o XXXX XXXXXXX X. INVESCO FUNDS GROUP, INC., ET AL., in the District
Court, City and County of Denver, Colorado (Case Number 03CV9268),
filed on December 5, 2003.
o X. XXXXX XXXXXX, DERIVATIVELY ON BEHALF OF INVESCO FUNDS GROUP,
INC. V. AMVESCAP PLC, INVESCO, INC., ET AL., in the United States
District Court, District of Colorado (Civil Action No. 03-MK-2406),
filed on November 28, 2003.
o XXXXXX XXXXXXXX AND XXXXXX XXXXXXXX X. INVESCO ADVANTAGE HEALTH
SCIENCES FUND, ET AL., in the United States District Court,
Southern District of New York (Civil Action No. 03-CV-9634), filed
on December 4, 2003.
o XXXXXXX XXXXX X. INVESCO FUNDS GROUP, INC., ET AL., in the United
States District Court, District of Colorado (Civil Action No.
03-F-2441), filed on December 2, 2003.
More detailed information regarding each of the cases identified above is
provided in each fund's statement of additional information. Additional lawsuits
arising out of these circumstances and presenting similar allegations and
requests for relief may be filed against the funds, INVESCO, AMVESCAP and
related parties in the future. Information about any similar additional lawsuits
will be provided in the statement of additional information.
As a result of these developments, investors in the AIM and INVESCO Funds might
react by redeeming their investments. This might require the funds to sell
investments to provide for sufficient liquidity and could also have an adverse
effect on the investment performance of the funds.
AIM V.I. GROWTH FUND
May 1, 2003
Prospectus
SERIES I SHARES
Shares of the fund are currently offered only to
insurance company separate accounts. AIM V.I. Growth
Fund seeks to provide growth of capital.
--------------------------------------------------------
This prospectus contains important information about the
Series I class shares ("Series I shares") of the fund.
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.
YOUR GOALS. OUR SOLUTIONS. [AIM INVESTMENTS LOGO APPEARS HERE]
--Servicemark-- --Servicemark--
--------------------
AIM V.I. GROWTH FUND
--------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND STRATEGIES 1
------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
------------------------------------------------------
PERFORMANCE INFORMATION 2
------------------------------------------------------
Annual Total Returns 2
Performance Table 2
FEE TABLE AND EXPENSE EXAMPLE 3
------------------------------------------------------
Fees and Expenses of the Fund 3
Expense Example 3
FUND MANAGEMENT 4
------------------------------------------------------
The Advisor 4
Advisor Compensation 4
Portfolio Managers 4
OTHER INFORMATION 5
------------------------------------------------------
Purchase and Redemption of Shares 5
Pricing of Shares 5
Taxes 5
Dividends and Distributions 5
Share Classes 5
FINANCIAL HIGHLIGHTS 6
------------------------------------------------------
OBTAINING ADDITIONAL INFORMATION Back Cover
------------------------------------------------------
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
Lifetime America, AIM LINK, AIM Institutional Funds, xxxxxxxx.xxx, 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
Internet Connect, AIM Private Asset Management, AIM Private Asset Management and
Design, AIM stylized and/or Design, AIM Alternative Assets and Design, AIM
Investments, AIM Investments and Design, xxxxx.xxx, The AIM College Savings
Plan, AIM Solo 401(k) and Your goals. Our solutions. 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.
--------------------
AIM V.I. GROWTH FUND
--------------------
INVESTMENT OBJECTIVE AND STRATEGIES
--------------------------------------------------------------------------------
The fund's investment objective is to seek growth of capital. The investment
objective of the fund may be changed by the Board of Trustees without
shareholder approval.
The fund seeks to meet its objective by investing principally in seasoned
and better capitalized companies considered to have strong earnings momentum.
The fund may invest up to 25% of its assets in foreign securities. Any
percentage limitations with respect to assets of the fund are applied at the
time of purchase.
The portfolio managers focus on companies that have experienced
above-average growth in earnings and have excellent prospects for future growth.
The portfolio managers consider whether to sell a particular security when any
of these factors materially changes.
In anticipation of or in response to adverse market or other conditions, or
atypical circumstances such as unusually large cash inflows or redemptions, the
fund may temporarily hold all or a portion of its assets in cash, cash
equivalents or high-quality debt instruments. As a result, the fund may not
achieve its investment objective. For cash management purposes, the fund may
also hold a portion of its assets in cash or cash equivalents, including shares
of affiliated money market funds.
A larger position in cash or cash equivalents could also detract from the
achievement of the fund's objective, but could also reduce the fund's exposure
in the event of a market downturn.
The fund may engage in active and frequent trading of portfolio securities
to achieve its investment objective. 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.
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 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.
To the extent the fund holds cash or cash equivalents rather than equity
securities for risk management, the fund may not achieve its investment
objective.
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.
1
--------------------
AIM V.I. GROWTH 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. All performance shown assumes the
reinvestment of dividends and capital gains. 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 Series I
shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1994................................................................... -2.48%
1995................................................................... 34.77%
1996................................................................... 18.09%
1997................................................................... 26.87%
1998................................................................... 34.12%
1999................................................................... 35.24%
2000................................................................... -20.49%
2001................................................................... -33.88%
2002................................................................... -30.97%
During the periods shown in the bar chart, the highest quarterly return was
27.80% (quarter ended December 31, 1998) and the lowest quarterly return was
-27.44% (quarter ended March 31, 2001).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of
unmanaged broad-based securities market indices, style-specific indices and
peer-group indices.
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 2002) 1 YEAR 5 YEARS INCEPTION DATE
-------------------------------------------------------------------------------
AIM V.I. Growth Fund (30.97)% (8.02)% 3.80% 05/05/93
Standard & Poor's 500 Index(1) (22.09)% (0.58)% 9.47%(2) 04/30/93(2)
Xxxxxxx 1000--Registered
Trademark-- Growth Index(3) (27.88)% (3.84)% 7.49%(2) 04/30/93(2)
Lipper Large-Cap Growth Fund
Index(4) (28.11)% (4.16)% 6.68%(2) 04/30/93(2)
-------------------------------------------------------------------------------
(1)The Standard & Poor's 500 Index is an index of common stocks frequently used
as a general measure of U.S. stock market performance. The fund has also
included the Xxxxxxx 1000--Registered Trademark--Growth Index, which the fund
believes more closely reflects the performance of the securities in which the
fund invests. In addition, the Lipper Large-Cap Growth Fund Index (which may
or may not include the fund) is included for comparison to a peer-group.
(2)The average annual total return given is since the date closest to the
inception date of the fund's Series I shares.
(3)The Xxxxxxx 1000--Registered Trademark-- Growth Index measures the
performance of those securities in the Xxxxxxx 1000--Registered Trademark--
Index with a greater than average growth orientation. The Xxxxxxx
1000--Registered Trademark-- Index measures the performance of the 1,000
largest companies in the Xxxxxxx 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
(4)The Lipper Large-Cap Growth Index is an equally weighted representation of
the 30 largest funds in the Lipper Large-Cap Growth category. These funds
typically invest in stocks with market capitalizations greater than $5
billion at the time of purchase and have an above-average price-to-earnings
ratio, price-to-book ratio, and a three year sales-per-share growth value,
compared to the S&P 500 Index.
2
--------------------
AIM V.I. GROWTH FUND
--------------------
FEE TABLE AND EXPENSE EXAMPLE
--------------------------------------------------------------------------------
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly
or indirectly, when a variable contract owner buys, holds, or redeems interest
in a separate account that invests in the Series I shares of the fund but does
not represent the effect of any fees or other expenses of any variable annuity
or variable life insurance product.
SHAREHOLDER FEES
--------------------------------------------------------------------------------
(fees paid directly from
your investment) SERIES I SHARES
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) None
Maximum Deferred
Sales Charge (Load) None
--------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1)
--------------------------------------------------------------------------------
(expenses that are deducted
from fund assets) SERIES I SHARES
--------------------------------------------------------------------------------
Management Fees 0.63%
Other Expenses 0.28
Total Annual Fund
Operating Expenses 0.91
Net Expenses 0.91
--------------------------------------------------------------------------------
(1) Except as otherwise noted, figures shown in the table are for the year ended
December 31, 2002 and are expressed as a percentage of fund average daily
net assets. There is no guarantee that actual expenses will be the same as
those shown in the table.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Series I shares of the fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the fund's Series I shares
for the time periods indicated. The example also assumes that your investment
has a 5% return each year and that the fund's operating expenses remain the
same. The example does not assume that any fund expense waiver or reimbursement
arrangements are in effect for the periods indicated. To the extent fees are
waived and/or expenses are reimbursed, your expenses will be lower. Although
your actual returns and costs may be higher or lower, based on these assumptions
your costs would be:
SERIES I SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
AIM V.I. Growth Fund $93 $290 $504 $1,120
--------------------------------------------------------------------------------
3
--------------------
AIM V.I. GROWTH FUND
--------------------
FUND MANAGEMENT
--------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor. The
advisor is located at 00 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000.
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 190 investment portfolios, including the fund, encompassing a broad range
of investment objectives.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2002, the advisor received
compensation of 0.63% of the fund's average daily 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 fund's portfolio are
as follows:
- Xxxxx X. Xxxxxxxxxx (lead manager), Senior Portfolio Manager, who has been
responsible for the fund since 2002 and has been associated with the advisor
and/or its affiliates since 1987.
- Xxxxx X. Xxxxxxxx, Portfolio Manager, who has been responsible for the fund
since 2003 and has been associated with the advisor and/or its affiliates
since 1997.
- Xxxxxx X. Xxxxx, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1995.
They are assisted by the Large Cap Growth Team. More information on the fund's
management team may be found on our website (xxxx://xxx.xxxxxxxxxxxxxx.xxx).
4
--------------------
AIM V.I. GROWTH FUND
--------------------
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.
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated life insurance
companies funding variable annuity contracts and variable life insurance
policies. 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. Due to differences in tax
treatment and other considerations, the interests of variable contract owners
investing in separate accounts investing in the fund, and the interests of plan
participants investing in the fund, may conflict.
Mixed and shared funding may present certain conflicts of interest. For
example, violation of the federal tax laws by one separate account investing in
a fund could cause owners of contracts and policies funded through another
separate account to lose their tax-deferred status, unless remedial actions were
taken. The Board of Trustees of the fund will monitor for the existence of any
material conflicts and determine what action, if any, should be taken. 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 customary trading session 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
customary trading session of the NYSE on each day the NYSE is open for business,
or any earlier NYSE closing time that day.
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, if any,
annually to separate accounts of participating 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.
SHARE CLASSES
The fund has two classes of shares, Series I shares and Series II shares. Each
class is identical except that Series II shares has a distribution or "Rule
12b-1 Plan" that is described in the prospectus relating to the Series II
shares.
5
--------------------
AIM V.I. GROWTH FUND
--------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance of the fund's Series I shares. 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 indicated.
This information has been audited by Xxxx, Xxxxxx & Xxxxx, whose report,
along with the fund's financial statements, is included in the fund's annual
report, which is available upon request.
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 16.37 $ 24.81 $ 32.25 $ 24.80 $ 19.83
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03)(a) (0.03)(a) 0.03 0.01(a) 0.08
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (5.04) (8.37) (6.60) 8.63 6.57
===============================================================================================================================
Total from investment operations (5.07) (8.40) (6.57) 8.64 6.65
===============================================================================================================================
Less distributions:
Dividends from net investment income -- (0.04) 0.00 (0.06) (0.09)
-------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- (0.87) (1.13) (1.59)
===============================================================================================================================
Total distributions -- (0.04) (0.87) (1.19) (1.68)
===============================================================================================================================
Net asset value, end of period $ 11.30 $ 16.37 $ 24.81 $ 32.25 $ 24.80
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) (30.97)% (33.86)% (20.49)% 35.24% 34.12%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $361,259 $601,648 $879,182 $704,096 $371,915
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 0.91%(c) 0.88% 0.83% 0.73% 0.72%
===============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.21)%(c) (0.17)% 0.11% 0.04% 0.41%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 195% 239% 162% 101% 133%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America. Total returns do not reflect
charges at the separate account level which if included would reduce total
returns for all periods shown.
(c) Ratios are based on average daily net assets of $468,319,600.
6
--------------------
AIM V.I. GROWTH 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., 00 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000-0000 or call (000) 000-0000.
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 XXXXX
database on the SEC's Internet website (xxxx://xxx.xxx.xxx); 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
xxxxxxxxxx@xxx.xxx. Please call the SEC at 0-000-000-0000 for information about
the Public Reference Room.
------------------------------------
AIM V.I. GROWTH FUND SERIES I
SEC 1940 Act file number: 811-7452
------------------------------------
XXXxxxxxxxxxxx.xxx
AIM V.I. Growth Fund
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
BEAR MARKET PERSISTS THROUGHOUT FISCAL YEAR
For the year ended December 31, 2002, the fund's Series I shares returned
-30.97%, and Series II shares of AIM V.I. Growth Fund returned -31.11%,* lagging
the Xxxxxxx 1000 Growth Index return of -27.88% for the same period. Despite
being down for the year, the fund performed strongly in the fourth quarter
rally, with Series I shares returning 7.01% and Series II shares returning
7.03%.
During this difficult market, we appreciate your patience as we work
diligently to meet the goals of the fund. To meet growth expectations, we must
take a measured amount of risk. As discussed further in this report, we used
diversification and investments in core companies to decrease the risk profile
of the fund.
RELEVANT MARKET CONDITIONS
In the first quarter of 2002, U.S. gross domestic product, the broadest measure
of economic activity, grew at an annualized rate of 5.0%. It was bolstered by
strong consumer confidence, robust retail sales, and near-record auto and home
sales. Short-term interest rates held steady at levels unseen since the early
1960s. Despite this growing economy, investors kept their money out of the
markets. Several major market indexes, including the Dow and the S&P 500, dipped
to their lowest levels since 1997. Investors were concerned about the accounting
practices of several high-profile companies, weak company earnings, the threat
of additional terrorist attacks and the possibility of war with Iraq.
In October and November the markets rebounded as several major companies
reported better-than-expected earnings, and the Federal Reserve Board cut the
key federal funds rate to 1.25%, its lowest level since 1961. Investors pulled
back in December, however, largely due to reports of rising unemployment and
mounting tensions with North Korea over its nuclear program.
FUND STRATEGIES AND TECHNIQUES
Early in 2002, we determined to make the fund less aggressive and to temper
volatility. We began increasing our core growth holdings in companies that used
the current downturn to strengthen their positions within their industries. We
worked to increase our sector exposure for broader diversification by
maintaining at least minimal exposure to virtually every economic sector.
The bear market drove many previously large-cap stocks into mid-cap status
and that allowed us to broaden our percentage of mid-cap stocks. This too added
to diversification. These efforts combined to increase the number of stocks in
the portfolio from 76 in early 2002 to 113 at the close of the fiscal year,
further serving to reduce market risk. In a well-diversified portfolio, no
single investment has a disproportionate impact.
Two stocks that benefited the fund were:
o Bed, Bath & Beyond, a nationwide chain of superstores selling better-quality
domestic merchandise and home furnishings. For the 39 weeks ended 11/30/02,
net sales rose 28% and net income rose 44%. Revenues reflect increased
comparable store sales and the addition of new stores. Net income benefited
from an improved operating margin.
o Dell Computer, which continues to thrive due to its consistent financial
results and ample liquidity. Dell is the leading manufacturer of personal
computers and network
PORTFOLIO COMPOSITION
as of 12/31/02, based on total net assets
==============================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
----------------------------------------------------------------------------------------------
1. Microsoft Corp. 4.0% 1. Pharmaceuticals 10.9%
2. Pharmacia Corp. 2.8 2. Semiconductors 7.1
3. Gap, Inc. (The) 2.1 3. Diversified Financial Services 6.9
4. Pfizer Inc. 2.1 4. Systems Software 6.6
5. Wyeth 2.1 5. Computer Hardware 4.1
6. Cisco Systems, Inc. 1.9 6. Managed Health Care 3.9
7. Amgen Inc. 1.8 7. Semiconductor Equipment 3.4
8. Applied Materials, Inc. 1.8 8. Industrial Conglomerates 3.1
9. Xxxxxxx & Xxxxxxx 1.8 9. Apparel Retail 3.1
10. Tyco International Ltd. (Bermuda) 1.7 10. Health Care Equipment 2.9
The fund's holdings are subject to change, and there is no assurance that the
fund will continue to hold any particular security.
===================================================================================================
161
AIM V.I. GROWTH FUND
================================================================================
RESULTS OF A $10,000 INVESTMENT
5/5/93-12/31/02
Index data from 4/30/93-12/31/02
[LINE CHART]
Source: Lipper, Inc.
INDEX PERFORMANCE VI GROWTH - LIPPER LARGE CAP
IS FROM 04/30/1993 SERIES I S&P 500 XXXXXXX 1000 GROWTH GROWTH IX
5/5/1993 10000 10000 10000 10000
5/31/1993 10260 10267 10350 10378
6/30/1993 10460 10297 10256 10461
7/31/1993 10420 10256 10072 10390
8/31/1993 10930 10644 10486 10821
9/30/1993 11170 10562 10409 10983
10/31/1993 11160 10781 10698 11109
11/30/1993 10731 10679 10626 10884
12/31/1993 11068 10808 10809 11223
1/31/1994 11609 11175 11060 11631
2/28/1994 11379 10872 10857 11443
3/31/1994 10688 10399 10333 10883
4/30/1994 10628 10533 10381 10937
5/31/1994 10538 10704 10538 11002
6/30/1994 10158 10442 10226 10592
7/31/1994 10428 10784 10576 10896
8/31/1994 11078 11226 11165 11455
9/30/1994 10878 10952 11015 11182
10/31/1994 11209 11197 11273 11468
11/30/1994 10728 10789 10911 11045
12/31/1994 10794 10949 11095 11131
1/31/1995 10785 11233 11332 11218
2/28/1995 11339 11670 11807 11604
3/31/1995 11772 12014 12152 11934
4/30/1995 12064 12367 12418 12259
5/31/1995 12446 12860 12850 12665
6/30/1995 13212 13159 13346 13312
7/31/1995 14098 13594 13901 14037
8/31/1995 14239 13628 13917 14115
9/30/1995 14763 14204 14558 14639
10/31/1995 14442 14152 14568 14555
11/30/1995 14784 14772 15135 15014
12/31/1995 14549 15057 15221 15020
1/31/1996 14811 15569 15730 15462
2/29/1996 15243 15714 16018 15809
3/31/1996 15344 15865 16038 15817
4/30/1996 15717 16098 16460 16194
5/31/1996 16050 16512 17035 16671
6/30/1996 15748 16575 17058 16521
7/31/1996 14891 15842 16059 15638
8/31/1996 15515 16176 16473 16107
9/30/1996 16502 17085 17672 17228
10/31/1996 16642 17557 17778 17443
11/30/1996 17579 18883 19114 18572
12/31/1996 17178 18509 18739 18111
1/31/1997 18108 19664 20053 19259
2/28/1997 17970 19819 19916 18982
3/31/1997 16935 19006 18839 18010
4/30/1997 17643 20139 20090 18999
5/31/1997 19017 21370 21540 20289
6/30/1997 19841 22321 22402 21139
7/31/1997 21638 24095 24382 23160
8/31/1997 20846 22746 22956 21898
9/30/1997 22116 23990 24085 23106
10/31/1997 21218 23189 23194 22305
11/30/1997 21630 24262 24180 22800
12/31/1997 21794 24680 24451 23110
01/31/98 22047 24951 25182 23519
02/28/98 23751 26750 27075 25316
03/31/98 24685 28120 28156 26493
04/30/98 25124 28407 28544 26938
05/31/98 24652 27918 27733 26335
06/30/98 25904 29051 29431 27841
07/31/98 25772 28743 29236 27827
08/31/98 21432 24590 24848 23283
09/30/98 22872 26166 26756 24975
10/31/98 24114 28291 28908 26586
11/30/98 25884 30005 31108 28413
12/31/98 29231 31734 33913 31538
01/31/99 30964 33060 35904 33585
02/28/99 29549 32032 34263 32205
03/31/99 31340 33313 36069 34034
04/30/99 31246 34602 36116 34150
05/31/99 30761 33786 35007 33019
06/30/99 32906 35654 37458 35314
07/31/99 32080 34545 36266 34205
08/31/99 31987 34373 36858 34212
09/30/99 32258 33431 36084 33867
10/31/99 33662 35547 38808 36464
11/30/99 35890 36269 40904 38266
12/31/99 39529 38401 45158 42517
01/31/00 37960 36473 43040 40812
02/29/00 43563 35784 45144 42959
03/31/00 44652 39284 48377 45974
04/30/00 41968 38101 46074 42416
05/31/00 38917 37320 43752 39973
06/30/00 41466 38238 47068 42615
07/31/00 40401 37642 45105 41750
08/31/00 44873 39979 49187 45361
09/30/00 40422 37868 44534 41900
10/31/00 36804 37709 42428 39684
11/30/00 30382 34738 36174 34358
12/31/00 31427 34908 35031 34145
01/31/01 30883 36147 37451 35139
02/28/01 25083 32854 31092 29699
03/31/01 22803 30775 27709 26613
04/30/01 24513 33163 31215 29472
05/31/01 23817 33385 30756 29248
06/30/01 23248 32574 30042 28405
07/31/01 22741 32255 29291 27389
08/31/01 21386 30239 26895 25307
09/30/01 19119 27798 24211 22761
10/31/01 19486 28329 25482 23706
11/30/01 20536 30502 27931 25877
12/31/01 20777 30771 27878 25996
01/31/02 20218 30321 27384 25409
02/28/02 18823 29736 26248 24357
03/31/02 20041 30854 27156 25336
04/30/02 18467 28984 24940 23649
05/31/02 18074 28773 24337 23218
06/30/02 16487 26724 22086 21328
07/31/02 14913 24642 20871 19722
08/31/02 14874 24803 20933 19831
09/30/02 13401 22109 18763 17909
10/31/02 14696 24052 20483 19288
11/30/02 15610 25467 21595 20087
12/31/02 14342 23972 20103 18687
Past performance cannot guarantee comparable future results.
This chart uses a logarithmic scale, which means the price scale (vertical axis)
is structured so that a given distance always represents the same percent
change in price, rather than the same absolute change in price. For example, the
distance from one to 10 is the same as the distance from 10 to 100 on a
logarithmic chart, but the latter distance is 10 times greater on a linear
chart. A logarithmic scale better illustrates performance in the fund's early
years before reinvested distributions and compounding create the potential for
the original investment to grow to very large numbers.
==============================================================================================
FUND RETURNS
AVERAGE ANNUAL TOTAL RETURNS
as of 12/31/02
SERIES I SHARES
Inception (5/5/93) 3.80%
5 Years -8.02
1 Year -30.97
SERIES II SHARES*
Inception 3.55%
5 Years -8.24
1 Year -31.11
*Performance shown for periods prior to the inception date of the Series II
class of shares (9/19/01) reflects the historical results of the Series I class
(inception date 5/5/93), adjusted to reflect the impact that the Series II class
Rule 12b-1 plan would have had if the Series II class had then existed. The
Series I and Series II share classes invest in the same portfolio of securities
and will have substantially similar performance, except to the extent that
expenses borne by each class differ.
AIM Variable Insurance Funds are offered through insurance company separate
accounts to fund variable annuity contracts and variable life insurance
policies, and through certain pension or retirement plans. Performance figures
given represent the fund and are not intended to reflect actual annuity values.
They do not reflect expenses and fees at the separate-account level. These
expenses and fees, which are determined by the product issuers, will vary and
will lower the total return. Fund performance figures are historical, and they
reflect fund expenses, the reinvestment of distributions and changes in net
asset value. The fund's investment return and principal value will fluctuate, so
an investor's shares, when redeemed, may be worth more or less than their
original cost.
AIM V.I. Growth Fund is for shareholders who seek growth of capital by
investing principally in seasoned and better-capitalized companies considered to
have strong earnings momentum.
The unmanaged Xxxxxxx 1000 Growth Index represents the performance of the
stocks of large-capitalization companies. The Growth segment measures the
performance of Xxxxxxx 1000 companies with higher price/book ratios and higher
forecasted growth values. The unmanaged Dow Xxxxx Industrial Average (the Dow)
is a price-weighted average of 30 actively traded blue chip stocks. The
unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500) is an
index of common stocks frequently used as a general measure of U.S. stock-market
performance. The unmanaged Lipper Large-Cap Growth Fund Index represents an
average of the performance of the 30 largest large-capitalization growth funds
tracked by Lipper, Inc., an independent mutual fund performance monitor.
An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
Performance of an index of funds reflects fund expenses. Performance of a market
index does not.
In the management discussion and in the Schedule of Investments in this
report, the fund's portfolio holdings are organized according to the Global
Industry Classification Standard, which was developed by and is the exclusive
property and a service mark of Xxxxxx Xxxxxxx Capital International Inc. and
Standard & Poor's.
DUE TO RECENT SIGNIFICANT MARKET VOLATILITY, RESULTS OF AN INVESTMENT MADE
TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. CALL YOUR
FINANCIAL ADVISOR FOR MORE CURRENT PERFORMANCE.
servers. The company is consistently profitable, and its stock has
significantly outperformed the tech sector as a whole over the last several
years.
One stock that experienced considerable volatility in the short term was:
o Tyco, which grew rapidly for a decade, largely through acquisitions, until
questionable accounting practices undermined the stock. Since then, Tyco
has overhauled its management team, made significant changes to its board,
and strengthened its corporate governance. We consider Tyco attractive
because, despite its troubles, many of its underlying businesses remain
leaders in their fields, providing Tyco with well-diversified income
sources.
Our exposure to both mid- and large-cap stocks gave us the flexibility to
participate in growth opportunities across a broad spectrum of companies.
Recovery may be slow, but we believe the fund is poised to benefit from it. We
did not exclude earnings momentum stocks from the fund. These may enjoy
significantly accelerating earnings when economic growth becomes more durable.
We added more names from the computer hardware industry. The managed health care
industry has provided attractive opportunities along with retail apparel and
industrial conglomerates. We continue to follow the AIM growth investment
discipline, targeting high-quality, established companies with the potential to
deliver above-average, sustainable revenue and earnings growth.
IN CLOSING
We know that market conditions in recent years have been largely disappointing.
We want to assure you that your fund management team continues to work
diligently to meet the fund's investment objectives of seeking growth of capital
by investing primarily in common stocks of leading companies considered by
management to have strong earnings momentum.
PORTFOLIO MANAGEMENT TEAM
AS OF 12/31/02
XXXXX XXXXXXXXXX, LEAD MANAGER
XXXXXX X. XXXXX
ASSISTED BY THE LARGE CAP GROWTH TEAM
AIM V.I. GROWTH FUND
162
APPENDIX IV
CHARTER OF THE
GOVERNANCE COMMITTEES OF THE AIM FUNDS
AND THE INVESCO FUNDS
(ADOPTED DECEMBER 10, 2003)
The Boards of Directors/Trustees ("Boards") of The AIM Funds and The
INVESCO Funds (collectively, "Funds"), have established a Governance Committee
for each of the Funds. This Charter shall govern the membership, duties and
operations of the Governance Committee of each of the Funds. References in this
Charter to "the Committees" shall mean the collective Governance Committees of
all Funds.
Membership: Each member of the Committees shall be a director and
trustee of the Funds who is not an "interested person" of the Funds within the
meaning of the Investment Company Act of 1940, as amended ("1940 Act"). Each
member of the Committees shall also meet the director independence requirements
for serving on audit committees as set forth from time to time in the New York
Stock Exchange listing standards (currently, Section 303A.06), and as set forth
in rules promulgated by the Securities and Exchange Act (the "SEC") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
applicable to investment companies whose shares are listed for trading on a
national securities exchange (currently, Rule 10A-3(b)(1)(iii)) (members that
meet such requirements are referred to herein as the "audit committee
independent directors").
Chair and Vice Chair: The Committees shall have a Chair and Vice Chair.
The Chair shall set the agenda for, and preside at, each meeting of the
Committees and shall engage in such other activities on behalf of the Committees
as shall be determined from time to time by the Committees. The Vice Chair shall
act as Chair in the absence or inability to act of the Chair and shall engage in
such other activities on behalf of the Committees as shall be determined from
time to time by the Committees.
Lead Dis-interested Director: The directors/trustees of the Funds who
are not "interested persons" of the Funds, as defined in the 1940 Act
("dis-interested directors"), may appoint a dis-interested director as the "Lead
Dis-interested Director." The Lead Dis-interested Director shall from time to
time as requested by the Committees act as liaison with management on particular
issues. Such functions are not to interfere with any directors'/trustees'
communications with management (and vice versa) on any issue; nor are such
functions intended to interfere with the interaction between management and any
of the Committees, other committees of the Boards, or the chair or vice chair of
the Committees or of such other committees.
Recommendation as to Share Ownership: The Committees recommend that
each director/trustee of the Funds beneficially own, on an aggregate basis, a
minimum dollar amount of shares of the Funds. The recommended minimum dollar
amount shall be $100,000 or the lowest dollar amount in the highest dollar range
set forth from time to time in Item 13(b)(4) of Form N-1A and/or Item 22(b)(5)
of Schedule 14A, if the lowest dollar amount in the highest dollar range set
forth in such Items is greater than $100,000. For purposes of this
recommendation, (i) shares of the Funds beneficially owned by the
directors/trustees shall include, for those directors/trustees who have executed
a Deferred Compensation Agreement with respect to the Funds, shares of the Funds
in which the deferral accounts of such directors/trustees are deemed to be
invested under such Deferred Compensation Agreements,
and (ii) shares of the Funds beneficially owned by the directors/trustees shall
not include shares of AIM Select Real Estate Income Fund that are beneficially
owned by the directors/trustees.
Meetings: The Committees may meet separately or in conjunction with
meetings of the Boards of the Funds. Meetings of the Committees may be held in
person or by other means as permitted by the Bylaws of the Funds.
Duties: The duties of the Committees are:
(a) to nominate persons for election or appointment as
dis-interested directors (i) as additions to the Boards, (ii)
to fill vacancies which, from time to time, may occur in the
Boards and (iii) for election by shareholders of Funds at
meetings called for the election of directors;
(b) to nominate persons for appointment as members of each
committee of the Boards, including without limitation the
Committees, the Audit Committees, the Investments Committees
and the Valuation Committees, and to nominate persons for
appointment as chair and vice chair of each such committee;
(c) to review from time to time, the compensation, if any, payable
to the directors of the Funds and to make recommendations to
the Boards with respect thereto;
(d) to review and evaluate from time to time the functioning of
the Boards and the various committees of the Boards and to
make recommendations to the Boards with respect thereto;
(e) to select independent legal counsel to the dis-interested
directors and to review and approve the compensation paid to
independent legal counsel to the dis-interested directors; and
(f) provided that the Committees are comprised solely of
dis-interested directors and that each member of the
Committees is an audit committee independent director, to
review and approve the compensation paid to independent
counsel and other advisers, if any, to the Audit Committees of
the Funds.
Nomination of Dis-interested Directors: After a determination by the
Committees that a person should be nominated as an additional dis-interested
director, or as soon as practical after a vacancy occurs or it appears that a
vacancy is about to occur for a dis-interested director position on any of the
Boards, the Committees shall nominate a person for appointment by a majority of
the dis-interested directors to add to the Boards or to fill the vacancy. Prior
to a meeting of the shareholders of the Funds called for the purpose of electing
dis-interested directors, the Committees shall nominate one or more persons for
election as dis-interested directors at such meeting.
Evaluation by the Committees of a person as a potential nominee to serve as a
dis-interested director, including a person nominated by a shareholder, should
result in the following findings by the Committees:
(a) upon advice of independent legal counsel to the dis-interested
directors, that the person will qualify as a dis-interested
director and that the person is otherwise
2
qualified under applicable laws and regulations to serve as a
director/trustee of the Funds;
(b) that the person is willing to serve, and willing and able to
commit the time necessary for the performance of the duties of
a dis-interested director;
(c) with respect to potential nominees to serve as dis-interested
director members of the Audit Committees of the Funds, upon
advice of independent legal counsel to the dis-interested
directors, that the person: (i) is free of any material
relationship with the Funds (other than as a shareholder of
the Funds), either directly or as a partner, shareholder or
officer of an organization that has a relationship with the
Funds, (ii) meets the requirements regarding the financial
literacy or financial expertise of audit committee members, as
set forth from time to time in the New York Stock Exchange
listing standards and in any rules promulgated by the SEC that
are applicable to investment companies whose shares are listed
for trading on a national securities exchange, and (iii) is an
audit committee independent director;
(d) that the person can make a positive contribution to the Boards
and the Funds, with consideration being given to the person's
business experience, education and such other factors as the
Committees may consider relevant;
(e) that the person is of good character and high integrity; and
(f) that the person has desirable personality traits including
independence, leadership and the ability to work with the
other members of the Boards.
Consistent with the 1940 Act, the Committees can consider recommendations from
management in its evaluation process.
As long as any Fund relies on any of Rule 10f-3, Rule 12b-1, Rule 15a-4(b)(2),
Rule 17a-7, Rule 17a-8, Rule 17d-1(d)(7), Rule 17e-1, Rule 17g-1(j), Rule 18f-3
or Rule 23c-3, (i) a majority of the directors/trustees of the Fund shall be
dis-interested directors, (ii) the selection and nomination of any other
dis-interested directors shall be committed to the discretion of the existing
dis-interested directors, and (iii) any person who acts as legal counsel to the
dis-interested directors shall be "independent legal counsel," as defined in the
1940 Act.
In seeking out potential nominees and in nominating persons to serve as
dis-interested directors of the Funds, the Committees shall not discriminate
against any person based on his or her race, religion, national origin, sex,
physical disability and other factors not relevant to the person's ability to
serve as a dis-interested director.
Nomination of Committee Members: The Committees shall periodically
review the members of each committee of the Boards, including without limitation
the Committees, the Audit Committees, the Investments Committees and the
Valuation Committees. The Committees shall from time to time nominate persons to
serve as members of each committee of the Boards, as well as persons who shall
serve as the chair and vice chair of each such committee. Evaluation by the
Committees of a person as a potential committee member shall include the factors
set forth above under "Nomination of Dis-interested Directors," to the extent
that such factors are applicable or relevant. All such persons shall be
appointed by a majority of
3
the directors/trustees of the Funds. An individual may be nominated to serve on
more than one committee of a Board.
Nominees Recommended by Shareholders: The Committees shall consider
nominees recommended by a shareholder to serve as directors/trustees, provided:
(i) that such person is a shareholder of record at the time he or she submits
such names and is entitled to vote at the meeting of shareholders at which
directors/trustees will be elected; and (ii) that the Committees or the Board,
as applicable, shall make the final determination of persons to be nominated.
For each Fund other than INVESCO Variable Investment Funds, Inc. ("IVIFI"), the
procedures to be followed by shareholders in submitting such recommendations are
set forth in the Fund's Bylaws. For IVIFI, a shareholder who desires to
recommend a nominee shall submit a request in writing to the Chair of IVIFI's
Governance Committee. The Committees shall evaluate nominees recommended by a
shareholder to serve as directors/trustees in the same manner as they evaluate
nominees identified by the Committees.
Review of Compensation: At least annually, the Committees shall review
and recommend the amount of compensation, if any, payable to the directors of
the Funds and report its findings and recommendation to the Boards. Compensation
shall be based on the responsibilities and duties of the dis-interested
directors and such other directors and the time required to perform these
duties. The Committees shall also make recommendations to the Boards regarding
matters related to compensation including deferred compensation plans and
retirement plans for the dis-interested directors and such other directors, and
shall monitor any and all such retirement plans and deferred compensation plans.
Evaluation Function: The Committees shall consider, oversee and
implement any periodic evaluation process of the Boards and all committees of
the Boards.
Selection of Counsel: The Committees shall consider and oversee the
selection of "independent legal counsel," as defined in the 1940 Act, to the
dis-interested directors and recommend such counsel to the dis-interested
directors. In making such selection the Committees will examine and monitor such
legal counsel's client relationships, in accordance with any applicable rules
promulgated by the SEC, in order to ascertain continued independence.
Attendance at Annual Meetings. Of the Funds, only AIM Select Real
Estate Income Fund holds annual meetings of shareholders. The Funds' policy with
regard to director/trustee attendance at annual meetings of shareholders, if
any, is that directors/trustees are encouraged but not required to attend such
annual meetings.
Authority: The Committees shall have the resources and authority
appropriate to carry out their duties, including the authority to engage
independent counsel and other advisers, experts or consultants as they deem
necessary to carry out their duties, all at the expense of the appropriate
Funds. The Committees shall be responsible for reviewing and approving the
compensation paid to such counsel and other advisers.
Funding: The Funds shall provide for appropriate funding, as determined
by the Committees, in their capacity as committees of the Boards, for payment of
(i) compensation to any independent counsel or other advisers employed by the
Committees and (ii) ordinary administrative expenses of the Committees under the
authority set forth in this Charter.
4
Review of Charter: The Committees shall review this Charter at least
annually, and shall recommend any changes to the full Boards. This Charter may
be amended only by the full Boards, with the approval of a majority of the
dis-interested directors.
Maintenance of Charter: Each Fund shall maintain and preserve in an
easily accessible place a copy of the Committee Charter established for such
Fund and any modification to such Charter.
5
APPENDIX V
AIM VARIABLE INSURANCE FUNDS
AMENDED AND RESTATED
MASTER INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this ____ day of _________________, 2004, by and
between AIM Variable Insurance Funds, a Delaware statutory trust (the "Trust")
with respect to its series of shares shown on the Appendix A attached hereto, as
the same may be amended from time to time, and A I M Advisors, Inc., a Delaware
corporation (the "Advisor").
RECITALS
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"), as an investment advisor and engages in
the business of acting as an investment advisor;
WHEREAS, the Trust's Agreement and Declaration of Trust (the
"Declaration of Trust") authorizes the Board of Trustees of the Trust (the
"Board of Trustees") to create separate series of shares of beneficial interest
of the Trust, and as of the date of this Agreement, the Board of Trustees has
created seventeen separate series portfolios (such portfolios and any other
portfolios hereafter added to the Trust being referred to collectively herein as
the "Funds"); and
WHEREAS, the Trust and the Advisor desire to enter into an agreement to
provide for investment advisory services to the Funds upon the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Advisory Services. The Advisor shall act as investment advisor
for the Funds and shall, in such capacity, supervise all aspects of the Funds'
operations, including the investment and reinvestment of cash, securities or
other properties comprising the Funds' assets, subject at all times to the
policies and control of the Board of Trustees. The Advisor shall give the Trust
and the Funds the benefit of its best judgment, efforts and facilities in
rendering its services as investment advisor.
2. Investment Analysis and Implementation. In carrying out its
obligations under Section 1 hereof, the Advisor shall:
(a) supervise all aspects of the operations of the Funds;
(b) obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data,
domestic, foreign or otherwise, whether affecting the economy generally
or the Funds, and whether concerning the individual issuers whose
securities are included in the assets of the Funds or the activities in
which such issuers engage, or with respect to securities which the
Advisor considers desirable for inclusion in the Funds' assets;
1
(c) determine which issuers and securities shall be
represented in the Funds' investment portfolios and regularly report
thereon to the Board of Trustees;
(d) formulate and implement continuing programs for the
purchases and sales of the securities of such issuers and regularly
report thereon to the Board of Trustees; and
(e) take, on behalf of the Trust and the Funds, all
actions which appear to the Trust and the Funds necessary to carry into
effect such purchase and sale programs and supervisory functions as
aforesaid, including but not limited to the placing of orders for the
purchase and sale of securities for the Funds.
3. Securities Lending Duties and Fees. The Advisor agrees to
provide the following services in connection with the securities lending
activities of each Fund: (a) oversee participation in the securities lending
program to ensure compliance with all applicable regulatory and investment
guidelines; (b) assist the securities lending agent or principal (the "Agent")
in determining which specific securities are available for loan; (c) monitor the
Agent to ensure that securities loans are effected in accordance with the
Advisor's instructions and with procedures adopted by the Board of Trustees; (d)
prepare appropriate periodic reports for, and seek appropriate approvals from,
the Board of Trustees with respect to securities lending activities; (e) respond
to Agent inquiries; and (f) perform such other duties as necessary.
As compensation for such services provided by the Advisor in connection
with securities lending activities of each Fund, a lending Fund shall pay the
Advisor a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities.
4. Delegation of Responsibilities. The Advisor is authorized to
delegate any or all of its rights, duties and obligations under this Agreement
to one or more sub-advisors, and may enter into agreements with sub-advisors,
and may replace any such sub-advisors from time to time in its discretion, in
accordance with the 1940 Act, the Advisers Act, and rules and regulations
thereunder, as such statutes, rules and regulations are amended from time to
time or are interpreted from time to time by the staff of the Securities and
Exchange Commission ("SEC"), and if applicable, exemptive orders or similar
relief granted by the SEC and upon receipt of approval of such sub-advisors by
the Board of Trustees and by shareholders (unless any such approval is not
required by such statutes, rules, regulations, interpretations, orders or
similar relief).
5. Independent Contractors. The Advisor and any sub-advisors
shall for all purposes herein be deemed to be independent contractors and shall,
unless otherwise expressly provided or authorized, have no authority to act for
or represent the Trust in any way or otherwise be deemed to be an agent of the
Trust.
6. Control by Board of Trustees. Any investment program
undertaken by the Advisor pursuant to this Agreement, as well as any other
activities undertaken by the Advisor on behalf of the Funds, shall at all times
be subject to any directives of the Board of Trustees.
7. Compliance with Applicable Requirements. In carrying out its
obligations under this Agreement, the Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the
Advisers Act and any rules and regulations adopted thereunder;
2
(b) the provisions of the registration statement of the
Trust, as the same may be amended from time to time under the
Securities Act of 1933 and the 1940 Act;
(c) the provisions of the Declaration of Trust, as the
same may be amended from time to time;
(d) the provisions of the by-laws of the Trust, as the
same may be amended from time to time; and
(e) any other applicable provisions of state, federal or
foreign law.
8. Broker-Dealer Relationships. The Advisor is responsible for
decisions to buy and sell securities for the Funds, broker-dealer selection, and
negotiation of brokerage commission rates.
(a) The Advisor's primary consideration in effecting a
security transaction will be to obtain the best execution.
(b) In selecting a broker-dealer to execute each
particular transaction, the Advisor will take the following into
consideration: the best net price available; the reliability, integrity
and financial condition of the broker-dealer; the size of and the
difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the
Funds on a continuing basis. Accordingly, the price to the Funds in any
transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified by other
aspects of the fund execution services offered.
(c) Subject to such policies as the Board of Trustees may
from time to time determine, the Advisor shall not be deemed to have
acted unlawfully or to have breached any duty created by this Agreement
or otherwise solely by reason of its having caused the Funds to pay a
broker or dealer that provides brokerage and research services to the
Advisor an amount of commission for effecting a fund investment
transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction, if the
Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Advisor's overall responsibilities
with respect to a particular Fund, other Funds of the Trust, and to
other clients of the Advisor as to which the Advisor exercises
investment discretion. The Advisor is further authorized to allocate
the orders placed by it on behalf of the Funds to such brokers and
dealers who also provide research or statistical material, or other
services to the Funds, to the Advisor, or to any sub-advisor. Such
allocation shall be in such amounts and proportions as the Advisor
shall determine and the Advisor will report on said allocations
regularly to the Board of Trustees indicating the brokers to whom such
allocations have been made and the basis therefor.
(d) With respect to one or more Funds, to the extent the
Advisor does not delegate trading responsibility to one or more
sub-advisors, in making decisions regarding broker-dealer
relationships, the Advisor may take into consideration the
recommendations of any sub-advisor appointed to provide investment
research or
3
advisory services in connection with the Funds, and may take into
consideration any research services provided to such sub-advisor by
broker-dealers.
(e) Subject to the other provisions of this Section 8,
the 1940 Act, the Securities Exchange Act of 1934, and rules and
regulations thereunder, as such statutes, rules and regulations are
amended from time to time or are interpreted from time to time by the
staff of the SEC, any exemptive orders issued by the SEC, and any other
applicable provisions of law, the Advisor may select brokers or dealers
with which it or the Funds are affiliated.
9. Compensation. The compensation that each Fund shall pay the
Advisor is set forth in Appendix B attached hereto.
10. Expenses of the Funds. All of the ordinary business expenses
incurred in the operations of the Funds and the offering of their shares shall
be borne by the Funds unless specifically provided otherwise in this Agreement.
These expenses borne by the Funds include but are not limited to brokerage
commissions, taxes, legal, accounting, auditing, or governmental fees, the cost
of preparing share certificates, custodian, transfer and shareholder service
agent costs, expenses of issue, sale, redemption and repurchase of shares,
expenses of registering and qualifying shares for sale, expenses relating to
trustees and shareholder meetings, the cost of preparing and distributing
reports and notices to shareholders, the fees and other expenses incurred by the
Trust on behalf of the Funds in connection with membership in investment company
organizations and the cost of printing copies of prospectuses and statements of
additional information distributed to the Funds' shareholders.
11. Services to Other Companies or Accounts. The Trust understands
that the Advisor now acts, will continue to act and may act in the future as
investment manager or advisor to fiduciary and other managed accounts, and as
investment manager or advisor to other investment companies, including any
offshore entities, or accounts, and the Trust has no objection to the Advisor so
acting, provided that whenever the Trust and one or more other investment
companies or accounts managed or advised by the Advisor have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each company and account.
The Trust recognizes that in some cases this procedure may adversely affect the
size of the positions obtainable and the prices realized for the Funds.
12. Non-Exclusivity. The Trust understands that the persons
employed by the Advisor to assist in the performance of the Advisor's duties
under this Agreement will not devote their full time to such service and nothing
contained in this Agreement shall be deemed to limit or restrict the right of
the Advisor or any affiliate of the Advisor to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
The Trust further understands and agrees that officers or directors of the
Advisor may serve as officers or trustees of the Trust, and that officers or
trustees of the Trust may serve as officers or directors of the Advisor to the
extent permitted by law; and that the officers and directors of the Advisor are
not prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors
or trustees of any other firm or trust, including other investment advisory
companies.
13. Effective Date, Term and Approval. This Agreement shall become
effective with respect to a Fund, if approved by the shareholders of such Fund,
on the Effective Date for such Fund, as set forth in Appendix A attached hereto.
If so approved, this Agreement shall thereafter continue in force and effect
until [April 30, 2006], and may be continued from year to
4
year thereafter, provided that the continuation of the Agreement is specifically
approved at least annually:
(a) (i) by the Board of Trustees or (ii) by the vote of
"a majority of the outstanding voting securities" of such Fund (as
defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the trustees
who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of a party to this Agreement (other than as
trustees of the Trust), by votes cast in person at a meeting
specifically called for such purpose.
14. Termination. This Agreement may be terminated as to the Trust
or as to any one or more of the Funds at any time, without the payment of any
penalty, by vote of the Board of Trustees or by vote of a majority of the
outstanding voting securities of the applicable Fund, or by the Advisor, on
sixty (60) days' written notice to the other party. The notice provided for
herein may be waived by the party entitled to receipt thereof. This Agreement
shall automatically terminate in the event of its assignment, the term
"assignment" for purposes of this paragraph having the meaning defined in
Section 2(a)(4) of the 1940 Act.
15. Amendment. No amendment of this Agreement shall be effective
unless it is in writing and signed by the party against which enforcement of the
amendment is sought.
16. Liability of Advisor and Fund. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Advisor or any of its officers, directors or
employees, the Advisor shall not be subject to liability to the Trust or to the
Funds or to any shareholder of the Funds for any act or omission in the course
of, or connected with, rendering services hereunder or for any losses that may
be sustained in the purchase, holding or sale of any security. Any liability of
the Advisor to one Fund shall not automatically impart liability on the part of
the Advisor to any other Fund. No Fund shall be liable for the obligations of
any other Fund.
17. Liability of Shareholders. Notice is hereby given that, as
provided by applicable law, the obligations of or arising out of this Agreement
are not binding upon any of the shareholders of the Trust individually but are
binding only upon the assets and property of the Trust and that the shareholders
shall be entitled, to the fullest extent permitted by applicable law, to the
same limitation on personal liability as shareholders of private corporations
for profit.
18. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered, telecopied or mailed postage paid, to the other party
entitled to receipt thereof at such address as such party may designate for the
receipt of such notice. Until further notice to the other party, it is agreed
that the address of the Trust and that of the Advisor shall be 00 Xxxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000-0000.
19. Questions of Interpretation. Any question of interpretation of
any term or provision of this Agreement having a counterpart in or otherwise
derived from a term or provision of the 1940 Act or the Advisers Act shall be
resolved by reference to such term or provision of the 1940 Act or the Advisers
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said Acts. In addition, where the effect
of a requirement of the 1940 Act or the Advisers Act reflected in any provision
of the Agreement is revised by rule, regulation or order of the SEC, such
provision shall be deemed to incorporate
5
the effect of such rule, regulation or order. Subject to the foregoing, this
Agreement shall be governed by and construed in accordance with the laws
(without reference to conflicts of law provisions) of the State of Texas.
20. License Agreement. The Trust shall have the non-exclusive
right to use the name "AIM" to designate any current or future series of shares
only so long as A I M Advisors, Inc. serves as investment manager or advisor to
the Trust with respect to such series of shares.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
written above.
AIM VARIABLE INSURANCE FUNDS
(a Delaware business trust)
Attest:
_______________________________ By:__________________________________
Assistant Secretary President
(SEAL)
Attest: A I M ADVISORS, INC.
______________________________ By:__________________________________
Assistant Secretary President
(SEAL)
6
APPENDIX A
FUNDS AND EFFECTIVE DATES
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
------------ ------------------
AIM V.I. Aggressive Growth Fund May 1, 2000
AIM V.I. Balanced Fund May 1, 2000
AIM V.I. Basic Value Fund September 10, 2001
AIM V.I. Blue Chip Fund May 1, 2000
AIM V.I. Capital Appreciation Fund May 1, 2000
AIM V.I. Capital Development Fund May 1, 2000
AIM V.I. Core Equity Fund May 1, 2000
AIM V.I. Dent Demographic Trends Fund May 1, 2000
AIM V.I. Diversified Income Fund May 1, 2000
AIM V.I. Global Utilities Fund May 1, 2000
AIM V.I. Government Securities Fund May 1, 2000
AIM V.I. Growth Fund May 1, 2000
AIM V.I. High Yield Fund May 1, 2000
AIM V.I. International Growth Fund May 1, 2000
AIM V.I. Large Cap Growth Fund September 1, 2003
AIM V.I. Mid Cap Core Equity Fund September 10, 2001
AIM V.I. Money Market Fund May 1, 2000
AIM V.I. New Technology Fund May 1, 2001
AIM V.I. Premier Equity Fund May 1, 2000
AIM V.I. Small Cap Equity Fund September 1, 2003
A-1
APPENDIX B
COMPENSATION TO THE ADVISOR
The Trust shall pay the Advisor, out of the assets of a Fund, as full
compensation for all services rendered, an advisory fee for such Fund set forth
below. Such fee shall be calculated by applying the following annual rates to
the average daily net assets of such Fund for the calendar year computed in the
manner used for the determination of the net asset value of shares of such Fund.
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. GROWTH FUND
AIM V.I. CORE EQUITY FUND
AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. PREMIER EQUITY FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $250 million............................................. 0.65%
Over $250 million.............................................. 0.60%
AIM V.I. AGGRESSIVE GROWTH FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $150 million............................................. 0.80%
Over $150 million.............................................. 0.625%
AIM V.I. BALANCED FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $150 million............................................. 0.75%
Over $150 million.............................................. 0.50%
AIM V.I. BASIC VALUE FUND
AIM V.I. MID CAP CORE EQUITY FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $500 million............................................. 0.725%
Next $500 million.............................................. 0.700%
Next $500 million.............................................. 0.675%
Over $1.5 billion.............................................. 0.65%
B-1
AIM V.I. BLUE CHIP FUND
AIM V.I. CAPITAL DEVELOPMENT FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $350 million............................................. 0.75%
Over $350 million.............................................. 0.625%
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $2 billion............................................... 0.85%
Over $2 billion................................................ 0.80%
AIM V.I. DIVERSIFIED INCOME FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $250 million............................................. 0.60%
Over $250 million.............................................. 0.55%
AIM V.I. NEW TECHNOLOGY FUND
NET ASSETS ANNUAL RATE
---------- -----------
Average Daily Net Assets....................................... 1.00%
AIM V.I. GOVERNMENT SECURITIES FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $250 million............................................. 0.50%
Over $250 million.............................................. 0.45%
AIM V.I. HIGH YIELD FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $200 million............................................. 0.625%
Next $300 million.............................................. 0.55%
Next $500 million.............................................. 0.50%
Over $1 billion................................................ 0.45%
B-2
AIM V.I. INTERNATIONAL GROWTH FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $250 million............................................. 0.75%
Over $250 million.............................................. 0.70%
AIM V.I. LARGE CAP GROWTH FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $1 billion............................................... 0.75%
Next $1 billion................................................ 0.70%
Over $2 billion................................................ 0.625%
AIM V.I. MONEY MARKET FUND
NET ASSETS ANNUAL RATE
---------- -----------
First $250 million............................................. 0.40%
Over $250 million.............................................. 0.35%"
AIM V.I. SMALL CAP EQUITY FUND
NET ASSETS ANNUAL RATE
---------- -----------
All Assets..................................................... 0.85%
B-3
APPENDIX VI
MASTER INTERGROUP SUB-ADVISORY CONTRACT FOR MUTUAL FUNDS
This contract is made as of December ___, 2003, between A I M Advisors,
Inc. hereinafter "Adviser," 00 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000,
and INVESCO Institutional (N.A.), Inc. "Sub-Adviser," 0000 Xxxxxxxxx Xxxxxx,
X.X., Xxxxx 000, Xxxxxxx, Xxxxxxx 00000.
WHEREAS:
A) Adviser has entered into an investment advisory agreement with
INVESCO Variable Investment Funds, Inc. (hereinafter "Trust"),
an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"),
with respect to the funds set forth in Exhibit A attached
hereto (each a "Fund");
B) Sub-Adviser represents that it is licensed under the
Investment Advisers Act of 1940 ("Advisers Act") as an
investment adviser and engages in the business of acting as an
investment adviser;
C) Adviser is authorized to delegate certain, any or all of its
rights, duties and obligations under investment advisory
agreements to sub-advisers, including sub-advisers that are
affiliated with Adviser.
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment. Adviser hereby appoints Sub-Adviser as Sub-Adviser of each Fund
for the period and on the terms set forth herein. Sub-Adviser accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. Duties as Sub-Adviser.
(a) Subject to the supervision of the Trust's Board of Trustees
("Board") and Adviser, the Sub-Adviser will provide a continuous investment
program for each Fund, including investment research and management, with
respect to all or a portion of the securities and investments and cash
equivalents of the Fund (the "Sub-Advised Assets"), such Sub-Advised Assets to
be determined by the Adviser. The Sub-Adviser will determine from time to time
what securities and other investments will be purchased, retained or sold with
respect to the Sub-Advised Assets of each Fund, and the brokers and dealers
through whom trades will be executed.
(b) The Sub-Adviser agrees that, in placing orders with brokers and
dealers, it will attempt to obtain the best net result in terms of price and
execution. Consistent with this obligation, the Sub-Adviser may, in its
discretion, purchase and sell portfolio securities from and to brokers and
dealers who sell shares of the Funds or provide the Funds, Adviser's other
clients, or Sub-Adviser's other clients with research, analysis, advice and
similar services. The Sub-Adviser may pay to brokers and dealers, in return for
such research and analysis, a higher commission or spread than may be charged by
other brokers and dealers, subject to the Sub-Adviser determining in good faith
that such commission or spread is reasonable in terms either of the particular
transaction or of the
1
overall responsibility of the Adviser and the Sub-Adviser to the Funds and their
other clients and that the total commissions or spreads paid by each Fund will
be reasonable in relation to the benefits to the Fund over the long term. In no
instance will portfolio securities be purchased from or sold to the Sub-Adviser,
or any affiliated person thereof, except in accordance with the applicable
securities laws and the rules and regulations thereunder and any exemptive
orders currently in effect. Whenever the Sub-Adviser simultaneously places
orders to purchase or sell the same security on behalf of a Fund and one or more
other accounts advised by the Sub-Adviser, such orders will be allocated as to
price and amount among all such accounts in a manner believed to be equitable to
each account.
(c) The Sub-Adviser will maintain all required books and records with
respect to the securities transactions of the Funds, and will furnish the Board
and Adviser with such periodic and special reports as the Board or Adviser
reasonably may request. Sub-Adviser xxxxxx agrees that all records which it
maintains for the Adviser are the property of the Adviser, and agrees to
preserve for the periods prescribed by applicable law any records which it
maintains for the Adviser and which are required to be maintained, and further
agrees to surrender promptly to the Adviser any records which it maintains for
the Adviser upon request by the Adviser.
3. Further Duties. In all matters relating to the performance of this Contract,
Sub-Adviser will act in conformity with the Agreement and Declaration of Trust,
By-Laws and Registration Statement of the Trust and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules, regulations, exemptive orders and no-action positions thereunder, and
all other applicable laws and regulations. Sub-Adviser shall maintain compliance
procedures for the Funds that it and the Adviser reasonably believe are adequate
to ensure compliance with the 1940 Act and the investment objective(s) and
policies as stated in the prospectuses and statements of additional information.
4. Services Not Exclusive. The services furnished by Sub-Adviser hereunder are
not to be deemed exclusive and Sub-Adviser shall be free to furnish similar
services to others so long as its services under this Contract are not impaired
thereby. Nothing in this Contract shall limit or restrict the right of any
director, officer or employee of Sub-Adviser, who may also be a Trustee, officer
or employee of the Trust, to engage in any other business or to devote his or
her time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature.
5. Compensation.
(a) For the services provided to a Fund under this Contract, Adviser
will pay Sub-Adviser a fee, computed daily and paid monthly, at the rate of 40%
of the Adviser's compensation on the Sub-Advised Assets per year, on or before
the last business day of the next succeeding calendar month.
(b) If this Contract becomes effective or terminates before the end of
any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
2
6. Fee Waivers and Expense Limitations. If, for any fiscal year of the Trust,
the amount of the advisory fee which the Fund would otherwise be obligated to
pay to the Adviser is reduced because of contractual or voluntary fee waivers or
expense limitations by the Adviser, the fee payable hereunder to the Sub-Adviser
shall be reduced proportionately; and to the extent that the Adviser reimburses
the Fund as a result of such expense limitations, the Sub-Adviser shall
reimburse the Adviser that proportion of such reimbursement payments which the
sub-advisory fee hereunder bears to the advisory fee under this Contract.
7. Limitation of Liability of Sub-Adviser and Indemnification. Sub-Adviser shall
not be liable for any costs or liabilities arising from any error of judgment or
mistake of law or any loss suffered by the Fund or the Trust in connection with
the matters to which this Contract relates except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of Sub-Adviser in the
performance by Sub-Adviser of its duties or from reckless disregard by
Sub-Adviser of its obligations and duties under this Contract. Any person, even
though also an officer, partner, employee, or agent of Sub-Adviser, who may be
or become a Trustee, officer, employee or agent of the Trust, shall be deemed,
when rendering services to a Fund or the Trust or acting with respect to any
business of a Fund or the Trust to be rendering such service to or acting solely
for the Fund or the Trust and not as an officer, partner, employee, or agent or
one under the control or direction of Sub-Adviser even though paid by it.
8. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written, provided that this Contract shall not take effect with respect to any
Fund unless it has first been approved (i) by a vote of a majority of the
independent Trustees who are not parties to this Contract or "interested
persons" (as defined in the 1940 Act) of a party to this Contract, other than as
Board members ("Independent Trustees"), cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of that
Fund's outstanding voting securities, when required by the 1940 Act.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in force and effect until June 30, 2005. Thereafter, if not terminated,
with respect to each Fund, this Contract shall continue automatically for
successive periods not to exceed twelve months each, provided that such
continuance is specifically approved at least annually (i) by a vote of a
majority of the Independent Trustees, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by the Board or by vote of a
majority of the outstanding voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this
Contract may be terminated at any time, without the payment of any penalty, (i)
by vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to Sub-Adviser; or (ii) by
the Adviser on sixty days' written notice to Sub-Adviser; or (iii) by the
Sub-Adviser on sixty days' written notice to the Trust. Termination of this
Contract with respect to one Fund shall not affect the continued effectiveness
of this Contract with respect to any other Fund. This Contract will
automatically terminate in the event of its assignment.
9. Amendment. No provision of this Contract may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which
3
enforcement of the change, waiver, discharge or termination is sought, and, when
required by the 1940 Act, no amendment of this Contract shall be effective until
approved by vote of a majority of the Fund's outstanding voting securities.
10. Notices. Any notices under this Contract shall be writing, addressed and
delivered, telecopied or mailed postage paid, to the other party entitled to
receipt thereof at such address as such party may designate for the receipt of
such notice. Until further notice to the other party, it is agreed that the
address of the Trust and the Adviser shall be 00 Xxxxxxxx Xxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000. Until further notice to the other party, it is agreed that
the address of the Sub-Adviser shall be 0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000.
11. Governing Law. This Contract shall be construed in accordance with the laws
of the State of Texas and the 1940 Act. To the extent that the applicable laws
of the State of Texas conflict with the applicable provisions of the 1940 Act,
the latter shall control.
12. Miscellaneous. The captions in this Contract are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this Contract
shall be held or made invalid by a court decision, statute, rule or otherwise,
the remainder of this Contract shall not be affected thereby. This Contract
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors. Any question of interpretation of any term or
provision of this Contract having a counterpart in or otherwise derived from a
term or provision of the 1940 Act or the Advisers Act shall be resolved by
reference to such term or provision of the 1940 Act or the Advisers Act and to
interpretations thereof, if any, by the United States Courts or in the absence
of any controlling decision of any such court, by rules, regulations or orders
of the Securities and Exchange Commission ("SEC") issued pursuant to said Acts.
In addition, where the effect of a requirement of the 1940 Act or the Advisers
Act reflected in any provision of the Contract is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order.
4
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated as of the day and year first above
written.
A I M ADVISORS, INC. INVESCO INSTITUTIONAL (N.A.), INC.
Adviser Sub-adviser
By: By:
-------------------------------- ---------------------------------
Name: Name:
------------------------------ -------------------------------
Title: Title:
----------------------------- ------------------------------
5
EXHIBIT A
TO
MASTER INTERGROUP SUB-ADVISORY CONTRACT FOR MUTUAL FUNDS
FUND
INVESCO VARIABLE INVESTMENT FUNDS, INC.
INVESCO VIF - Core Equity Fund
INVESCO VIF - Dynamics Fund
INVESCO VIF - Financial Services Fund
INVESCO VIF - Growth Fund
INVESCO VIF - Health Sciences Fund
INVESCO VIF - High Yield Fund
INVESCO VIF - Leisure Fund
INVESCO VIF - Real Estate Opportunity Fund
INVESCO VIF - Small Company Growth Fund
INVESCO VIF - Technology Fund
INVESCO VIF - Telecommunications Fund
INVESCO VIF - Total Return Fund
INVESCO VIF - Utilities Fund
6
APPENDIX VII
INVESCO VARIABLE INVESTMENT FUNDS, INC.
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of
December 10, 2003, by and between INVESCO Variable Investment Funds, Inc., a
Maryland corporation (the "Company"), acting on its own behalf and on behalf of
each of its series portfolios, all of which are identified on Schedule A to this
Agreement, and AIM Variable Insurance Funds, a Delaware statutory trust (the
"Trust"), acting on its own behalf and on behalf of each of its series
portfolios, all of which are identified on Schedule A.
BACKGROUND
The Company is organized as a series management investment company and
is registered with the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended. The Company currently publicly offers shares of
common stock representing interests in one or more separate series portfolios.
Each of these series portfolios is listed on Schedule A and is referred to in
this Agreement as a "Current Fund."
The Board of Directors of the Company has designated two classes of
common stock that represent interests in each Current Fund. These classes are
listed on Schedule B to this Agreement and each such class is referred to in
this Agreement as a "Current Fund Class."
The Company desires to change its form and place of organization by
reorganizing as the Trust. In anticipation of such reorganization, the Board of
Trustees of the Trust has established a series portfolio corresponding to each
of the Current Funds (each a "New Fund"), and has designated one or more classes
of shares of beneficial interest in each New Fund corresponding to the Current
Fund Classes (each a "New Fund Class"). Schedule A lists the New Funds and
Schedule B lists the New Fund Classes.
Each Current Fund desires to provide for its Reorganization (each, a
"Reorganization" and collectively, the "Reorganizations") through the transfer
of all of its assets to the corresponding New Fund in exchange for the
assumption by such New Fund of the liabilities of the corresponding Current Fund
and the issuance by the Trust to such Current Fund of shares of beneficial
interest in the New Fund ("New Fund Shares"). New Fund Shares received by a
Current Fund will have an aggregate net asset value equal to the aggregate net
asset value of the shares of the Current Fund immediately prior to the
Reorganization (the "Current Fund Shares"). Each Current Fund will then
distribute the New Fund Shares it has received to its shareholders.
Each Reorganization of each Current Fund is dependent upon the
consummation of the Reorganization of all of the other Current Funds, so that
the Reorganizations of all of the Current Funds must be consummated if any of
them are to be consummated. For convenience, the balance of this Agreement
refers only to a single Reorganization, but the terms and conditions hereof
shall apply separately to each Reorganization and to the Current Fund and the
corresponding New Fund participating therein, as applicable.
The Reorganization is subject to, and shall be effected in accordance
with, the terms of this Agreement. This Agreement is intended to be and is
adopted by the Company, on its own
behalf and on behalf of the Current Funds, and by the Trust, on its own behalf
and on behalf of the New Funds, as a Plan of Reorganization within the meaning
of the regulations under Section 368(a) of the Internal Revenue Code of 1986, as
amended.
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS
Any capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the preamble or background to this Agreement. In addition,
the following terms shall have the following meanings:
1.1 "Assets" shall mean all assets including, without limitation, all
cash, cash equivalents, securities, receivables (including interest and
dividends receivable), claims and rights of action, rights to register shares
under applicable securities laws, books and records, deferred and prepaid
expenses shown as assets on a Current Fund's books, and other property owned by
a Current Fund at the Effective Time.
1.2 "Closing" shall mean the consummation of the transfer of Assets,
assumption of Liabilities and issuance of shares described in Sections 2.1 and
2.2 of this Agreement, together with the related acts necessary to consummate
the Reorganization, to occur on the date set forth in Section 3.1.
1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "Current Fund" shall mean each of the series portfolios of the
Company as shown on Schedule A.
1.5 "Current Fund Class" shall mean each class of common stock of the
Company representing an interest in a Current Fund as shown on Schedule B.
1.6 "Current Fund Shares" shall mean the shares of a Current Fund
outstanding immediately prior to the Reorganization.
1.7 "Effective Time" shall have the meaning set forth in Section 3.1.
1.8 "Liabilities" shall mean all liabilities of a Current Fund
including, without limitation, all debts, obligations, and duties of whatever
kind or nature, whether absolute, accrued, contingent, or otherwise, whether or
not determinable at the Effective Time, and whether or not specifically referred
to herein.
1.9 "New Fund" shall mean each of the series portfolios of the Trust,
one of which shall correspond to one of the Current Funds as shown on Schedule
A.
1.10 "New Fund Class" shall mean each class of shares of beneficial
interest in a New Fund, one of which shall correspond to one of the Current Fund
Classes as shown on Schedule B.
2
1.11 "New Fund Shares" shall mean those shares of beneficial interest
in a New Fund issued to a Current Fund hereunder.
1.12 "Registration Statement" shall have the meaning set forth in
Section 5.4.
1.13 "RIC" shall mean a "regulated investment company" (as defined
under Subchapter M of the Code).
1.14 "SEC" shall mean the Securities and Exchange Commission.
1.15 "Shareholder(s)" shall mean a Current Fund's shareholder(s) of
record, determined as of the Effective Time.
1.16 "Shareholders Meeting" shall have the meaning set forth in Section
5.1.
1.17 "Transfer Agent" shall have the meaning set forth in Section 2.2.
1.18 "1940 Act" shall mean the Investment Company Act of 1940, as
amended.
2. PLAN OF REORGANIZATION
2.1 The Company agrees, on behalf of each Current Fund, to assign,
sell, convey, transfer and deliver all of the Assets of each Current Fund to its
corresponding New Fund. The Trust, on behalf of each New Fund, agrees in
exchange therefor:
(a) to issue and deliver to the corresponding Current Fund the
number of full and fractional (rounded to the third decimal place) New
Fund Shares of each New Fund Class designated on Schedule B equal to
the number of full and fractional Current Fund Shares of each
corresponding Current Fund Class designated on Schedule B; and
(b) to assume all of the Current Fund's Liabilities.
Such transactions shall take place at the Closing.
2.2 At the Effective Time (or as soon thereafter as is reasonably
practicable), (a) the New Fund Shares issued pursuant to Section 5.2 shall be
redeemed by each New Fund for $10.00 and (b) each Current Fund shall distribute
the New Fund Shares received by it pursuant to Section 2.1 to the Current Fund's
Shareholders in exchange for such Shareholders' Current Fund Shares. Such
distribution shall be accomplished through opening accounts, by the transfer
agent for the Trust (the "Transfer Agent"), on each New Fund's share transfer
books in the Shareholders' names and transferring New Fund Shares to such
accounts. Each Shareholder's account shall be credited with the respective pro
rata number of full and fractional (rounded to the third decimal place) New Fund
Shares of each New Fund Class due that Shareholder. All outstanding Current Fund
Shares, including those represented by certificates, shall simultaneously be
canceled on each Current Fund's share transfer books. The Trust shall not issue
certificates representing the New Fund Shares in connection with the
Reorganization. However, certificates representing Current Fund Shares shall
represent New Fund Shares after the Reorganization.
3
2.3 Following receipt of the required shareholder vote and as soon as
reasonably practicable after the Closing, the status of each Current Fund as a
designated series of the Company shall be terminated; provided, however, that
the termination of each Current Fund as a designated series of the Company shall
not be required if the Reorganization shall not have been consummated.
2.4 Following receipt of the required shareholder vote and as soon as
reasonably practicable after distribution of the New Fund Shares pursuant to
Section 2.2, the Company and the Trust shall cause Articles of Transfer to be
filed with the State Department of Assessments and Taxation of Maryland and,
following the filing of Articles of Transfer, the Company shall file a Form N-8F
with the Securities and Exchange Commission to deregister as an investment
company. Following such deregistration, the Company shall file Articles of
Dissolution with the State Department of Assessments and Taxation of Maryland to
dissolve the Company as a Maryland corporation; provided, however, that the
filing of Articles of Transfer, a Form N-8F and Articles of Dissolution as
aforesaid shall not be required if the Reorganization shall not have been
consummated.
2.5 Any transfer taxes payable on issuance of New Fund Shares in a name
other than that of the registered holder of the Current Fund Shares exchanged
therefor shall be paid by the person to whom such New Fund Shares are to be
issued, as a condition of such transfer.
2.6 Any reporting responsibility of the Company or each Current Fund to
a public authority is and shall remain its responsibility up to and including
the date on which it is terminated.
3. CLOSING
3.1 The Closing shall occur at the principal office of the Company on
April 30, 2004, or on such other date and at such other place upon which the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Company's and the Trust's close of business on
the date of the Closing or at such other time as the parties may agree (the
"Effective Time").
3.2 The Company or its fund accounting agent shall deliver to the Trust
at the Closing, a certificate of an authorized officer verifying that the
information (including adjusted basis and holding period, by lot) concerning the
Assets, including all portfolio securities, transferred by the Current Funds to
the New Funds, as reflected on the New Funds' books immediately following the
Closing, does or will conform to such information on the Current Funds' books
immediately before the Closing. The Company shall cause the custodian for each
Current Fund to deliver at the Closing a certificate of an authorized officer of
the custodian stating that (a) the Assets held by the custodian will be
transferred to each corresponding New Fund at the Effective Time and (b) all
necessary taxes in conjunction with the delivery of the Assets, including all
applicable federal and state stock transfer stamps, if any, have been paid or
provision for payment has been made.
3.3 The Company shall deliver to the Trust at the Closing a list of the
names and addresses of each Shareholder of each Current Fund and the number of
outstanding Current Fund
4
Shares of the Current Fund Class owned by each Shareholder, all as of the
Effective Time, certified by the Company's Secretary or Assistant Secretary. The
Trust shall cause the Transfer Agent to deliver at the Closing a certificate as
to the opening on each New Fund's share transfer books of accounts in the
Shareholders' names. The Trust shall issue and deliver a confirmation to the
Company evidencing the New Fund Shares to be credited to each corresponding
Current Fund at the Effective Time or provide evidence satisfactory to the
Company that such shares have been credited to each Current Fund's account on
such books. At the Closing, each party shall deliver to the other such bills of
sale, checks, assignments, stock certificates, receipts, or other documents as
the other party or its counsel may reasonably request.
3.4 The Company and the Trust shall deliver to the other at the Closing
a certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Company represents and warrants on its own behalf and on behalf
of each Current Fund as follows:
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland,
and its Charter is on file with the Maryland Department of Assessments
and Taxation;
(b) The Company is duly registered as an open-end series
management investment company under the 1940 Act, and such registration
is in full force and effect;
(c) Each Current Fund is a duly established and designated
series of the Company;
(d) At the Closing, each Current Fund will have good and
marketable title to its Assets and full right, power, and authority to
sell, assign, transfer, and deliver its Assets free of any liens or
other encumbrances; and upon delivery and payment for the Assets, the
corresponding New Fund will acquire good and marketable title to the
Assets;
(e) The New Fund Shares are not being acquired for the purpose
of making any distribution thereof, other than in accordance with the
terms hereof;
(f) Each Current Fund is a "fund" as defined in Section
851(g)(2) of the Code; each Current Fund qualified for treatment as a
RIC for each taxable year since it commenced operations that has ended
(or will end) before the Closing and will continue to meet all the
requirements for such qualification for its current taxable year (and
the Assets will be invested at all times through the Effective Time in
a manner that ensures compliance with the foregoing); each Current Fund
has no earnings and profits accumulated in any taxable year in which
the provisions of Subchapter M did not apply to it; and each Current
Fund has made all distributions for each calendar year that has ended
(or will end) before the Closing that are necessary to avoid the
imposition of
5
federal excise tax or has paid or provided for the payment of any
excise tax imposed for any such calendar year;
(g) During the five-year period ending on the date of the
Reorganization, neither Company nor any person related to Company (as
defined in Section 1.368-1(e)(3) of the Federal income tax regulations
adopted pursuant to the Code without regard to Section
1.368-1(e)(3)(i)(A)) will have directly or through any transaction,
agreement, or arrangement with any other person, (i) acquired shares of
a Current Fund for consideration other than shares of such Current
Fund, except for shares redeemed in the ordinary course of such Current
Fund's business as an open-end investment company as required by the
1940 Act, or (ii) made distributions with respect to a Current Fund's
shares, except for (a) distributions necessary to satisfy the
requirements of Sections 852 and 4982 of the Code for qualification as
a regulated investment company and avoidance of excise tax liability
and (b) additional distributions, to the extent such additional
distributions do not exceed 50 percent of the value (without giving
effect to such distributions) of the proprietary interest in such
Current Fund at the Effective Time. There is no plan or intention of
the Shareholders who individually own 5% or more of any Current Fund
Shares and, to the best of the Company's knowledge, there is no plan or
intention of the remaining Shareholders to redeem or otherwise dispose
of any New Fund Shares to be received by them in the Reorganization.
The Company does not anticipate dispositions of those shares at the
time of or soon after the Reorganization to exceed the usual rate and
frequency of redemptions of shares of the Current Fund as a series of
an open-end investment company. Consequently, the Company is not aware
of any plan that would cause the percentage of Shareholder interests,
if any, that will be disposed of as a result of or at the time of the
Reorganization to be one percent (1%) or more of the shares of the
Current Fund outstanding as of the Effective Time;
(h) The Liabilities were incurred by the Current Funds in the
ordinary course of their business and are associated with the Assets;
(i) The Company is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case
within the meaning of Section 368(a)(3)(A) of the Code;
(j) As of the Effective Time, no Current Fund will have
outstanding any warrants, options, convertible securities, or any other
type of rights pursuant to which any person could acquire Current Fund
Shares except for the right of investors to acquire its shares at net
asset value in the normal course of its business as a series of an
open-end diversified management investment company operating under the
1940 Act;
(k) At the Effective Time, the performance of this Agreement
shall have been duly authorized by all necessary action by the
Company's shareholders;
(l) Throughout the five-year period ending on the date of the
Closing, each Current Fund will have conducted its historic business
within the meaning of Section 1.368-1(d) of the Income Tax Regulations
under the Code in a substantially unchanged manner;
6
(m) The fair market value of the Assets of each Current Fund
transferred to the corresponding New Fund will equal or exceed the sum
of the Liabilities assumed by the New Fund plus the amount of
Liabilities, if any, to which the transferred Assets are subject; and
(n) The total adjusted basis of the Assets of each Current
Fund transferred to the corresponding New Fund will equal or exceed the
sum of the Liabilities assumed by the New Fund plus the amount of
Liabilities, if any, to which the transferred assets are subject.
4.2 The Trust represents and warrants on its own behalf and on behalf
of each New Fund as follows:
(a) The Trust is a statutory trust duly organized, validly
existing, and in good standing under the laws of the State of Delaware,
and its Certificate of Trust has been duly filed in the office of the
Secretary of State of Delaware;
(b) The Trust is duly registered as an open-end management
investment company under the 1940 Act. At the Effective Time, the New
Fund Shares to be issued pursuant to Section 2.1 of this Agreement
shall be duly registered under the Securities Act of 1933 by a
Registration Statement filed with the SEC;
(c) At the Effective Time, each New Fund will be a duly
established and designated series of the Trust;
(d) No New Fund has commenced operations nor will it commence
operations until after the Closing;
(e) Prior to the Effective Time, there will be no issued and
outstanding shares in any New Fund or any other securities issued by
the Trust on behalf of any New Fund, except as provided in Section 5.2;
(f) No consideration other than New Fund Shares (and each New
Fund's assumption of the Liabilities) will be issued in exchange for
the Assets in the Reorganization;
(g) The New Fund Shares to be issued and delivered to each
corresponding Current Fund hereunder will, at the Effective Time, have
been duly authorized and, when issued and delivered as provided herein,
will be duly and validly issued and outstanding shares of the New Fund,
fully paid and nonassessable;
(h) Each New Fund will be a "fund" as defined in Section
851(g)(2) of the Code and will meet all the requirements to qualify for
treatment as a RIC for its taxable year in which the Reorganization
occurs;
(i) The Trust, on behalf of the New Funds, has no plan or
intention to issue additional New Fund Shares following the
Reorganization except for shares issued in the ordinary course of its
business as an open-end investment company; nor does the Trust,
7
on behalf of the New Funds, have any plan or intention to redeem or
otherwise reacquire any New Fund Shares issued pursuant to the
Reorganization, other than in the ordinary course of such business or
to the extent necessary to comply with its legal obligation under
Section 22(e) of the 1940 Act;
(j) Each New Fund will actively continue the corresponding
Current Fund's business in substantially the same manner that the
Current Fund conducted that business immediately before the
Reorganization; and no New Fund has any plan or intention to sell or
otherwise dispose of any of the Assets, except for dispositions made in
the ordinary course of its business or dispositions necessary to
maintain its qualification as a RIC, although in the ordinary course of
its business the New Fund will continuously review its investment
portfolio (as each Current Fund did before the Reorganization) to
determine whether to retain or dispose of particular stocks or
securities, including those included in the Assets, provided, however
that this Section 4.2(j) shall not preclude any of the combinations of
funds set forth on Schedule C to this Agreement; and
(k) There is no plan or intention for any of the New Funds to
be dissolved or merged into another corporation or statutory trust or
"fund" thereof (within the meaning of Section 851(g)(2) of the Code)
following the Reorganization, provided, however that this Section
4.2(k) shall not preclude any of the combinations of Funds set forth on
Schedule C.
4.3 Each of the Company and the Trust, on its own behalf and on behalf
of each Current Fund or each New Fund, as appropriate, represents and warrants
as follows:
(a) The fair market value of the New Fund Shares of each New
Fund received by each Shareholder will be equal to the fair market
value of the Current Fund Shares of the corresponding Current Fund
surrendered in exchange therefor;
(b) Immediately following consummation of the Reorganization,
the Shareholders will own all the New Fund Shares of each New Fund and
will own such shares solely by reason of their ownership of the Current
Fund Shares of the corresponding Current Fund immediately before the
Reorganization;
(c) The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
(d) There is no intercompany indebtedness between a Current
Fund and a New Fund that was issued or acquired, or will be settled, at
a discount; and
(e) Immediately following consummation of the Reorganization,
each New Fund will hold the same assets, except for assets distributed
to shareholders in the course of its business as a RIC and assets used
to pay expenses incurred in connection with the Reorganization, and be
subject to the same liabilities that the corresponding Current Fund
held or was subject to immediately prior to the Reorganization. Assets
used to pay (i) expenses, (ii) all redemptions (other than redemptions
at the usual rate and frequency of the Current Fund as a series of an
open-end investment company), and (iii) distributions (other than
regular, normal distributions), made by a Current Fund after
8
the date of this Agreement will, in the aggregate, constitute less than
one percent (1%) of its net assets.
5. COVENANTS
5.1 As soon as practicable after the date of this Agreement, the
Company shall call a meeting of its shareholders (the "Shareholders Meeting") to
consider and act on this Agreement and, in connection therewith, the sale of all
of the Company's assets and the dissolution of the Company as a Maryland
corporation. The Board of Directors of the Company shall recommend that
shareholders approve this Agreement and, in connection therewith, sale of all of
the Company's assets and the dissolution of the Company as a Maryland
corporation. Approval by shareholders of this Agreement will authorize the
Company, and the Company hereby agrees, to vote on the matters referred to in
Sections 5.2 and 5.3.
5.2 Prior to the Closing, the Company shall acquire one New Fund Share
in each New Fund Class of each New Fund for the purpose of enabling the Company
to elect the Company's directors as the Trust's trustees (to serve without limit
in time, except as they may resign or be removed by action of the Trust's
trustees or shareholders), to ratify the selection of each New Fund's
independent accountants, and to vote on the matters referred to in Section 5.3.
5.3 Immediately prior to the Closing, the Trust (on its own behalf and
with respect to each New Fund or each New Fund Class, as appropriate) shall
enter into a Master Investment Advisory Agreement, a Master Sub-Advisory
Agreement, a Master Administrative Services Agreement, Master Distribution
Agreements, a Custodian Agreement, and a Transfer Agency and Servicing
Agreement; shall adopt a plan of distribution pursuant to Rule 12b-l of the 1940
Act for the Series II Shares of each New Fund, a multiple class plan pursuant to
Rule 18f-3 of the 1940 Act; and shall enter into or adopt, as appropriate, such
other agreements and plans as are necessary for each New Fund's operation as a
series of an open-end investment company. Each such agreement and plan shall
have been approved by the Trust's trustees and, to the extent required by law,
by such of those trustees who are not "interested persons" of the Trust (as
defined in the 1940 Act) and by the Company as the sole shareholder of each New
Fund.
5.4 The Company or the Trust, as appropriate, shall file with the SEC
one or more post-effective amendments to the Company's Registration Statement on
Form N-lA under the Securities Act of 1933, as amended, and the 1940 Act, as
amended (the "Registration Statement"), (i) which will contain such amendments
to such Registration Statement as are determined by the Company to be necessary
and appropriate to effect the Reorganization and (ii) which will register the
New Fund Shares to be issued pursuant to Section 2.1 of this Agreement, and
shall use its best efforts to have such post-effective amendment or amendments
to the Registration Statement become effective as of the Closing.
6. CONDITIONS PRECEDENT
The obligations of the Company, on its own behalf and on behalf of each
Current Fund, and the Trust, on its own behalf and on behalf of each New Fund,
will be subject to (a) performance by the other party of all its obligations to
be performed hereunder at or before the Effective Time, (b) all representations
and warranties of the other party contained herein
9
being true and correct in all material respects as of the date hereof and,
except as they may be affected by the transactions contemplated hereby, as of
the Effective Time, with the same force and effect as if made on and as of the
Effective Time, and (c) the further conditions that, at or before the Effective
Time:
6.1 The shareholders of the Company shall have approved this Agreement
and the transactions contemplated by this Agreement in accordance with
applicable law.
6.2 All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. All consents, orders, and permits of federal,
state, and local regulatory authorities (including the SEC and state securities
authorities) deemed necessary by either the Company or the Trust to permit
consummation, in all material respects, of the transactions contemplated hereby
shall have been obtained, except where failure to obtain such consults, orders,
and permits would not involve a risk of a material adverse effect on the assets
or properties of either a Current Fund or a New Fund, provided that either the
Company or the Trust may for itself waive any of such conditions.
6.3 Each of the Company and the Trust shall have received an opinion
from Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, LLP as to the federal income tax
consequences mentioned below. In rendering such opinion, such counsel may rely
as to factual matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters of representation
that the Company and the Trust shall use their best efforts to deliver to such
counsel) and the certificates delivered pursuant to Section 3.4. Such opinion
shall be substantially to the effect that, based on the facts and assumptions
stated therein and conditioned on consummation of the Reorganization in
accordance with this Agreement, for federal income tax purposes:
(a) The Reorganization will constitute a reorganization within
the meaning of section 368(a) of the Code, and each Current Fund and
each New Fund will be "a party to a reorganization" within the meaning
of section 368(b) of the Code;
(b) No gain or loss will be recognized to a Current Fund on
the transfer of its Assets to the corresponding New Fund in exchange
solely for the New Fund's New Fund Shares and the New Fund's assumption
of the Current Fund's Liabilities or on the subsequent distribution of
those New Fund Shares to its Shareholders, in constructive exchange for
their Current Fund Shares, in liquidation of the Current Fund;
(c) No gain or loss will be recognized to a New Fund on its
receipt of the corresponding Current Fund's Assets in exchange for New
Fund Shares and its assumption of the Current Fund's Liabilities;
(d) Each New Fund's basis for the corresponding Current Fund's
Assets will be the same as the basis thereof in the Current Fund's
hands immediately before the Reorganization, and the New Fund's holding
period for those Assets will include the Current Fund's holding period
therefor;
10
(e) A Shareholder will recognize no gain or loss on the
constructive exchange of Current Fund Shares solely for New Fund Shares
pursuant to the Reorganization; and
(f) A Shareholder's basis for the New Fund Shares of each New
Fund to be received in the Reorganization will be the same as the basis
for the Current Fund Shares of the corresponding Current Fund to be
constructively surrendered in exchange for such New Fund Shares, and a
Shareholder's holding period for such New Fund Shares will include its
holding period for such Current Fund Shares, provided that such Current
Fund Shares are held as capital assets by the Shareholder at the
Effective Time.
6.4 No stop-order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the SEC (and not withdrawn or terminated).
At any time prior to the Closing, any of the foregoing conditions
(except those set forth in Sections 6.1 and 6.3) may be waived by the
directors/trustees of either the Company or the Trust if, in their judgment,
such waiver will not have a material adverse effect on the interests of the
Current Fund's Shareholders.
7. EXPENSES
Except as otherwise provided in Section 4.3(c), all expenses incurred
in connection with the transactions contemplated by this Agreement (regardless
of whether they are consummated) will be borne by the parties as they mutually
agree.
8. ENTIRE AGREEMENT
Neither party has made any representation, warranty, or covenant not
set forth herein, and this Agreement constitutes the entire agreement between
the parties.
9. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding its approval by the Company's shareholders, in such manner as
may be mutually agreed upon in writing by the parties; provided that following
such approval no such amendment shall have a material adverse effect on the
shareholders' interests.
10. TERMINATION
This Agreement may be terminated at any time at or prior to the
Effective Time, whether before or after approval by the Company's shareholders:
10.1 By either the Company or the Trust (a) in the event of the other
party's material breach of any representation, warranty, or covenant contained
herein to be performed at or prior to the Effective Time, (b) if a condition to
its obligations has not been met and it reasonably appears that such condition
will not or cannot be met, or (c) if the Closing has not occurred on or before
June 30, 2004; or
11
10.2 By the parties' mutual agreement.
Except as otherwise provided in Section 7, in the event of termination
under Sections 10.1(c) or 10.2, there shall be no liability for damages on the
part of either the Company or the Trust or any Current Fund or corresponding New
Fund, to the other.
11. MISCELLANEOUS
11.1 This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Delaware; provided that, in the case of
any conflict between such laws and the federal securities laws, the latter shall
govern.
11.2 Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
11.3 The execution and delivery of this Agreement have been authorized
by the Trust's trustees, and this Agreement has been executed and delivered by a
duly authorized officer of the Trust in his or her capacity as an officer of the
Trust intending to bind the Trust as provided herein, and no officer, trustee or
shareholder of the Trust shall be personally liable for the liabilities or
obligations of the Trust incurred hereunder. The liabilities and obligations of
the Trust pursuant to this Agreement shall be enforceable against the assets of
the New Funds only and not against the assets of the Trust generally.
12
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
Attest: INVESCO VARIABLE INVESTMENT FUNDS,
INC., on behalf of each of its series
listed in Schedule A
By:
-------------------------- ----------------------------------
Title:
-------------------------------
Attest: AIM VARIABLE INSURANCE FUNDS,
on behalf of each of its series
listed in Schedule A
By:
-------------------------- ----------------------------------
Title:
-------------------------------
13
SCHEDULE A
SERIES OF
INVESCO VARIABLE INVESTMENT FUNDS, INC. CORRESPONDING SERIES OF AIM VARIABLE
(EACH A "CURRENT FUND") INSURANCE FUNDS (EACH A "NEW FUND")
------------------------------------------- -------------------------------------------
INVESCO VIF - Core Equity Fund INVESCO VIF - Core Equity Fund
INVESCO VIF - Dynamics Fund INVESCO VIF - Dynamics Fund
INVESCO VIF - Financial Services Fund INVESCO VIF - Financial Services Fund
INVESCO VIF - Growth Fund INVESCO VIF - Growth Fund
INVESCO VIF - Health Sciences Fund INVESCO VIF - Health Sciences Fund
INVESCO VIF - High Yield Fund INVESCO VIF - High Yield Fund
INVESCO VIF - Leisure Fund INVESCO VIF - Leisure Fund
INVESCO VIF - Real Estate Opportunity Fund INVESCO VIF - Real Estate Opportunity Fund
INVESCO VIF - Small Company Growth Fund INVESCO VIF - Small Company Growth Fund
INVESCO VIF - Technology Fund INVESCO VIF - Technology Fund
INVESCO VIF - Telecommunications Fund INVESCO VIF - Telecommunications Fund
INVESCO VIF - Total Return Fund INVESCO VIF - Total Return Fund
INVESCO VIF - Utilities Fund INVESCO VIF - Utilities Fund
A-1
SCHEDULE B
SHARES OF COMMON STOCK OF CORRESPONDING SHARES OF COMMON STOCK OF
EACH CURRENT FUND EACH NEW FUND
---------------------------------------- ----------------------------------------
INVESCO VIF - Core Equity Fund INVESCO VIF - Core Equity Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Dynamics Fund INVESCO VIF - Dynamics Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Financial Services Fund INVESCO VIF - Financial Services Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Growth Fund INVESCO VIF - Growth Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Health Sciences Fund INVESCO VIF - Health Sciences Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - High Yield Fund INVESCO VIF - High Yield Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Leisure Fund INVESCO VIF - Leisure Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Real Estate Opportunity Fund INVESCO VIF - Real Estate Opportunity Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Small Company Growth Fund INVESCO VIF - Small Company Growth Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Technology Fund INVESCO VIF - Technology Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Telecommunications Fund INVESCO VIF - Telecommunications Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Total Return Fund INVESCO VIF - Total Return Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
INVESCO VIF - Utilities Fund INVESCO VIF - Utilities Fund
Series I Shares Series I Shares
Series II Shares Series II Shares
B-1
SCHEDULE C
PERMITTED COMBINATIONS OF FUNDS
AIM V.I. Global Utilities Fund into INVESCO VIF - Utilities Fund
AIM V.I. New Technology Fund into INVESCO VIF - Technology Fund
INVESCO VIF - Telecommunications Fund into INVESCO VIF - Technology Fund
INVESCO VIF - Growth Fund into AIM V.I. Growth Fund
INVESCO VIF - High Yield Fund into AIM V.I. High Yield Fund
LSA Basic Value Fund into AIM V.I. Basic Value Fund
C-1
APPENDIX VIII
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As adopted by the Audit Committees of
the AIM Funds and the INVESCO Funds (the "Funds")
AMENDED NOVEMBER 6, 2003
I. STATEMENT OF PRINCIPLES
Under the Xxxxxxxx-Xxxxx Act of 2002 and rules adopted by the Securities and
Exchange Commission ("SEC") ("Rules"), the Audit Committees of the Funds' (the
"Audit Committee") Board of Directors/Trustees (the "Board") are responsible for
the appointment, compensation and oversight of the work of independent
accountants (an "Auditor"). As part of this responsibility and to assure that
the Auditor's independence is not impaired, the Audit Committee pre-approves the
audit and non-audit services provided to the Funds by the Auditor, as well as
all non-audit services provided by the Auditor to the Funds' investment adviser
and to affiliates of the adviser that provide ongoing services to the Funds
("Service Affiliates") if the services directly impact the Funds' operations or
financial reporting. The SEC Rules also specify the types of services that an
Auditor may not provide to its audit client. The following policies and
procedures comply with the requirements for pre-approval and provide a mechanism
by which management of the Funds may request and secure pre-approval of audit
and non-audit services in an orderly manner with minimal disruption to normal
business operations.
Proposed services either may be pre-approved without consideration of specific
case-by-case services by the Audit Committee ("general pre-approval") or require
the specific pre-approval of the Audit Committee ("specific pre-approval"). As
set forth in these policies and procedures, unless a type of service has
received general pre-approval, it will require specific pre-approval by the
Audit Committee. Additionally, any proposed services exceeding general
pre-approved cost levels or established amounts will also require specific
pre-approval by the Audit Committee.
The Audit Committee will annually review and pre-approve the services that may
be provided by the Auditor without obtaining specific pre-approval from the
Audit Committee. The term of any general pre-approval runs from the date of such
pre-approval through September 30th of the following year, unless the Audit
Committee considers a different period and states otherwise. The Audit Committee
will add to or subtract from the list of general pre-approved services from time
to time, based on subsequent determinations.
The purpose of these policies and procedures is to set forth the guidelines to
assist the Audit Committee in fulfilling its responsibilities.
II. DELEGATION
The Audit Committee may from time to time delegate pre-approval authority to one
or more of its members who are Independent Directors. All decisions to
pre-approve a service by a delegated member shall be reported to the Audit
Committee at its next-scheduled meeting.
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III. AUDIT SERVICES
The annual audit services engagement terms and fees will be subject to specific
pre-approval of the Audit Committee. Audit services include the annual financial
statement audit and other procedures such as tax provision work that is required
to be performed by the independent auditor to be able to form an opinion on the
Funds' financial statements. The Audit Committee will obtain, review and
consider sufficient information concerning the proposed Auditor to make a
reasonable evaluation of the Auditor's qualifications and independence.
In addition to the annual Audit services engagement, the Audit Committee may
grant general pre-approval for other audit services, which are those services
that only the independent auditor reasonably can provide. Other Audit services
may include services such as issuing consents for the inclusion of audited
financial statements with SEC registration statements, periodic reports and
other documents filed with the SEC or other documents issued in connection with
securities offerings.
IV. GENERAL PRE-APPROVAL OF NON-AUDIT SERVICES
The Audit Committee may provide general pre-approval of types of non-audit
services described in this Section IV to the Funds and its Service Affiliates if
the Committee believes that the provision of the service will not impair the
independence of the Auditor, is consistent with the SEC's Rules on auditor
independence, and otherwise conforms to the Audit Committee's general principles
and policies as set forth herein.
AUDIT-RELATED SERVICES
"Audit-related services" are assurance and related services that are reasonably
related to the performance of the audit or review of the Fund's financial
statements or that are traditionally performed by the independent auditor.
Audit-related services include, among others, accounting consultations related
to accounting, financial reporting or disclosure matters not classified as
"Audit services"; assistance with understanding and implementing new accounting
and financial reporting guidance from rulemaking authorities; and agreed-upon
procedures related to mergers.
TAX SERVICES
"Tax services" include, but are not limited to, the review and signing of the
Funds' federal tax returns, the review of required distributions by the Funds
and consultations regarding tax matters such as the tax treatment of new
investments or the impact of new regulations. The Audit Committee will
scrutinize carefully the retention of the Auditor in connection with a
transaction initially recommended by the Auditor, the major business purpose of
which may be tax avoidance or the tax treatment of which may not be supported in
the Internal Revenue Code and related regulations. The Audit Committee will
consult with the Funds' Treasurer (or his or her designee) and may consult with
outside counsel or advisors as necessary to ensure the consistency of Tax
services rendered by the Auditor with the foregoing policy.
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ALL OTHER SERVICES
The Audit Committee may pre-approve non-audit services classified as "All other
services" that are not categorically prohibited by the SEC, as listed in Exhibit
1 to this policy.
V. SPECIFIC PRE-APPROVAL OF NON-AUDIT SERVICES
The Audit Committee may provide specific pre-approval of any non-audit services
to the Funds and its Service Affiliates if the Audit Committee believes that the
provision of the service will not impair the independence of the auditor, is
consistent with the SEC Rules on auditor independence, and otherwise conforms to
the Audit Committees' general principles and policies as set forth herein.
VI. PRE-APPROVAL FEE LEVELS OR ESTABLISHED AMOUNTS
Pre-approval fee levels or established amounts for services to be provided by
the Auditor under general pre-approval policies will be set annually by the
Audit Committee. Any proposed services exceeding these levels or amounts will
require specific pre-approval by the Audit Committee. The Audit Committee will
always factor in the overall relationship of fees for audit and non-audit
services in determining whether to pre-approve any such services.
VII. PROCEDURES
On an annual basis, A I M Advisors, Inc. ("AIM") will submit to the Audit
Committee for general pre-approval, a list of non-audit services that the Funds
or Service Affiliates of the Funds may request from the Auditor. The list will
describe the non-audit services in reasonable detail and will include an
estimated range of fees where possible and such other information as the Audit
Committee may request.
Each request for services to be provided by the Auditor under the general
pre-approval of the Audit Committee will be submitted to the Funds' Treasurer
(or his or her designee) and must include a detailed description of the services
to be rendered. The Treasurer or his or her designee will ensure that such
services are included within the list of services that have received the general
pre-approval of the Audit Committee. The Audit Committee will be informed at the
next regularly scheduled Audit Committee meeting of any such services rendered
by the Auditor.
Each request to provide services that require specific approval by the Audit
Committee shall be submitted to the Audit Committee jointly by the Fund's
Treasurer or his or her designee and the Auditor, and must include a joint
statement that, in their view, such request is consistent with the policies and
procedures and the SEC Rules.
Non-audit services pursuant to the de minimis exception provided by the SEC
Rules will be promptly brought to the attention of the Audit Committee for
approval, including documentation that each of the conditions for this
exception, as set forth in the SEC Rules, has been satisfied.
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On at least an annual basis, the Auditor will prepare a summary of all the
services provided to any entity in the investment company complex as defined in
section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of
the engagement and the fees associated with those services.
The Audit Committee has designated the Funds' Treasurer to monitor the
performance of all services provided by the Auditor and to ensure such services
are in compliance with these policies and procedures. The Funds' Treasurer will
report to the Audit Committee on a periodic basis as to the results of such
monitoring. Both the Funds' Treasurer and management of AIM will immediately
report to the chairman of the Audit Committee any breach of these policies and
procedures that comes to the attention of the Funds' Treasurer or senior
management of AIM.
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EXHIBIT 1
CONDITIONALLY PROHIBITED NON-AUDIT SERVICES (NOT PROHIBITED IF THE FUND CAN
REASONABLY CONCLUDE THAT THE RESULTS OF THE SERVICE WOULD NOT BE SUBJECT TO
AUDIT PROCEDURES IN CONNECTION WITH THE AUDIT OF THE FUND'S FINANCIAL
STATEMENTS)
o Bookkeeping or other services related to the accounting records or
financial statements of the audit client
o Financial information systems design and implementation
o Appraisal or valuation services, fairness opinions, or contribution-in-kind
reports
o Actuarial services
o Internal audit outsourcing services
CATEGORICALLY PROHIBITED NON-AUDIT SERVICES
o Management functions
o Human resources
o Broker-dealer, investment adviser, or investment banking services
o Legal services
o Expert services unrelated to the audit
o Any other service that the Public Company Oversight Board determines by
regulation is impermissible
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