As filed with the Securities and Exchange Commission on April 27, 2007
1933 Act Registration No. 33-57340
1940 Act Registration No. 811-7452
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____ [ ]
Post-Effective Amendment No. 33 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 32 [X]
(Check appropriate box or boxes.)
AIM VARIABLE INSURANCE FUNDS
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173 (Address of Principal Executive Offices) (Zip Code) |
Registrant's Telephone Number, including Area Code (713) 626-1919
John M. Zerr, Esquire
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
(Name and Address of Agent for Service)
Copy to:
Margaret Gallardo-Cortez, Esquire
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 2007 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following:
[ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
AIM V.I. BASIC BALANCED FUND
PROSPECTUS
MAY 1, 2007
Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Basic Balanced Fund's investment objective is long-term growth of capital and current income.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is long-term growth of capital and current income. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing in a broadly diversified portfolio of common stocks, preferred stocks, convertible securities and bonds. The fund invests without regard to market capitalization. The fund normally invests a minimum of 30% and a maximum of 70% of its total assets in equity securities. The fund will invest at least 25% and a maximum of 70% of its total assets in investment-grade non-convertible debt securities. The fund may also invest up to 25% of its total assets in convertible securities and up to 25% of its total assets in foreign securities. The fund may also invest in credit derivatives.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting the percentages of assets to be invested in equity or debt securities, the portfolio managers consider such factors as general market and economic conditions, as well as trends, yields, interest rates and changes in fiscal and monetary policies. In selecting equity investments, the portfolio managers seek to identify those companies whose stock prices are undervalued by investors due to temporary factors and that provide the potential for attractive returns. The portfolio managers will purchase debt securities for both capital appreciation and income, and to provide portfolio diversification. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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 the fund 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. Interest rate increases may cause the price of a debt security to decrease; the longer a debt security's duration, the more sensitive it is to this risk. The issuer of a security may default or otherwise be unable to honor a financial obligation.
The values of convertible securities in which the fund invests may also be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest or dividends, their values may fall if interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies located in developing countries more than those in countries with mature economies. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devaluated their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------------
1999............................................................. 19.31%
2000............................................................. -4.20%
2001............................................................. -11.42%
2002............................................................. -17.10%
2003............................................................. 16.36%
2004............................................................. 7.52%
2005............................................................. 5.29%
2006............................................................. 10.55%
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During the periods shown in the bar chart, the highest quarterly return was 15.67% (quarter ended December 31, 1999) and the lowest quarterly return was -11.97% (quarter ended September 30, 2001). For periods prior to July 1, 2005, performance shown above relates to the fund before changing its investment objective and strategy with an emphasis on purchasing debt securities for both growth of capital and current income.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE ------------------------------------------------------------------------------------------ AIM V.I. Basic Balanced Fund() 10.55% 3.84% 3.80% 05/01/98 S&P 500--Registered Trademark-- Index(1,2) 15.78 6.19 4.48(3) 04/30/98(3) Custom Balanced Index(1,2,4) 14.81 8.75 7.13(3) 04/30/98(3) Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index(1,2,5) 11.41 5.76 4.11(3) 04/30/98(3) Lipper Balanced Funds Index(1,2,6) 11.60 6.51 5.32(3) 04/30/98(3) ------------------------------------------------------------------------------------------ |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Custom Balanced Index as its style-specific index because the fund believes the Custom Balanced Index more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Mixed-Asset Target Allocation Moderate Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index as its peer-group index instead of the Lipper Balanced Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month-end closest to the inception date of the fund's Series I shares.
(4) The Custom Balanced Index is an index created by A I M Advisors, Inc. to benchmark the AIM Basic Balanced Fund. The index consists of 60% Russell 1000--Registered Trademark-- Value Index and 40% Lehman Brothers U.S. Aggregate Bond Index. The Russell 1000--Registered Trademark-- Value Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock market performance. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity market. The Lehman Brothers U.S. Aggregate Bond Index covers U.S. investment-grade fixed-rate bonds with components for government and corporate securities, mortgage pass-throughs and asset-backed securities.
(5) The Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index is an equally weighted representation of the largest variable insurance underlying moderate funds that by portfolio practice maintain a mix between 40%-60% equity securities, with the remainder invested in bonds, cash and cash equivalents.
(6) The Lipper Balanced Funds Index is an equally weighted representation of the largest funds in the Lipper Balanced Funds Category. These funds have a primary objective of conserving principal by maintaining at all times a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Other Expenses 0.40 Acquired Fund Fees and Expenses(3) 0.00 Total Annual Fund Operating Expenses 1.15 Fee Waiver and/or Expense Reimbursements(2,4) 0.24 Net Annual Fund Operating Expenses 0.91 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through December 31, 2009, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, where in the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.62% (for average net assets up to $150 million) to 0.45% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 0.91% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees, and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Basic Balanced Fund $93 $314 $583 $1,351 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 0.91% 1.02% 1.02% 1.15% 1.15%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 4.09% 8.23% 12.54% 16.87% 21.37%
End of Year Balance $10,409.00 $10,823.28 $11,254.04 $11,687.33 $12,137.29
Estimated Annual Expenses $ 92.86 $ 108.28 $ 112.59 $ 131.91 $ 136.99
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SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.15% 1.15% 1.15% 1.15% 1.15%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 26.05% 30.90% 35.94% 41.17% 46.61%
End of Year Balance $12,604.57 $13,089.85 $13,593.81 $14,117.17 $14,660.68
Estimated Annual Expenses $ 142.27 $ 147.74 $ 153.43 $ 159.34 $ 165.47
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(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.51% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1998. As the lead manager, Mr. Stanley generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Stanley may perform these functions, and the nature of these functions, may change from time to time.
- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999.
- Jan H. Friedli, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1999.
- Brendan D. Gau, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 1996.
- Matthew W. Seinsheimer, Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1998.
- Michael J. Simon, Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 2001.
Mr. Friedli and Mr. Gau are dual employees of AIM and INVESCO Institutional (N.A.), Inc.
They are assisted by the advisor's Basic Value and Taxable Investment Grade Bond Teams, which are comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the teams may change from time to time. More information on these portfolio managers and the teams, including biographies of members of the teams, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period $ 10.99 $ 10.59 $ 9.99 $ 8.75 $ 10.84
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.25 0.18 0.13 0.14 0.18
--------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.91 0.38 0.62 1.29 (2.02)
====================================================================================================================
Total from investment operations 1.16 0.56 0.75 1.43 (1.84)
====================================================================================================================
Less dividends from net investment income (0.23) (0.16) (0.15) (0.19) (0.25)
====================================================================================================================
Net asset value, end of period $ 11.92 $ 10.99 $ 10.59 $ 9.99 $ 8.75
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 10.55% 5.29% 7.52% 16.36% (17.02)%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $84,212 $90,633 $99,070 $97,665 $82,866
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.91%(c) 0.95% 1.12% 1.11% 1.17%
--------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.15%(c) 1.15% 1.12% 1.11% 1.17%
====================================================================================================================
Ratio of net investment income to average net assets 2.16%(c) 1.68% 1.24% 1.47% 1.90%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 44% 44% 51% 131% 90%
____________________________________________________________________________________________________________________
====================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $87,015,154.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIBBA-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. BASIC BALANCED FUND
PROSPECTUS
MAY 1, 2007
|
SERIES II SHARES
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Basic Balanced Fund's investment objective is long-term growth of capital and current income.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital and current income. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing in a broadly diversified portfolio of common stocks, preferred stocks, convertible securities and bonds. The fund invests without regard to market capitalization. The fund normally invests a minimum of 30% and a maximum of 70% of its total assets in equity securities. The fund will invest at least 25% and a maximum of 70% of its total assets in investment-grade non-convertible debt securities. The fund may also invest up to 25% of its total assets in convertible securities and up to 25% of its total assets in foreign securities. The fund may also invest in credit derivatives.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting the percentages of assets to be invested in equity or debt securities, the portfolio managers consider such factors as general market and economic conditions, as well as trends, yields, interest rates and changes in fiscal and monetary policies. In selecting equity investments, the portfolio managers seek to identify those companies whose stock prices are undervalued by investors due to temporary factors and that provide the potential for attractive returns. The portfolio managers will purchase debt securities for both capital appreciation and income, and to provide portfolio diversification. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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 the fund 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. Interest rate increases may cause the price of a debt security to decrease; the longer a debt security's duration, the more sensitive it is to this risk. The issuer of a security may default or otherwise be unable to honor a financial obligation.
The values of convertible securities in which the fund invests may also be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest or dividends, their values may fall if interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies located in developing countries more than those in countries with mature economies. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devaluated their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I shares and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1999*................................................................. 19.01%
2000*................................................................. -4.44%
2001*................................................................. -11.65%
2002*................................................................. -17.30%
2003.................................................................. 16.15%
2004.................................................................. 7.24%
2005.................................................................. 5.00%
2006.................................................................. 10.26%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 15.60% (quarter ended December 31, 1999) and the lowest quarterly return was -12.03% (quarter ended September 30, 2001). For periods prior to July 1, 2005, performance shown above relates to the fund before changing its investment objective and strategy with an emphasis on purchasing debt securities for both growth of capital and current income.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------
SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
--------------------------------------------------------------------------
AIM V.I. Basic Balanced
Fund(1) 10.26% 3.59% 3.54% 05/01/98
S&P 500--Registered
Trademark-- Index(2,3) 15.78 6.19 4.48(4) 04/30/98(4)
Custom Balanced Index(2,3,5) 14.81 8.75 7.13(4) 04/30/98(4)
Lipper VUF Mixed-Asset Target
Allocation Moderate Funds
Index(2,3,6) 11.41 5.76 4.11(4) 04/30/98(4)
Lipper Balanced Funds
Index(2,3,7) 11.60 6.51 5.32(4) 04/30/98(4)
--------------------------------------------------------------------------
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(1) The return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is January 24, 2002.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Custom Balanced Index as its style-specific index because the fund believes the Custom Balanced Index more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Mixed-Asset Target Allocation Moderate Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index as its peer-group index instead of the Lipper Balanced Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The average annual total return given is since the inception month-end closest to the inception date of the fund's Series I shares.
(5) The Custom Balanced Index is an index created by A I M Advisors, Inc. to benchmark the AIM Basic Balanced Fund. The index consists of 60% Russell 1000--Registered Trademark-- Value Index and 40% Lehman Brothers U.S. Aggregate Bond Index. The Russell 1000--Registered Trademark-- Value Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock market performance. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity markets. The Lehman Brothers U.S. Aggregate Bond Index covers U.S. investment-grade fixed-rate bonds with components for government and corporate securities, mortgage pass-throughs and asset-backed securities.
(6) The Lipper VUF Mixed-Asset Target Allocation Moderate Funds Index is an equally weighted representation of the largest variable insurance underlying moderate funds that by portfolio practice maintain a mix between 40%-60% equity securities, with the remainder invested in bonds, cash and cash equivalents.
(7) The Lipper Balanced Funds Index is an equally weighted representation of the largest funds in the Lipper Balanced Funds Category. These funds have a primary objective of conserving principal by maintaining at all times a balanced portfolio of both stocks and bonds. Typically, the stock/bond ratio ranges around 60%/40%.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES ------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES ------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A ------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) ------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES ------------------------------------------------------------------------------- Management Fees(2) 0.75% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.40 Acquired Fund Fees and Expenses(3) 0.00 Total Annual Fund Operating Expenses 1.40 Fee Waiver and/or Expense Reimbursements(2,4) 0.24 Net Annual Fund Operating Expenses 1.16 ------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through December 31, 2009, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.62% (for average net assets up to $150 million) to 0.45% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.16% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees, and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------- AIM V.I. Basic Balanced Fund $118 $392 $716 $1,634 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.16% 1.27% 1.27% 1.40% 1.40%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.84% 7.71% 11.73% 15.75% 19.92%
End of Year Balance $10,384.00 $10,771.32 $11,173.09 $11,575.32 $11,992.04
Estimated Annual Expenses $ 118.23 $ 134.34 $ 139.35 $ 159.24 $ 164.97
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SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.40% 1.40% 1.40% 1.40% 1.40%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 24.24% 28.71% 33.34% 38.14% 43.12%
End of Year Balance $12,423.75 $12,871.00 $13,334.36 $13,814.40 $14,311.72
Estimated Annual Expenses $ 170.91 $ 177.06 $ 183.44 $ 190.04 $ 196.88
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(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.51% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1998. As the lead manager, Mr. Stanley generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Stanley may perform these functions, and the nature of these functions, may change from time to time.
- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999.
- Jan H. Friedli, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1999.
- Brendan D. Gau, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 1996.
- Matthew W. Seinsheimer, Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1998.
- Michael J. Simon, Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 2001.
Mr. Friedli and Mr. Gau are dual employees of AIM and INVESCO Institutional (N.A.), Inc.
They are assisted by the advisor's Basic Value and Taxable Investment Grade Bond Teams, which are comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the teams may change from time to time. More information on these portfolio managers and the teams, including biographies of members of the teams, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products 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 insurance companies issuing the variable products.
The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI
Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
-----------------------------------------------------------
JANUARY 24,
2002
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
--------------------------------------- DECEMBER 31,
2006 2005 2004 2003 2002
------ ------ ------ ------ ----------------
Net asset value, beginning of period $10.91 $10.53 $ 9.95 $ 8.73 $ 10.70
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Income from investment operations:
Net investment income(a) 0.22 0.15 0.10 0.12 0.14
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Net gains (losses) on securities (both realized and
unrealized) 0.91 0.37 0.62 1.29 (1.86)
=========================================================================================================================
Total from investment operations 1.13 0.52 0.72 1.41 (1.72)
=========================================================================================================================
Less dividends from net investment income (0.20) (0.14) (0.14) (0.19) (0.25)
=========================================================================================================================
Net asset value, end of period $11.84 $10.91 $10.53 $ 9.95 $ 8.73
_________________________________________________________________________________________________________________________
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Total return(b) 10.36% 4.91% 7.24% 16.15% (16.12)%
_________________________________________________________________________________________________________________________
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Ratios/supplemental data:
Net assets, end of period (000s omitted) $5,878 $5,870 $5,642 $4,133 $ 733
_________________________________________________________________________________________________________________________
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Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.16%(c) 1.20% 1.37% 1.36% 1.42%(d)
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Without fee waivers and/or expense reimbursements 1.40%(c) 1.40% 1.37% 1.36% 1.42%(d)
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Ratio of net investment income to average net assets 1.91%(c) 1.43% 0.99% 1.22% 1.65%(d)
_________________________________________________________________________________________________________________________
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Portfolio turnover rate(e) 44% 44% 51% 131% 90%
_________________________________________________________________________________________________________________________
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(a) Calculated using average shares outstanding.
(b) Included adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns are not annualized for periods less than one
year and do not reflect charges assessed in connection with a variable
product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $5,781,500.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
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THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIBBA-PRO-2
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. BASIC VALUE FUND
PROSPECTUS
MAY 1, 2007
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SERIES I SHARES
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Basic Value Fund's investment objective is long-term 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet this objective by investing, normally, at least 65% of its total assets in equity securities of U.S. issuers that have market capitalizations in excess of $5 billion. In complying with the fund's 65% investment requirement, the fund will invest primarily in marketable equity securities the portfolio managers believe have the potential for capital growth, and its investments may include synthetic and derivative instruments. Synthetic and derivative instruments are investments that have economic characteristics similar to the fund's direct investments. Synthetic and derivative instruments that the fund may invest in include futures contracts, option contracts, and equity linked derivatives. Synthetic and derivative instruments may have the effect of leveraging the fund's portfolio.
In selecting securities, the portfolio managers emphasize the following characteristics, although not all investments will have these attributes:
- Buy businesses trading at a significant discount to portfolio managers' estimate of intrinsic value. A company's market price must generally offer 50% appreciation potential to estimated intrinsic value over a 2 to 3 year time period.
- Emphasize quality businesses with potential to grow intrinsic value over time. They seek established companies which they believe have solid growth prospects, the ability to earn an attractive return on invested capital and a management team that exhibits intelligent capital allocation skills.
They estimate a company's intrinsic value primarily by taking the present value of projected future free cash flows (i.e. the excess cash generated by the business after considering all cash inflows and outflows to operate the business). They believe this intrinsic value represents the fair economic worth of the business and a value that an informed buyer would pay to acquire the entire company for cash. They check this valuation method with long-run absolute valuation characteristics (including price-to-earnings ratio and price-to-book value ratio) adjusted for the prevailing inflation and interest rate environment.
The portfolio managers will consider selling a security to capitalize on a more attractive investment opportunity, if a security is trading significantly above the portfolio managers' estimate of intrinsic value or if there is a permanent, fundamental deterioration in business prospects that results in inadequate upside potential to estimated intrinsic value.
The portfolio managers seek to achieve strong long-term performance by constructing a diversified portfolio of typically 40-60 stocks that offers value content greater than the broad market, as measured by the portfolio's aggregate discount to the portfolio managers' estimated intrinsic value of the portfolio. The investment process is fundamental in nature and focused on individual companies as opposed to macro economic forecasts or specific industry exposure. The portfolio construction process is intended to preserve and grow the estimated intrinsic value of the fund's portfolio rather than mirror the composition or sector weights of any benchmark. The fund may also invest up to 25% of its total assets in foreign securities.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations.
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
- Value Investing Risk--Value stocks can react differently to issuer, political, market and economic developments than the market as a whole and other types of stocks. Value stocks tend to be currently out-of-favor with many investors and can continue to be undervalued for long periods of time and may not ever realize their full value.
- Equity Securities Risk--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.
- Derivatives Risk--The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. If the fund uses derivatives to "hedge" the overall risk of its portfolio, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio.
- Counterparty Risk--Individually negotiated, or over-the-counter, derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
- Leveraging Risk--The fund may engage in transactions, including the use of synthetic instruments and derivatives, which may give rise to a form of leverage. Leverage may cause the fund's portfolio to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the fund.
- Foreign Securities Risk--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 delayed in settlement procedures.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
2002................................................................... -22.15%
2003................................................................... 33.63%
2004................................................................... 11.07%
2005................................................................... 5.74%
2006................................................................... 13.20%
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During the period shown in the bar chart, the highest quarterly return was 20.56% (quarter ended June 30, 2003) and the lowest quarterly return was -20.06% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ----------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEAR INCEPTION DATE ------------------------------------------------------------------------------------------ AIM V.I. Basic Value Fund 13.20% 6.70% 6.82% 09/10/01 S&P 500--Registered Trademark-- Index(1,2) 15.78 6.19 6.13(3) 08/31/01(3) Russell 1000--Registered Trademark-- Value Index(1,2,4) 22.25 10.86 10.11(3) 08/31/01(3) Lipper VUF Large-Cap Value Funds Index(1,2,5) 17.86 7.70 7.31(3) 08/31/01(3) Lipper Large-Cap Value Funds Index(1,2,6) 18.28 7.67 7.22(3) 08/31/01(3) ------------------------------------------------------------------------------------------ |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell 1000--Registered Trademark-- Value Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Large-Cap Value Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Large-Cap Value Funds Index as its peer-group index instead of the Lipper Large-Cap Value Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Large-Cap Value Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month end closest to the
inception date of the fund's Series I shares.
(4) The Russell 1000--Registered Trademark-- Value Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000--Registered Trademark-- Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock performance market. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity market.
(5) The Lipper VUF Large-Cap Value Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Large-Cap Value Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalization (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalization of $300 million and above, and represents the small-, mid-, and large-cap markets.
(6) The Lipper Large-Cap Value Funds Index is an equally weighted representation of the largest funds in the Lipper Large-Cap Value Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.72% Other Expenses 0.30 Acquired Fund Fees and Expenses(3) 0.00 Total Annual Fund Operating Expenses 1.02 Fee Waiver and/or Expense Reimbursements(2,4) 0.05 Net Annual Fund Operating Expenses 0.97 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through December 31, 2009, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee ranges from 0.695% (for average net assets up to $250 million) to 0.52% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expense are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Basic Value Fund $99 $309 $548 $1,233 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 0.97% 0.97% 0.97% 1.02% 1.02% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.03% 8.22% 12.58% 17.06% 21.72% End of Year Balance $10,403.00 $10,822.24 $11,258.38 $11,706.46 $12,172.38 Estimated Annual Expenses $ 98.95 $ 102.94 $ 107.09 $ 117.12 $ 121.78 ----------------------------------------------------------------------------------------------- SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 Annual Expense Ratio(1) 1.02% 1.02% 1.02% 1.02% 1.02% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 26.57% 31.61% 36.84% 42.29% 47.95% End of Year Balance $12,656.84 $13,160.58 $13,684.37 $14,229.01 $14,795.32 Estimated Annual Expenses $ 126.63 $ 131.67 $ 136.91 $ 142.36 $ 148.02 ----------------------------------------------------------------------------------------------- |
(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.67% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been responsible for the fund since its inception in 2001 and has been associated with the advisor and/or its affiliates since 1998. As the lead manager, Mr. Stanley generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Stanley may perform these functions, and the nature of these functions, may change from time to time.
- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999.
- Matthew W. Seinsheimer, Senior Portfolio Manager, who has been responsible for the fund since its inception in 2001 and has been associated with the advisor and/or its affiliates since 1998.
- Michael J. Simon, Senior Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 2001.
They are assisted by the advisor's Basic Value Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
The information for the fiscal years 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- -------
Net asset value, beginning of period $ 12.37 $ 11.84 $ 10.66 $ 7.98 $ 10.25
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.07(a) 0.05 0.02 0.00 0.02(a)
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.54 0.63 1.16 2.68 (2.29)
========================================================================================================================
Total from investment operations 1.61 0.68 1.18 2.68 (2.27)
========================================================================================================================
Less distributions:
Dividends from net investment income (0.05) (0.01) -- (0.00) (0.00)
------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.58) (0.14) -- -- --
========================================================================================================================
Total distributions (0.63) (0.15) -- (0.00) (0.00)
========================================================================================================================
Net asset value, end of period $ 13.35 $ 12.37 $ 11.84 $ 10.66 $ 7.98
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 13.12% 5.74% 11.07% 33.63% (22.15)%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $489,352 $487,332 $496,837 $309,384 $97,916
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.97%(c) 0.97% 1.02% 1.04% 1.16%
------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.02%(c) 1.02% 1.02% 1.04% 1.16%
========================================================================================================================
Ratio of net investment income to average net assets 0.54%(c) 0.38% 0.17% 0.01% 0.18%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate 15% 16% 14% 18% 22%
________________________________________________________________________________________________________________________
========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $480,344,970.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Form N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIBVA-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. BASIC VALUE FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Basic Value Fund's investment objective is long-term growth of capital.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet this objective by investing, normally, at least 65% of its total assets in equity securities of U.S. issuers that have market capitalizations in excess of $5 billion. In complying with the fund's 65% investment requirement, the fund will invest primarily in marketable equity securities the portfolio managers believe have the potential for capital growth, and its investments may include synthetic and derivative instruments. Synthetic and derivative instruments are investments that have economic characteristics similar to the fund's direct investments. Synthetic and derivative instruments that the fund may invest in include futures contracts, option contracts, and equity linked derivatives. Synthetic and derivative instruments may have the effect of leveraging the fund's portfolio.
In selecting securities, the portfolio managers emphasize the following characteristics, although not all investments will have these attributes:
- Buy businesses trading at a significant discount to portfolio managers' estimate of intrinsic value. A company's market price must generally offer 50% appreciation potential to estimated intrinsic value over a 2 to 3 year time period.
- Emphasize quality businesses with potential to grow intrinsic value over time. They seek established companies which they believe have solid growth prospects, the ability to earn an attractive return on invested capital and a management team that exhibits intelligent capital allocation skills.
They estimate a company's intrinsic value primarily by taking the present value of projected future free cash flows (i.e. the excess cash generated by the business after considering all cash inflows and outflows to operate the business). They believe this intrinsic value represents the fair economic worth of the business and a value that an informed buyer would pay to acquire the entire company for cash. They check this valuation method with long-run absolute valuation characteristics (including price-to-earnings ratio and price-to-book value ratio) adjusted for the prevailing inflation and interest rate environment.
The portfolio managers will consider selling a security to capitalize on a more attractive investment opportunity, if a security is trading significantly above the portfolio managers' estimate of intrinsic value or if there is a permanent, fundamental deterioration in business prospects that results in inadequate upside potential to estimated intrinsic value.
The portfolio managers seek to achieve strong long-term performance by constructing a diversified portfolio of typically 40-60 stocks that offers value content greater than the broad market, as measured by the portfolio's aggregate discount to the portfolio managers' estimated intrinsic value of the portfolio. The investment process is fundamental in nature and focused on individual companies as opposed to macro economic forecasts or specific industry exposure. The portfolio construction process is intended to preserve and grow the estimated intrinsic value of the fund's portfolio rather than mirror the composition or sector weights of any benchmark. The fund may also invest up to 25% if its total assets in foreign securities.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions;
- Value Investing Risk--Value stocks can react differently to issuer, political, market and economic developments than the market as a whole and other types of stocks. Value stocks tend to be currently
out-of-favor with many investors and can continue to be undervalued for long periods of time and may not ever realize their full value.
- Equity Securities Risk--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.
- Derivatives Risk--The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. If the fund uses derivatives to "hedge" the overall risk of its portfolio, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio.
- Counterparty Risk--Individually negotiated, or over-the-counter, derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
- Leveraging Risk--The fund may engage in transactions, including the use of synthetic instruments and derivatives, which may give rise to a form of leverage. Leverage may cause the fund's portfolio to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the fund.
- Foreign Securities Risk--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.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product, if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2002................................................................... -22.34%
2003................................................................... 33.29%
2004................................................................... 10.84%
2005................................................................... 5.43%
2006................................................................... 12.94%
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During the period shown in the bar chart, the highest quarterly return was 20.48% (quarter ended June 30, 2003) and the lowest quarterly return was -20.09% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS --------------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE --------------------------------------------------------------------------------------- AIM V.I. Basic Value Fund 12.94% 6.44% 6.57% 09/10/01 S&P 500--Registered Trademark-- Index(1,2) 15.78 6.19 6.13(3) 08/31/01(3) Russell 1000--Registered Trademark-- Value Index(1,2,4) 22.25 10.86 10.11(3) 08/31/01(3) Lipper VUF Large-Cap Value Funds Index(1,2,5) 17.86 7.70 7.31(3) 08/31/01(3) Lipper Large-Cap Value Funds Index(1,2,6) 18.28 7.67 7.22(3) 08/31/01(3) --------------------------------------------------------------------------------------- |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell 1000--Registered Trademark-- Value Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Large-Cap Value Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Large-Cap Value Funds Index as its peer-group index instead of the Lipper Large-Cap Value Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Large-Cap Value Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month-end closest to the inception date of the fund's Series II shares.
(4) The Russell 1000--Registered Trademark-- Value Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 1000--Registered Trademark-- Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock performance market. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity market.
(5) The Lipper VUF Large-Cap Value Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Large-Cap Value Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalization (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalization of $300 million and above, and represents the small-, mid-, and large-cap markets.
(6) The Lipper Large-Cap Value Funds Index is an equally weighted representation of the largest funds in the Lipper Large-Cap Value Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product and if it did, expenses would be higher.
SHAREHOLDER FEES ---------------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES ---------------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A ---------------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) ---------------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES ---------------------------------------------------------------------------------------- Management Fees(2) 0.72% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.30 Acquired Fund Fees and Expenses(3) 0.00 Total Annual Fund Operating Expenses 1.27 Fee Waiver and/or Expense Reimbursements(2,4) 0.05 Net Annual Fund Operating Expenses 1.22 ---------------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through December 31, 2009, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.695% (for average net assets up to $250 million) to 0.52% (for average net assets up to $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expense are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------------------- AIM V.I. Basic Value Fund $124 $387 $682 $1,520 ------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 -------------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.22% 1.22% 1.22% 1.27% 1.27% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.78% 7.70% 11.77% 15.94% 20.27% End of Year Balance $10,378.00 $10,770.29 $11,177.41 $11,594.32 $12,026.79 Estimated Annual Expenses $ 124.31 $ 129.00 $ 133.88 $ 144.60 $ 149.99 -------------------------------------------------------------------------------------------------- SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 Annual Expense Ratio(1) 1.27% 1.27% 1.27% 1.27% 1.27% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 24.75% 29.41% 34.23% 39.24% 44.43% End of Year Balance $12,475.39 $12,940.72 $13,423.41 $13,924.10 $14,443.47 Estimated Annual Expenses $ 155.59 $ 161.39 $ 167.41 $ 173.66 $ 180.13 -------------------------------------------------------------------------------------------------- |
(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment
advisor and is responsible for its day-to-day management. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical
and financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.67% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the
day-to-day management of the fund's portfolio:
- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been responsible for the fund since its inception in 2001 and has been associated with the advisor and/or its affiliates since 1998. As the lead manager, Mr. Stanley generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Stanley may perform these functions, and the nature of these functions, may change from time to time.
- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1999.
- Matthew W. Seinsheimer, Portfolio Manager, who has been responsible for the fund since its inception in 2001 and has been associated with the advisor and/or its affiliates since 1998.
- Michael J. Simon, Portfolio Manager, who has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 2001.
They are assisted by the advisor's Basic Value Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of members of the team, may be found on the advisor's website
http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The
advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays this fee out of its assets on an ongoing basis, over time this fee will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates is motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal year ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 12.26 $ 11.76 $ 10.61 $ 7.96 $ 10.25
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04(a) 0.02 (0.01) (0.02) (0.01)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.54 0.62 1.16 2.67 (2.28)
=========================================================================================================================
Total from investment operations 1.58 0.64 1.15 2.65 (2.29)
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.02) -- -- (0.00) (0.00)
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.58) (0.14) -- -- --
=========================================================================================================================
Total distributions (0.60) (0.14) -- (0.00) (0.00)
=========================================================================================================================
Net asset value, end of period $ 13.24 $ 12.26 $ 11.76 $ 10.61 $ 7.96
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 12.94% 5.43% 10.84% 33.29% (22.34)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $339,457 $363,393 $353,605 $253,877 $104,597
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.22%(c) 1.22% 1.27% 1.29% 1.41%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.27%(c) 1.27% 1.27% 1.29% 1.41%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets 0.29%(c) 0.13% (0.08)% (0.24)% (0.07)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 15% 16% 14% 18% 22%
_________________________________________________________________________________________________________________________
=========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $340,612,509.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI, or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
The fund's most recent portfolio holdings, as filed
on Form N-Q, have also been made available to
insurance companies issuing variable products that
invest in the fund.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIBVA-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. CAPITAL APPRECIATION FUND
PROSPECTUS
MAY 1, 2007
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Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Capital Appreciation Fund's investment objective is 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 6 ------------------------------------------------------ Purchase and Redemption of Shares 6 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 7 Risks 7 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing principally in common stocks of companies the portfolio managers believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when it no longer meets these criteria. The fund will invest without regard to market capitalization. The fund may also invest up to 25% of its total assets in foreign securities.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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, which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay.
There is a risk that you could lose all or a portion of your investment in the fund. 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. This is especially true with respect to common stocks of smaller companies, whose prices may go up and down more than equity securities of larger, more-established companies. Also, since common stocks of smaller companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
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.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
1997................................................................... 13.50%
1998................................................................... 19.30%
1999................................................................... 44.61%
2000................................................................... -10.91%
2001................................................................... -23.28%
2002................................................................... -24.35%
2003................................................................... 29.52%
2004................................................................... 6.62%
2005................................................................... 8.83%
2006................................................................... 6.30%
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During the periods shown in the bar chart, the highest quarterly return was 35.78% (quarter ended December 31, 1999) and the lowest quarterly return was -23.09% (quarter ended September 30, 2001).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------- (for the periods ended INCEPTION December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE ------------------------------------------------------------------------------- AIM V.I. Capital Appreciation Fund 6.30% 3.86% 4.93% 05/05/93 S&P 500--Registered Trademark-- Index(1,2) 15.78 6.19 8.42 -- Russell 1000--Registered Trademark-- Growth Index(1,2,3) 9.07 2.69 5.44 -- Lipper VUF Multi-Cap Growth Funds Category Average(1,2,4) 7.85 4.86% 6.85 -- Lipper Multi-Cap Growth Funds Index(1,2,5) 9.21 4.73% 6.41 -- ------------------------------------------------------------------------------- |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell 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 Variable Underlying Funds (VUF) Multi-Cap Growth Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Multi-Cap Growth Funds Category Average as its peer-group index instead of the Lipper Multi-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Multi-Cap Growth Funds Category Average.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The Russell 1000--Registered Trademark-- Growth Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000--Registered Trademark-- Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock performance market. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. equity market.
(4) The Lipper VUF Multi-Cap Growth Funds Category Average represents the average of all the variable insurance underlying Multi-Cap Growth Funds tracked by Lipper Inc.
(5) The Lipper Multi-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper Multi-Cap Growth Category. These funds, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-Cap funds typically have between 25% and 75% of their assets invested in companies with market capitalizations (on a three-year weighted basis) above 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Multi-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to- book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) --------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES --------------------------------------------------------------------------------- Management Fees 0.61% Other Expenses 0.30 Acquired Fund Fees and Expenses(2) 0.00 Total Annual Fund Operating Expenses(3) 0.91 --------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expense are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Capital Appreciation Fund $93 $290 $504 $1,120 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates (collectively, AIM Affiliates) and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 0.91% 0.91% 0.91% 0.91% 0.91%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 4.09% 8.35% 12.78% 17.39% 22.19%
End of Year Balance $10,409.00 $10,834.73 $11,277.87 $11,739.13 $12,219.26
Estimated Annual Expenses $ 92.86 $ 96.66 $ 100.61 $ 104.73 $ 109.01
-----------------------------------------------------------------------------------------------
SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 0.91% 0.91% 0.91% 0.91% 0.91%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 27.19% 32.39% 37.81% 43.44% 49.31%
End of Year Balance $12,719.03 $13,239.24 $13,780.73 $14,344.36 $14,931.04
Estimated Annual Expenses $ 113.47 $ 118.11 $ 122.94 $ 127.97 $ 133.20
-----------------------------------------------------------------------------------------------
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(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to
the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.61% of average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGERS
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Lanny H. Sachnowitz (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1987. As the lead manager, Mr. Sachnowitz generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Sachnowitz may perform these functions, and the nature of these functions, may change from time to time.
- Kirk L. Anderson, Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1994.
- James G. Birdsall, Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor since 1995.
- Robert J. Lloyd, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 2000.
They are assisted by the advisor's Large/Multi-Cap Growth Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the
future, the fund may offer them to pension and retirement plans that qualify for special federal income tax treatment. The fund and AIM have applied for regulatory relief to enable the fund's shares to be sold to and held by one or more fund of funds (open-end management investment companies or series thereof that offer their shares exclusively to insurance companies, their separate accounts and/or qualified plans). The fund plans to offer its shares to fund of funds following receipt of the requested regulatory relief. Due to differences in tax treatment and other considerations, the interests of fund shareholders, including variable product owners and plan participants investing in the fund (whether directly or indirectly through fund of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM
Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product own-
ers' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
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 the fiscal years (or period) indicated.
The information for the fiscal year ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statement, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2006 2005 2004 2003 2002
---------- -------- -------- -------- --------
Net asset value, beginning of period $ 24.67 $ 22.69 $ 21.28 $ 16.43 $ 21.72
----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.01 0.03 0.02(a) (0.04)(b) (0.05)(b)
----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized
and unrealized) 1.55 1.97 1.39 4.89 (5.24)
============================================================================================================================
Total from investment operations 1.56 2.00 1.41 4.85 (5.29)
============================================================================================================================
Less dividends from net investment income (0.01) (0.02) -- -- --
============================================================================================================================
Net asset value, end of period $ 26.22 $ 24.67 $ 22.69 $ 21.28 $ 16.43
____________________________________________________________________________________________________________________________
============================================================================================================================
Total return(c) 6.34% 8.79% 6.62% 29.52% (24.35)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,204,559 $822,899 $886,990 $938,820 $763,038
____________________________________________________________________________________________________________________________
============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.91%(d) 0.89% 0.91% 0.85% 0.85%
============================================================================================================================
Ratio of net investment income (loss) to average
net assets 0.06%(d) 0.11% 0.09%(a) (0.23)% (0.27)%
____________________________________________________________________________________________________________________________
============================================================================================================================
Portfolio turnover rate(e) 120% 97% 74% 61% 67%
____________________________________________________________________________________________________________________________
============================================================================================================================
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(a) Net investment income per share and the ratio of net investment income to
average net assets include a special cash dividend received of $3.00 per
share owned of Microsoft Corp. on December 2, 2004. Net investment income
(loss) per share and the ratio of net investment income (loss) to average
net assets excluding the special dividend are $(0.04) and (0.17)%,
respectively.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(d) Ratios based on average daily net assets of $1,071,728,909.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year. For the period ending December 31, 2006, the portfolio turnover calculation excludes the value of securities purchased of $441,499,081 and sold of $338,653,532 in the effort to realign the Fund's portfolio holdings after the reorganization of AIM V.I. Aggressive Growth Fund and AIM V.I. Growth Fund into the Fund.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
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You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
SEC 1940 Act file number: 811-07452
AIMinvestments.com VICAP-PRO-1
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. CAPITAL APPRECIATION FUND
PROSPECTUS
MAY 1, 2007
|
Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Capital Appreciation Fund's investment objective is growth of capital.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 5 ------------------------------------------------------ The Advisor 5 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 6 ------------------------------------------------------ Purchase and Redemption of Shares 6 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 7 Risks 7 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Distribution Plan 9 Payment to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing principally in common stocks of companies the portfolio managers believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when it no longer meets these criteria. The fund will invest without regard to market capitalization. The fund may also invest up to 25% of its total assets in foreign securities.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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, which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay.
There is a risk that you could lose all or a portion of your investment in the fund. 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. This is especially true with respect to common stocks of smaller companies, whose prices may go up and down more than equity securities of larger, more-established companies. Also, since common stocks of smaller companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
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.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). All performance shown assumes the reinvestment of dividends and capital gains.
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- --------
1997*................................................................. 13.22%
1998*................................................................. 19.01%
1999*................................................................. 44.26%
2000*................................................................. -11.13%
2001*................................................................. -23.47%
2002.................................................................. -24.52%
2003.................................................................. 29.18%
2004.................................................................. 6.33%
2005.................................................................. 8.58%
2006.................................................................. 6.06%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 35.69% (quarter ended December 31, 1999) and the lowest quarterly return was -23.11% (quarter ended September 30, 2001).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------
SERIES I
(for the periods ended INCEPTION
December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE
-------------------------------------------------------------------------------
AIM V.I. Capital Appreciation
Fund(1) 6.06% 3.61% 4.67% 05/05/93
S&P 500--Registered
Trademark-- Index(2,3) 15.78 6.19 8.42 --
Russell 1000--Registered
Trademark-- Growth
Index(2,3,4) 9.07 2.69 5.44 --
Lipper VUF Multi-Cap Growth
Funds Category
Average(2,3,5) 7.85 4.86 6.85 --
Lipper Multi-Cap Growth Funds
Index(2,3,6) 9.21 4.73 6.41 --
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(1) The returns shown for the one year and five year periods are the historical performance of the fund's Series II shares. The return shown for the ten year period is the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is August 21, 2001.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell 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 Variable Underlying Funds (VUF) Multi-Cap Growth Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Multi-Cap Growth Funds Category Average as its peer-group index instead of the Lipper Multi-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Multi-Cap Growth Funds Category Average.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The Russell 1000--Registered Trademark-- Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock performance market. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. equity market.
(5) The Lipper VUF Multi-Cap Growth Funds Category Average represents the average of all the variable insurance underlying Multi-Cap Growth Funds tracked by Lipper Inc.
(6) The Lipper Multi-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper Multi-Cap Growth Category. These funds, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-Cap funds typically have between 25% and 75% of their assets invested in companies with market capitalizations (on a three-year weighted basis) above 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Multi-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to- book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees 0.61% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.30 Acquired Fund Fees and Expenses(2) 0.00 Total Annual Fund Operating Expenses(3) 1.16 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------- AIM V.I. Capital Appreciation Fund $118 $368 $638 $1,409 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.16% 1.16% 1.16% 1.16% 1.16%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.84% 7.83% 11.97% 16.27% 20.73%
End of Year Balance $10,384.00 $10,782.75 $11,196.80 $11,626.76 $12,073.23
Estimated Annual Expenses $ 118.23 $ 122.77 $ 127.48 $ 132.38 $ 137.46
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SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.16% 1.16% 1.16% 1.16% 1.16%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.37% 30.18% 35.18% 40.37% 45.76%
End of Year Balance $12,536.84 $13,018.25 $13,518.16 $14,037.25 $14,576.28
Estimated Annual Expenses $ 142.74 $ 148.22 $ 153.91 $ 159.82 $ 165.96
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|
(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a
result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the
independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action
and shareholder derivative suits, have been filed against certain of the AIM
funds, IFG, AIM, ADI and/or related entities and individuals, depending on the
lawsuit, alleging among other things: (i) that the defendants permitted improper
market timing and related activity in the funds; (ii) that certain funds
inadequately employed fair value pricing; and (iii) that the defendants
improperly used the assets of the funds to pay brokers to aggressively promote
the sale of the funds over other mutual funds and that the defendants concealed
such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed
by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or
related entities and individuals in the future. You can find more detailed
information concerning all of the above matters, including the parties to the
civil lawsuits and summaries of the various allegations and remedies sought in
such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's last fiscal year ended December 31, 2006, the advisor received compensation of 0.61% of average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGERS(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Lanny H. Sachnowitz (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1987. As the lead manager, Mr. Sachnowitz generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Sachnowitz may perform these functions, and the nature of these functions, may change from time to time.
- Kirk L. Anderson, Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1994.
- James G. Birdsall, Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor since 1995.
- Robert J. Lloyd, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 2000.
They are assisted by the advisor's Large/Multi-Cap Growth Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in
cash, the fund reserves the right to determine, in its sole discretion, whether
to satisfy redemption requests by making payment in securities or other property
(known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or
qualified plans). The fund plans to offer its shares to fund of funds following receipt of the requested regulatory relief. Due to differences in tax treatment and other considerations, the interests of fund shareholders, including variable product owners and plan participants investing in the fund (whether directly or
indirectly through fund of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For
example, violation of the federal tax laws by one insurance company separate
account investing directly or indirectly in a fund could cause variable products
funded through another insurance company separate account to lose their
tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage
excessive short-term trading of fund shares. The fund may alter its policies and
procedures at any time without giving prior notice to fund shareholders, if the
advisor believes the change would be in the best interests of long-term
investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates
(collectively the AIM Affiliates) currently use the following tools designed to
discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive
short-term trading activity may be imposed by the insurance companies and/or
their separate accounts that invest in the fund on behalf of variable product
owners. Variable product owners should refer to the applicable contract and
related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a
variable product owner has engaged in excessive short-term trading (regardless
of whether or not the insurance company's own trading restrictions are
exceeded), the AIM Affiliates will seek to act in a manner that they believe is
consistent with the best interests of long-term investors, which may include
taking steps such as (i) asking the insurance company to take action to stop
such activities, or (ii) refusing to process future purchases related to such
activities in the insurance company's account with the funds. AIM Affiliates
will use reasonable efforts to apply the fund's policies uniformly given the
potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more
information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies
that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board of Trustees.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the
investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or earlier NYSE closing time that day.
TAXES
6The 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. Variable product owners should refer to the prospectus for their
variable products for information regarding the tax consequences of owning such
variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II
shares. The plan allows the fund to pay distribution fees to life insurance
companies and others to promote the sale and distribution of Series II shares.
The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed
as a percentage of average daily net assets of the fund). Because the fund pays
these fees out of its assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates makes may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board of the fund. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain
variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2006 2005 2004 2003 2002
--------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 24.43 $ 22.50 $ 21.16 $ 16.38 $ 21.70
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.05) (0.03) (0.02)(a) (0.09)(b) (0.09)(b)
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.53 1.96 1.36 4.87 (5.23)
================================================================================================================================
Total from investment operations 1.48 1.93 1.34 4.78 (5.32)
================================================================================================================================
Net asset value, end of period $ 25.91 $ 24.43 $ 22.50 $ 21.16 $ 16.38
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(c) 6.06% 8.58% 6.33% 29.18% (24.52)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $371,316 $339,190 $136,982 $70,466 $23,893
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.16%(d) 1.14% 1.16% 1.10% 1.10%
================================================================================================================================
Ratio of net investment income (loss) to average net
assets (0.19)%(d) (0.14)% (0.16)%(a) (0.48)% (0.52)%
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(e) 120% 97% 74% 61% 67%
________________________________________________________________________________________________________________________________
================================================================================================================================
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(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $(0.08) and
(0.42)%, respectively.
(b) Calculated using average shares outstanding.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(d) Ratios are based on average daily net assets of $368,224,387.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year. For the period ending December 31, 2006, the portfolio turnover calculation excludes the value of securities purchased of $441,499,081 and sold of $338,653,532 in the effort to realign the Fund's portfolio holdings after the reorganization of AIM V.I. Aggressive Growth Fund and AIM V.I. Growth Fund into the Fund.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VICAP-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. CAPITAL DEVELOPMENT FUND
PROSPECTUS
MAY 1, 2007
|
Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Capital Development Fund's investment objective is long-term 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 2 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing primarily in equity securities of mid-capitalization companies. The principal type of equity securities purchased by the fund is common stocks.
The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell Mid Cap(R) Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The largest capitalized company in the Russell Mid Cap(R) Index during the above referenced period ended March 31, 2007, had a market capitalization of approximately $27 billion, while the smallest capitalized company had a market capitalization of approximately $694 million during such period. The Russell Mid Cap(R) Index measures the performance of the 800 smallest companies with the lowest market capitalization in the Russell 1000(R) Index. The Russell 1000(R) Index measures the performance of the 1,000 largest companies domiciled in the United States based on total market capitalization. The companies in the Russell Mid Cap(R) Index are considered representative of medium-sized companies and constitute approximately 25% of the total market capitalization of the Russell 1000(R) Index.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers actively manage the fund using a two-step stock selection process that combines quantitative and fundamental analyses. The quantitative analysis involves using a stock ranking model to rank stocks based primarily upon: (1) earning, (2) quality; and (3) valuation. The fundamental analysis focuses on identifying both industries and mid-capitalization companies that in, the portfolio managers' view, have high growth potential and are also favorably priced relative to the growth expectations for that company.
The resulting portfolio contains two types of companies: (1) consistent growth companies and (2) earnings-acceleration companies. Consistent growth companies are companies with a history of strong returns and, in the portfolio managers' opinion, are industry leaders serving growth, non-cyclical markets whose performance tends to remain constant regardless of economic conditions. Earning-acceleration companies are companies that are driven by near-term catalysts such as new products, improved processes and/or specific economic conditions that may lead to rapid sales and earnings growth. The portfolio managers strive to control the fund's volatility and risk by diversifying fund holdings across sectors as well as by building a portfolio with approximately equal weightings among security holdings.
The portfolio managers consider selling or reducing the fund's holdings in a stock if: (1) it no longer meets their investment criteria; (2) a company's fundamentals deteriorate; (3) a stock's price reaches its valuation target; (4) a company is no longer considered a mid-capitalization company; and/or (5) a more attractive investment option is identified.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of, and the income generated by, securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of mid-size companies are more volatile than those of large companies.
- Growth Investing Risk--Growth stocks can perform differently from the market as a whole than other types of stocks and tend to be more expensive relative to their earnings or assets compared with other types of stocks. As a result, growth stocks tend to be more sensitive to changes in their earnings and can be more volatile that other types of stocks.
- Equity Securities Risk--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.
- Market Capitalization Risk--Stocks fall into three broad market capitalization categories--large, medium and small. Investing primarily in one category carries the risk that, due to current market conditions, that category may be out of favor with investors. Mid-capitalization companies tend to be more vulnerable to adverse developments and more volatile than larger companies. Investments in mid-capitalization sized companies may involve special risks, including those associated with dependence on a small management group, little or no operating history, little or no track record of success, and limited product lines, markets and financial resources. Also, there may be less publicly available information about the issuers of the securities or less market interest in such securities than in the case of larger companies, each of which can cause significant price volatility. The securities of mid-capitalization companies may be illiquid, restricted as to resale, or may trade less frequently and in smaller volume than more widely held securities, which may make it difficult for the fund to establish or close out a position in these securities at prevailing market prices.
- Foreign Securities Risk--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.
- Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If a fund does trade in this way, it may incur increasing costs, which can lower the actual return of the fund. Active Trading may also increase short term gains and losses, which may affect the taxes that must be paid.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with variable products; if it did, the performance shown would be lower.
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
----------- -------
1999................................................................... 29.10%
2000................................................................... 9.25%
2001................................................................... -8.08%
2002................................................................... -21.36%
2003................................................................... 35.36%
2004................................................................... 15.50%
2005................................................................... 9.61%
2006................................................................... 16.52%
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During the period shown in the bar chart, the highest quarterly return was 29.66% (quarter ended December 31, 1999) and the lowest quarterly return was -21.21% (quarter ended September 30, 2002).
PERFORMANCE INFORMATION (CONTINUED)
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with variable products; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ----------------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE ----------------------------------------------------------------------------------------- AIM V.I. Capital Development Fund 16.52% 9.44% 7.57% 05/01/98 S&P 500--Registered Trademark-- Index(1,2) 15.78 6.19 4.48(3) 04/30/98(3) Russell Midcap--Registered Trademark-- Growth Index(1,2,4) 10.66 8.22 5.90(3) 04/30/98(3) Lipper VUF Mid-Cap Growth Funds Index(1,2,5) 8.51 6.19 4.94(3) 04/30/98(3) Lipper Mid-Cap Growth Funds Index(1,2,6) 11.02 6.09 5.19(3) 04/30/98(3) ----------------------------------------------------------------------------------------- |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell Midcap--Registered Trademark-- Growth Index, which the fund believes more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Mid-Cap Growth Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Mid-Cap Growth Funds Index as it peer-group index instead of the Lipper Mid-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Mid-Cap Growth Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month end closest to the
inception date of the fund's Series I shares.
(4) The Russell Midcap--Registered Trademark-- Growth Index measures the performance of those Russell Midcap--Registered Trademark-- Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell MidCap--Registered Trademark-- Index measures the performance of the 800 smallest companies in the Russell 1000--Registered Trademark-- Index. These stocks represent approximately 25% of the total market capitalization of the Russell 1000--Registered Trademark-- Index. The Russell 1000 Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1,000 stocks of the Russell 3000(R) universe. The Russell 3000(R) Index is widely regarded as the standard for measuring the U.S. stock performance market. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity market.
(5) The Lipper VUF Mid-Cap Growth Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Mid-Cap Growth Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalization (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalization of $300 million and above, and represents small-, mid- and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. It is also a market-value weighted index and was the first benchmark of mid-cap stock price movement.
(6) The Lipper Mid-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper Mid-Cap Growth Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. It is also a market-value weighted index and was the first benchmark of mid-cap stock price movement.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Other Expenses 0.34 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses 1.10 Fee Waiver and/or Expense Reimbursements(2,4) 0.01 Net Annual Fund Operating Expenses 1.09 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.745% (for average net assets up to $250 million) to 0.64% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and the expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees, and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Capital Development Fund $111 $349 $605 $1,339 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.09% 1.10% 1.10% 1.10% 1.10%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.91% 7.96% 12.17% 16.55% 21.09%
End of Year Balance $10,391.00 $10,796.25 $11,217.30 $11,654.78 $12,109.31
Estimated Annual Expenses $ 111.13 $ 116.53 $ 121.07 $ 125.80 $ 130.70
-----------------------------------------------------------------------------------------------
SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.10% 1.10% 1.10% 1.10% 1.10%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.82% 30.72% 35.82% 41.12% 46.62%
End of Year Balance $12,581.58 $13,072.26 $13,582.08 $14,111.78 $14,662.14
Estimated Annual Expenses $ 135.80 $ 141.10 $ 146.60 $ 152.32 $ 158.26
-----------------------------------------------------------------------------------------------
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable
products that invest in the fund.
A description of the fund's policies and procedures with respect to the
disclosure of the fund's portfolio holdings is available in the fund's Statement
of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.74% of average daily net assets, after fee waivers and/or expense reimbursement.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Paul J. Rasplicka (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994. As the lead manager, Mr. Rasplicka generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree of these functions, may change from time to time.
- Karl F. Farmer, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1998.
- Warren Tennant, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2000.
They are assisted by the advisor's Mid Cap Growth-GARP (growth at a reasonable price) Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
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 the fiscal years (or period) indicated.
The information for the fiscal years 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- ------- -------
Net asset value, beginning of period $ 16.09 $ 14.68 $ 12.71 $ 9.39 $ 11.94
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.07) (0.04) (0.03)(a) (0.01) (0.01)(a)
-----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.73 1.45 2.00 3.33 (2.54)
=======================================================================================================================
Total from investment operations 2.66 1.41 1.97 3.32 (2.55)
=======================================================================================================================
Less distributions from net realized gains (0.32) -- -- -- --
=======================================================================================================================
Net asset value, end of period $ 18.43 $ 16.09 $ 14.68 $ 12.71 $ 9.39
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 16.52% 9.61% 15.50% 35.36% (21.36)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $148,668 $117,674 $112,028 $93,813 $70,018
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets 1.08%(c)(d) 1.09% 1.10% 1.13% 1.14%
=======================================================================================================================
Ratio of net investment income (loss) to average net assets (0.48)%(c) (0.22)% (0.21)% (0.13)% (0.08)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 119% 125% 93% 95% 121%
_______________________________________________________________________________________________________________________
=======================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $125,471,170.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.09% for the year ended December 31, 2006.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
The fund's most recent portfolio holdings, as filed
on Form N-Q, have also been made available to
insurance companies issuing variable products that
invest in the fund.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VICDV-PRO-1
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. CAPITAL DEVELOPMENT FUND
PROSPECTUS
MAY 1, 2007
|
SERIES II SHARES
SHARES OF THE FUND ARE CURRENTLY OFFERED ONLY TO INSURANCE COMPANY SEPARATE ACCOUNTS FUNDING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. AIM V.I. CAPITAL DEVELOPMENT FUND'S INVESTMENT OBJECTIVE IS LONG-TERM GROWTH OF CAPITAL.
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE SERIES II CLASS SHARES (SERIES II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 2 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing primarily in equity securities of mid-capitalization companies. The principal type of equity securities purchased by the fund is common stocks.
The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell Mid Cap(R) Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The largest capitalized company in the Russell Mid Cap(R) Index during the above referenced period ended March 31, 2007, had a market capitalization of approximately $27 billion, while the smallest capitalized company had a market capitalization of approximately $694 million during such period. The Russell Mid Cap(R) Index measures the performance of the 800 smallest companies with the lowest market capitalization in the Russell 1000(R) Index. The Russell 1000(R) Index measures the performance of the 1,000 largest companies domiciled in the United States based on total market capitalization. The companies in the Russell Mid Cap(R) Index are considered representative of medium-sized companies and constitute approximately 25% of the total market capitalization of the Russell 1000(R) Index.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers actively manage the fund using a two-step stock selection process that combines quantitative and fundamental analyses. The quantitative analysis involves using a stock ranking model to rank stocks based primarily upon: (1) earning, (2) quality; and (3) valuation. The fundamental analysis focuses on identifying both industries and mid-capitalization companies that in, the portfolio managers' view, have high growth potential and are also favorably priced relative to the growth expectations for that company.
The resulting portfolio contains two types of companies: (1) consistent growth companies and (2) earnings-acceleration companies. Consistent growth companies are companies with a history of strong returns and, in the portfolio managers' opinion, are industry leaders serving growth, non-cyclical markets whose performance tends to remain constant regardless of economic conditions. Earning-acceleration companies are companies that are driven by near-term catalysts such as new products, improved processes and/or specific economic conditions that may lead to rapid sales and earnings growth. The portfolio managers strive to control the fund's volatility and risk by diversifying fund holdings across sectors as well as by building a portfolio with approximately equal weightings among security holdings.
The portfolio managers consider selling or reducing the fund's holdings in a stock if: (1) it no longer meets their investment criteria; (2) a company's fundamentals deteriorate; (3) a stock's price reaches its valuation target; (4) a company is no longer considered a mid-capitalization company; and/or (5) a more attractive investment option is identified.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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, which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of, and the income generated by, securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of mid-size companies are more volatile than those of large companies.
- Growth Investing Risk--Growth stocks can perform differently from the market as a whole than other types of stocks and tend to be more expensive relative to their earnings or assets compared with other types of stocks. As a result, growth stocks tend to be more sensitive to changes in their earnings and can be more volatile than other types of stocks.
- Equity Securities Risk--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.
- Market Capitalization Risk--Stocks fall into three broad market capitalization categories--large, medium and small. Investing primarily in one category carries the risk that, due to current market conditions, that category may be out of favor with investors. Mid-capitalization companies tend to be more vulnerable to adverse developments and more volatile than larger companies. Investments in mid-capitalization sized companies may involve special risks, including those associated with dependence on a small management group, little or no operating history, little or no track record of success, and limited product lines, markets and financial resources. Also, there may be less publicly available information about the issuers of the securities or less market interest in such securities than in the case of larger companies, each of which can cause significant price volatility. The securities of mid-capitalization companies may be illiquid, restricted as to resale, or may trade less frequently and in smaller volume than more widely held securities, which may make it difficult for the fund to establish or close out a position in these securities at prevailing market prices.
- Foreign Securities Risk--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.
- Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If a fund does trade in this way, it may incur increasing costs, which can lower the actual return of the fund. Active Trading may also increase short term gains and losses, which may affect the taxes that must be paid.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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1999*.................................................................. 28.78%
2000*.................................................................. 8.98%
2001*.................................................................. -8.23%
2002................................................................... -21.61%
2003................................................................... 35.04%
2004................................................................... 15.27%
2005................................................................... 9.27%
2006................................................................... 16.26%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the period shown in the bar chart, the highest quarterly return was 29.58% (quarter ended December 31, 1999) and the lowest quarterly return was -21.25% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------------------------------------------------------------
SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
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AIM V.I. Capital Development Fund(1) 16.26% 9.16% 7.31% 05/01/98
S&P 500--Registered Trademark--
Index(2,3) 15.78 6.19 4.48(4) 04/30/98(4)
Russell Midcap--Registered Trademark--
Growth Index(2,3,5) 10.66 8.22 5.90(4) 04/30/98(4)
Lipper VUF Mid-Cap Growth Funds
Index(2,3,6) 8.51 6.19 4.94(4) 04/30/98(4)
Lipper Mid-Cap Growth Funds Index(2,3,7) 11.02 6.09 5.19(4) 04/30/98(4)
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(1) The returns shown for the one year and five year periods are the historical performance of the fund's Series II shares. The return shown since inception is the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is August 21, 2001.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell Midcap--Registered Trademark-- Growth Index, which the fund believes more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Mid-Cap Growth Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Mid-Cap Growth Funds Index as its peer-group index instead of the Lipper Mid-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Mid-Cap Growth Funds Index.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The average annual total return given is since the month-end closest to the inception date of the fund's Series I shares.
(5) The Russell Midcap--Registered Trademark-- Growth Index measures the performance of those Russell Midcap--Registered Trademark-- Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000--Registered Trademark-- Index. These stocks represent approximately 25% of the total market capitalization of the Russell 1000 Index. The Russell 1000 Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1,000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock performance market. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity market.
(6) The Lipper VUF Mid-Cap Growth Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Mid-Cap Growth Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalization (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalization of $300 million and above, and represents small-, mid- and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. It is also a market-value weighted index and was the first benchmark of mid-cap stock price movement.
(7) The Lipper Mid-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper Mid-Cap Growth Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. It is also a market-value weighted index and was the first benchmark of mid-cap stock price movement.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.34 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses 1.35 Fee Waiver and/or Expense Reimbursements(2,4) 0.01 Net Annual Fund Operating Expenses 1.34 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee ranges from 0.745% (for average net assets up to $250 million) to 0.64% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------- AIM V.I. Capital Development Fund $136 $427 $738 $1,623 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.34% 1.35% 1.35% 1.35% 1.35%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.66% 7.44% 11.37% 15.43% 19.64%
End of Year Balance $10,366.00 $10,744.36 $11,136.53 $11,543.01 $11,964.33
Estimated Annual Expenses $ 136.45 $ 142.49 $ 147.70 $ 153.09 $ 158.67
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SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.35% 1.35% 1.35% 1.35% 1.35%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 24.01% 28.54% 33.23% 38.09% 43.13%
End of Year Balance $12,401.03 $12,853.67 $13,322.83 $13,809.11 $14,313.14
Estimated Annual Expenses $ 164.47 $ 170.47 $ 176.69 $ 183.14 $ 189.83
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment
advisor and is responsible for its day-to-day management. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical
and financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.74% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Paul J. Rasplicka (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994. As the lead manager, Mr. Rasplicka generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual portfolio construction techniques, securities, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Rasplicka may perform these functions, and the nature of these functions, may change from time to time.
- Karl F. Farmer, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1998.
- Warren Tennant, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1998.
They are assisted by the advisor's Mid Cap Growth-GARP (growth at a reasonable price) Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of Trustees of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign
securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typi-
cally on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2006 2005 2004 2003 2002
-------- ------- ------- ------- -------
Net asset value, beginning of period $ 15.92 $ 14.57 $ 12.64 $ 9.36 $ 11.94
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.10) (0.07) (0.06)(a) (0.03) (0.03)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.69 1.42 1.99 3.31 (2.55)
=============================================================================================================================
Total from investment operations 2.59 1.35 1.93 3.28 (2.58)
=============================================================================================================================
Less distributions from net realized gains (0.32) -- -- -- --
=============================================================================================================================
Net asset value, end of period $ 18.19 $ 15.92 $ 14.57 $ 12.64 $ 9.36
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 16.26% 9.27% 15.27% 35.04% (21.61)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $128,990 $83,388 $71,339 $33,550 $14,969
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets 1.33%(c)(d) 1.34% 1.35% 1.38% 1.39%
=============================================================================================================================
Ratio of net investment income (loss) to average net assets (0.73)%(c) (0.47)% (0.46)% (0.38)% (0.33)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 119% 125% 93% 95% 121%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $102,505,185.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.34% for the year ended December 31, 2006.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VICDV-PRO-2
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. CORE EQUITY FUND
PROSPECTUS
MAY 1, 2007
|
SERIES I SHARES
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Core Equity Fund's investment objective is 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities, including convertible securities, of established companies that have long-term above-average growth in earnings, and growth companies that the portfolio managers believe have the potential for above-average growth in earnings. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential. In complying with this 80% investment requirement, the fund's investments may include synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund may also invest up to 25% of its total assets in foreign securities.
The fund employs a risk management strategy to reduce volatility. Pursuant to this strategy, the fund generally invests a substantial amount of its assets in cash and cash equivalents. 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 increase the portion of its assets held in cash, cash equivalents (including shares of affiliated money market funds) or high quality debt instruments. As a result the fund may not achieve its investment objective.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
A larger position in cash or cash equivalents could also detract from achieving the fund's objective, but could also reduce the fund's exposure in the event of a market downturn.
There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies located in developing countries more than those in countries with mature economies. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devaluated their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures.
To the extent the fund holds cash or cash equivalents rather than equity securities for risk management purposes, the fund may not achieve its investment objective.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
1997................................................................... 25.72%
1998................................................................... 27.68%
1999................................................................... 34.25%
2000................................................................... -14.56%
2001................................................................... -22.83%
2002................................................................... -15.58%
2003................................................................... 24.42%
2004................................................................... 8.97%
2005................................................................... 5.31%
2006................................................................... 16.70%
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During the periods shown in the bar chart, the highest quarterly return was 26.48% (quarter ended December 31, 1998) and the lowest quarterly return was -21.54% (quarter ended September 30, 2001). Effective September 30, 2002 the fund changed its investment objective. Performance shown for the fund reflects the investment objective of the fund in effect during the periods shown.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------ (for the periods ended INCEPTION December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE ------------------------------------------------------------------------------ AIM V.I. Core Equity Fund(1) 16.70% 7.06% 7.17% 05/02/94 S&P 500--Registered Trademark-- Index(2,3) 15.78 6.19 8.42 -- Russell 1000--Registered Trademark-- Index(2,3,4) 15.46 6.82 8.64 -- Lipper VUF Large-Cap Core Funds Index(2,3,5) 13.87 5.50 6.45 -- Lipper Large-Cap Core Funds Index(2,3,6) 13.39 5.00 7.27 -- ------------------------------------------------------------------------------ |
(1) Effective September 30, 2002, the fund changed its investment objective. As a result, performance shown for the fund reflects the investment objective of the fund in effect during the periods shown.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell 1000--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Large-Cap Core Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Large-Cap Core Funds Index as its peer-group index instead of the Lipper Large-Cap Core Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Large-Cap Core Funds Index.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The Russell 1000--Registered Trademark-- Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock market performance. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity market.
(5) The Lipper VUF Large-Cap Core Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Large-Cap Core Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalization of $300 million and above, and represents the small-, mid-, and large-cap markets.
(6) The Lipper Large-Cap Core Funds Index is an equally weighted representation of the largest funds in the Lipper Large-Cap Core Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.61% Other Expenses 0.28 Acquired Fund Fees and Expenses(2) 0.02 Total Annual Fund Operating Expenses(3) 0.91 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Core Equity Fund $93 $290 $504 $1,120 ------------------------------------------------------------------------ |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 0.91% 0.91% 0.91% 0.91% 0.91%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 4.09% 8.35% 12.78% 17.39% 22.19%
End of Year Balance $10,409.00 $10,834.73 $11,277.87 $11,739.13 $12,219.26
Estimated Annual Expenses $ 92.86 $ 96.66 $ 100.61 $ 104.73 $ 109.01
--------------------------------------------------------------------------------------------------
SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 0.91% 0.91% 0.91% 0.91% 0.91%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 27.19% 32.39% 37.81% 43.44% 49.31%
End of Year Balance $12,719.03 $13,239.24 $13,780.73 $14,344.36 $14,931.04
Estimated Annual Expenses $ 113.47 $ 118.11 $ 122.94 $ 127.97 $ 133.20
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable
products that invest in the fund.
A description of the fund's policies and procedures with respect to the
disclosure of the fund's portfolio holdings is available in the fund's Statement
of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.61% of the average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Ronald S. Sloan, (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 1998. As lead manager, Mr. Sloan generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Sloan may perform these functions, and the nature of these functions, may change from time to time.
- Tyler Dann II, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2004. From 1998 to 2004, Mr. Dann was a principal and senior research analyst at Banc of America Securities LLC.
- Brian Nelson, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, Mr. Nelson was a senior telecommunications analyst for RCM Global investors.
They are assisted by the advisor's Mid/Large Cap Core Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable contract owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
---------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
2006 2005 2004 2003 2002
---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period $ 23.45 $ 22.60 $ 20.94 $ 16.99 $ 20.20
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.34(a) 0.24(a) 0.30(b) 0.17(a) 0.12(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.58 0.96 1.58 3.97 (3.27)
=================================================================================================================================
Total from investment operations 3.92 1.20 1.88 4.14 (3.15)
=================================================================================================================================
Less dividends from net investment income (0.15) (0.35) (0.22) (0.19) (0.06)
=================================================================================================================================
Net asset value, end of period $ 27.22 $ 23.45 $ 22.60 $ 20.94 $ 16.99
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(c) 16.70% 5.31% 8.97% 24.42% (15.58)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,699,252 $1,246,529 $1,487,462 $1,555,475 $1,385,050
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 0.89%(d) 0.89% 0.91% 0.81%(e) 0.78%
=================================================================================================================================
Ratio of net investment income to average net assets 1.35%(d) 1.08% 1.25%(b) 0.91% 0.67%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f) 45% 52% 52% 31% 113%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.23 and 0.92%, respectively.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(d) Ratios are based on average daily net assets of $2,210,548,014.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 0.82%.
(f) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year. For the period ending December 31, 2006, the portfolio turnover calculation excludes the value of securities purchased of $1,443,696,721 and sold of $744,903,259 in the effort to realign the Fund's portfolio holdings after the reorganization of AIM V.I. Core Stock Fund and AIM V.I. Premier Equity Fund into the Fund.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
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You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VICEQ-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. CORE EQUITY FUND
PROSPECTUS
MAY 1, 2007
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SERIES II SHARES
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Core Equity Fund's investment objective is growth of capital.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Distribution Plan 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities, including convertible securities, of established companies that have long-term above-average growth in earnings, and growth companies that the portfolio managers believe have the potential for above-average growth in earnings. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential. In complying with this 80% investment requirement, the fund's investments may include synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund may also invest up to 25% of its total assets in foreign securities.
The fund employs a risk management strategy to reduce volatility. Pursuant to this strategy, the fund generally invests a substantial amount of its assets in cash and cash equivalents. 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 increase the portion of its assets held in cash, cash equivalents (including shares of affiliated money market funds) or high quality debt instruments. As a result the fund may not achieve its investment objective.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
A larger position in cash or cash equivalents could also detract from achieving the fund's objective, but could also reduce the fund's exposure in the event of a market downturn.
There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies located in developing countries more than those in countries with mature economies. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devaluated their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures.
To the extent the fund holds cash or cash equivalents rather than equity securities for risk management purposes, the fund may not achieve its investment objective.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower. All performance shown assumes the reinvestment of dividends and capital gains.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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1997*.................................................................. 25.41%
1998*.................................................................. 27.36%
1999*.................................................................. 33.91%
2000*.................................................................. -14.77%
2001*.................................................................. -23.03%
2002................................................................... -15.79%
2003................................................................... 24.15%
2004................................................................... 8.67%
2005................................................................... 5.08%
2006................................................................... 16.42%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 26.40% (quarter ended December 31, 1998) and the lowest quarterly return was -21.59% (quarter ended September 30, 2001). Effective September 30, 2002 the fund changed its investment objective. Performance shown for the fund reflects the investment objective of the fund in effect during the periods shown.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
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SERIES I
(for the periods ended INCEPTION
December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE
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AIM V.I. Core Equity Fund(1) 16.42% 6.80% 6.91% 05/02/94
S&P 500--Registered
Trademark-- Index(2,3) 15.78 6.19 8.42 --
Russell 1000--Registered
Trademark-- Index(2,3,4) 15.46 6.82 8.64 --
Lipper VUF Large-Cap Core
Funds Index(2,3,5) 13.87 5.50 6.45 --
Lipper Large-Cap Core Funds
Index(2,3,6) 13.39 5.00 7.27 --
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(1) Effective September 30, 2002, the fund changed its investment objective. As a result, performance shown for the fund reflects the investment objective of the fund in effect during the periods shown. The returns shown for the one year and five year periods are the historical performance of the fund's Series II shares. The return shown for the ten year period is the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is October 24, 2001.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell 1000--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Large-Cap Core Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Large-Cap Core Funds Index as its peer-group index instead of the Lipper Large-Cap Core Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Large-Cap Core Funds Index.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The Russell 1000--Registered Trademark-- Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock market performance. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity market.
(5) The Lipper VUF Large-Cap Core Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Large-Cap Core Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalization of $300 million and above, and represents the small-, mid-, and large-cap markets.
(6) The Lipper Large-Cap Core Funds Index is an equally weighted representation of the largest funds in the Lipper Large-Cap Core Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------------- Management Fees 0.61% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.28 Acquired Fund Fees and Expenses(2) 0.02 Total Annual Fund Operating Expenses(3) 1.16 -------------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------- AIM V.I. Core Equity Fund $118 $368 $638 $1,409 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.16% 1.16% 1.16% 1.16% 1.16%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.84% 7.83% 11.97% 16.27% 20.73%
End of Year Balance $10,384.00 $10,782.75 $11,196.80 $11,626.76 $12,073.23
Estimated Annual Expenses $ 118.23 $ 122.77 $ 127.48 $ 132.38 $ 137.46
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SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.16% 1.16% 1.16% 1.16% 1.16%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.37% 30.18% 35.18% 40.37% 45.76%
End of Year Balance $12,536.84 $13,018.25 $13,518.16 $14,037.25 $14,576.28
Estimated Annual Expenses $ 142.74 $ 148.22 $ 153.91 $ 159.82 $ 165.96
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment
advisor and is responsible for its day-to-day management. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical
and financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.61% of average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Ronald S. Sloan (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 1998. As the lead manager, Mr. Sloan generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Sloan may perform these functions, and the nature of these functions, may change from time to time.
- Tyler Dann, II, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2004. From 1998 to 2004, Mr. Dann was a principal and senior research analyst for Banc of America Securities LLC.
- Brian Nelson, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, Mr. Nelson was a senior telecommunications analyst for RCM Global investors.
They are assisted by the advisor's Mid/Large Cap Core Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio managers and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign
securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performances.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II
shares. The plan allows the fund to pay distribution fees to life insurance
companies and others to promote the sale and distribution of Series II shares.
The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed
as a percentage of average daily net assets of the fund). Because the fund pays
these fees out of its assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI compensates insurance companies differently depending typically on
the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates is motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
2006 2005 2004 2003 2002
------- ------ ------ ------ -------
Net asset value, beginning of period $ 23.33 $22.48 $20.85 $16.94 $ 20.19
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.28(a) 0.18(a) 0.21(b) 0.12(a) 0.07(a)
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 3.55 0.96 1.60 3.96 (3.26)
==========================================================================================================================
Total from investment operations 3.83 1.14 1.81 4.08 (3.19)
==========================================================================================================================
Less dividends from net investment income (0.14) (0.29) (0.18) (0.17) (0.06)
==========================================================================================================================
Net asset value, end of period $ 27.02 $23.33 $22.48 $20.85 $ 16.94
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(c) 16.42% 5.08% 8.67% 24.15% (15.79)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $39,729 $3,858 $4,173 $3,808 $ 1,949
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets 1.14%(d) 1.14% 1.16% 1.06%(e) 1.03%
==========================================================================================================================
Ratio of net investment income to average net assets 1.10%(d) 0.83% 1.00%(b) 0.66% 0.42%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(f) 45% 52% 52% 31% 113%
__________________________________________________________________________________________________________________________
==========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Net investment income per share and the ratio of net investment income to average net assets include a special cash dividend received of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net investment income per share and the ratio of net investment income to average net assets excluding the special dividend are $0.14 and 0.67%, respectively.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(d) Ratios are based on average daily net assets of $24,902,857.
(e) After fee waivers and/or expense reimbursements. Ratio of expense to average net assets prior to fee waivers and/or expense reimbursements was 1.07%.
(f) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year. For the period ending December 31, 2006, the portfolio turnover calculation excludes the value of securities purchased of $1,443,696,721 and sold of $744,903,259 in the effort to realign the Fund's portfolio holdings after the reorganization of AIM V.I. Core Stock Fund and AIM V.I. Premier Equity Fund into the Fund.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VICEQ-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. DIVERSIFIED INCOME FUND
PROSPECTUS
MAY 1, 2007
|
Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Diversified Income Fund's investment objective is to achieve a high level of current income.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Shares Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is to achieve a high level of current income. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing primarily in (1) domestic and foreign corporate debt securities; (2) U.S. Government securities, including U.S. Government agency mortgage-backed securities; (3) securities issued by foreign governments, their agencies or instrumentalities, and (4) lower-quality debt securities, i.e., "junk bonds," of U.S. and foreign companies. The fund's assets will normally be invested in each of these four sectors, however the fund may invest up to 100% of its total assets in U.S. Government securities.
The fund may invest up to 50% of its total assets in foreign securities and up to 15% in securities of companies located in developing markets. Developing countries are those countries that are in the initial stages of their industrial cycles. The fund may invest up to 25% of its total assets in government securities of any one foreign country. The fund may also invest up to 10% of its total assets in equity securities and convertible debt securities of U.S. and foreign companies. The fund may invest in debt obligations issued by certain supranational entities, such as the World Bank. The fund may also invest in synthetic and derivative instruments, provided such investments are consistent with the fund's investment objective. Synthetic and derivative instruments are investments that have economic characteristics similar to the fund's direct investments. Synthetic and derivative instruments that the fund may invest in include swap agreements (including but not limited to, interest rate, currency, total return and credit default swaps), put options, call options, futures contracts, options on future contracts and forward currency contracts. The fund may engage in these transactions for hedging and non-hedging purposes.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers focus on securities that they believe have favorable prospects for current income, whether denominated in the U.S. dollar or in other currencies. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases may cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. Junk bonds are less sensitive to risk associated with a rise in the general level of interest rates than are higher-quality bonds. Some of the securities purchased by the fund are not guaranteed by the U.S. Government. The agency or instrumentality issuing such security may default or otherwise be unable to honor a financial obligation.
Compared to higher-quality debt securities, junk bonds involve greater risk of default or price changes due to changes in the credit quality of the issuer because they are generally unsecured and may be subordinated to other creditors' claims. The value of junk bonds often fluctuates in response to company, political or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. During those times the bonds could be difficult to value or sell at a fair price. Credit ratings on junk bonds do not necessarily reflect their actual market risk.
U.S. Government agency mortgage-backed securities provide a higher coupon at the time of purchase than current prevailing market interest rates. The fund may purchase such securities at a premium, which means that a faster principal prepayment rate than expected will reduce both the market value of and income from such securities.
The prices of equity securities fluctuate 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.
AIM V.I. DIVERSIFIED INCOME FUND
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
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.
The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. If the fund uses derivatives to "hedge" a portfolio risk, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
AIM V.I. DIVERSIFIED INCOME FUND
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
1997................................................................... 9.39%
1998................................................................... 3.58%
1999................................................................... -1.92%
2000................................................................... 0.69%
2001................................................................... 3.59%
2002................................................................... 2.30%
2003................................................................... 9.24%
2004................................................................... 5.03%
2005................................................................... 2.90%
2006................................................................... 4.48%
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During the periods shown in the bar chart, the highest quarterly return was 5.32% (quarter ended June 30, 2003) and the lowest quarterly return was -2.43% (quarter ended June 30, 2004).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------- (for the periods ended INCEPTION December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE -------------------------------------------------------------------------------- AIM V.I. Diversified Income Fund 4.48% 4.76% 3.88% 05/05/93 Lehman Brothers U.S. Aggregate Bond Index(1,2) 4.33 5.06 6.24 -- Lehman Brothers U.S. Credit Index(1,2,3) 4.26 5.90 6.56 -- Lipper VUF Corporate Debt BBB-Rated Funds Index(1,2,4) 5.35 5.72 6.07 -- Lipper BBB Rated Funds Index(1,2,5) 5.28 5.92 5.97 -- -------------------------------------------------------------------------------- |
(1) The Lehman Brothers U.S. Aggregate Bond Index covers U.S. investment-grade fixed-rate bonds with components for government and corporate securities, mortgage pass-throughs, and asset-backed securities. The fund has also included the Lehman Brothers U.S. Credit Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Corporate Debt BBB-Rated Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Corporate Debt BBB-Rated Funds Index as its peer-group index instead of the Lipper BBB Rated Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Corporate Debt BBB-Rated Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The Lehman Brothers U.S. Credit Index consists of publicly issued U.S.
corporate and specified foreign debentures and secured notes that meet the
specified maturity, liquidity and quality requirements. To qualify, bonds
must be SEC-registered.
(4) The Lipper VUF Corporate Debt BBB-Rated Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Corporate Debt BBB-Rated Funds Category. The funds invest at least 65% of assets in corporate and government debt issues rated in the top four grades.
(5) The Lipper BBB Rated Funds Index is an equally weighted representation of the largest funds in the Lipper BBB Rated Funds Category. The funds invest at least 65% of assets in corporate and government debt issues rated in the top four grades.
AIM V.I. DIVERSIFIED INCOME FUND
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.60% Other Expenses 0.50 Acquired Fund Fees and Expenses(2) 0.00 Total Annual Fund Operating Expenses 1.10 Fee Waiver and/or Expense Reimbursements(3) 0.35 Net Annual Fund Operating Expenses 0.75 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expense are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 0.75% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees, and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Diversified Income Fund $77 $315 $572 $1,309 ----------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 -------------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 0.75% 1.10% 1.10% 1.10% 1.10% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.25% 8.32% 12.54% 16.93% 21.49% End of Year Balance $10,425.00 $10,831.58 $11,254.01 $11,692.91 $12,148.94 Estimated Annual Expenses $ 76.59 $ 116.91 $ 121.47 $ 126.21 $ 131.13 -------------------------------------------------------------------------------------------------- SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 -------------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.10% 1.10% 1.10% 1.10% 1.10% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 26.23% 31.15% 36.27% 41.58% 47.10% End of Year Balance $12,622.74 $13,115.03 $13,626.52 $14,157.95 $14,710.11 Estimated Annual Expenses $ 136.24 $ 141.56 $ 147.08 $ 152.81 $ 158.77 -------------------------------------------------------------------------------------------------- |
(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.25% of the fund's average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Jan H. Friedli (lead manager), Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1999. As the lead manager, Mr. Friedli generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Friedli may perform these functions, and the nature of these functions, may change from time to time.
- Peter Ehret, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 2001.
- Brendan D. Gau, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 1996.
- Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for various high yield (or non-investment grade) bond holdings in the fund since 2000 and has been otherwise associated with the fund since 1995. She has been associated with the advisor and/or its affiliates since 1992.
- Darren Hughes, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 1992.
Mr. Friedli, Mr. Ehret, Mr. Gau, Ms. Gibbs and Mr. Hughes are dual employees of AIM and INVESCO Institutional (N.A.), Inc.
They are assisted by the advisor's Taxable Investment Grade Bond and Taxable High Yield Teams, which are comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the teams may change from time to time. More information on these portfolio managers and the teams, including biographies of members of the teams, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely
if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will
be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over
other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
----------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period $ 8.43 $ 8.74 $ 8.82 $ 8.60 $ 9.13
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.46 0.40 0.36 0.42 0.55
------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.08) (0.15) 0.08 0.37 (0.35)
========================================================================================================================
Total from investment operations 0.38 0.25 0.44 0.79 0.20
========================================================================================================================
Less dividends from net investment income (0.53) (0.56) (0.52) (0.57) (0.73)
========================================================================================================================
Net asset value, end of period $ 8.28 $ 8.43 $ 8.74 $ 8.82 $ 8.60
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(b) 4.48% 2.90% 5.03% 9.24% 2.30%
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $46,743 $55,065 $65,069 $71,860 $70,642
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets 0.75%(c)(d) 0.89%(d) 1.01% 0.95% 0.94%
========================================================================================================================
Ratio of net investment income to average net assets 5.47%(c) 4.54% 4.01% 4.71% 6.15%
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate 78% 92% 113% 153% 86%
________________________________________________________________________________________________________________________
========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $50,644,181.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.10% and 1.08% for the years ended December 31, 2006 and 2005, respectively.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI, or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
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THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIDIN-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. DIVERSIFIED INCOME FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Diversified Income Fund's investment objective is to achieve a high level of current income.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 11 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is to achieve a high level of current income. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing primarily in (1) domestic and foreign corporate debt securities; (2) U.S. Government securities, including U.S. Government agency mortgage-backed securities; (3) securities issued by foreign governments, their agencies or instrumentalities, and (4) lower-quality debt securities, i.e., "junk bonds," of U.S. and foreign companies. The fund's assets will normally be invested in each of these four sectors, however the fund may invest up to 100% of its total assets in U.S. Government securities.
The fund may invest up to 50% of its total assets in foreign securities and up to 15% in securities of companies located in developing markets. Developing countries are those countries that are in the initial stages of their industrial cycles. The fund may invest up to 25% of its total assets in government securities of any one foreign country. The fund may also invest up to 10% of its total assets in equity securities and convertible debt securities of U.S. and foreign companies. The fund may invest in debt obligations issued by certain supranational entities, such as the World Bank. The fund may also invest in synthetic and derivative instruments, provided such investments are consistent with the fund's investment objective. Synthetic and derivative instruments are investments that have economic characteristics similar to the fund's direct investments. Synthetic and derivative instruments that the fund may invest in include swap agreements (including but not limited to, interest rate, currency, total return and credit default swaps), put options, call options, futures contracts, options on future contracts and forward currency contracts. The fund may engage in these transactions for hedging and non-hedging purposes.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers focus on securities that they believe have favorable prospects for current income, whether denominated in the U.S. dollar or in other currencies. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases may cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. Junk bonds are less sensitive to risk associated with a rise in the general level of interest rates than are higher-quality bonds. Some of the securities purchased by the fund are not guaranteed by the U.S. Government. The agency or instrumentality issuing such security may default or otherwise be unable to honor a financial obligation.
Compared to higher-quality debt securities, junk bonds involve greater risk of default or price changes due to changes in the credit quality of the issuer because they are generally unsecured and may be subordinated to other creditors' claims. The value of junk bonds often fluctuates in response to company, political or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. During those times the bonds could be difficult to value or sell at a fair price. Credit ratings on junk bonds do not necessarily reflect their actual market risk.
U.S. Government agency mortgage-backed securities provide a higher coupon at the time of purchase than current prevailing market interest rates. The fund may purchase such securities at a premium, which means that a faster principal prepayment rate than expected will reduce both the market value of and income from such securities.
The prices of equity securities fluctuate 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.
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
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.
The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. If the fund uses derivatives to "hedge" a portfolio risk, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
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1996*.................................................................. 9.92%
1997*.................................................................. 9.12%
1998*.................................................................. 3.32%
1999*.................................................................. -2.16%
2000*.................................................................. 0.44%
2001*.................................................................. 3.33%
2002*.................................................................. 2.03%
2003................................................................... 9.02%
2004................................................................... 4.69%
2005................................................................... 2.67%
2006................................................................... 4.17%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004
During the periods shown in the bar chart, the highest quarterly return was 5.33% (quarter ended June 30, 2003) and the lowest quarterly return was -2.55% (quarter ended June 30, 2004).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
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SERIES I
(for the periods ended INCEPTION
December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE
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AIM V.I. Diversified Income
Fund(1) 4.17% 4.49% 3.61% 05/05/93
Lehman Brothers U.S.
Aggregate Bond Index(2,3) 4.33 5.06 6.24 --
Lehman Brothers U.S. Credit
Index(2,3,4) 4.26 5.90 6.56 --
Lipper VUF Corporate Debt
BBB-Rated Funds
Index(2,3,5) 5.35 5.72 6.07 --
Lipper BBB Rated Funds
Index(2,3,6) 5.28 5.92 5.97 --
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(1) The return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is March 14, 2002.
(2) The Lehman Brothers U.S. Aggregate Bond Index covers U.S. investment-grade fixed-rate bonds with components for government and corporate securities, mortgage pass-throughs, and asset-backed securities. The fund has also included the Lehman Brothers U.S. Credit Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Corporate Debt BBB-Rated Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Corporate Debt BBB-Rated Funds Index as its peer-group index instead of the Lipper BBB Rated Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Corporate Debt BBB-Rated Funds Index.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The Lehman Brothers U.S. Credit Index consists of publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC-registered.
(5) The Lipper VUF Corporate Debt BBB-Rated Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Corporate Debt BBB-Rated Funds Category. The funds invest at least 65% of assets in corporate and government debt issuers rated in the top four grades.
(6) The Lipper BBB Rated Funds Index is an equally weighted representation of the largest funds in the Lipper BBB Rated Funds Category. The funds invest at least 65% of assets in corporate and government debt issues rated in the top four grades.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES ------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES ------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A ------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) ------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES ------------------------------------------------------------------------------- Management Fees 0.60% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.50 Acquired Fund Fees and Expenses(2) 0.00 Total Annual Fund Operating Expenses 1.35 Fee Waiver and/or Expense Reimbursements(3) 0.35 Net Annual Fund Operating Expenses 1.00 ------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expense are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.00% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Diversified Income Fund $102 $393 $706 $1,593 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates makes any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.00% 1.35% 1.35% 1.35% 1.35%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 4.00% 7.80% 11.73% 15.81% 20.04%
End of Year Balance $10,400.00 $10,779.60 $11,173.06 $11,580.87 $12,003.57
Estimated Annual Expenses $ 102.00 $ 142.96 $ 148.18 $ 153.59 $ 159.20
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SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.35% 1.35% 1.35% 1.35% 1.35%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 24.42% 28.96% 33.67% 38.54% 43.60%
End of Year Balance $12,441.70 $12,895.83 $13,366.52 $13,854.40 $14,360.09
Estimated Annual Expenses $ 165.01 $ 171.03 $ 177.27 $ 183.74 $ 190.45
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(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.25% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Jan H. Friedli (lead manager), Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1999. As the lead manager, Mr. Friedli generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Friedli may perform these functions, and the nature of these functions, may change from time to time.
- Peter Ehret, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 2001.
- Brendan D. Gau, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 1996.
- Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for various high yield (or non-investment grade) bond holdings in the fund since 2000 and has been otherwise associated with the fund since 1995. She has been associated with the advisor and/or its affiliates since 1992.
- Darren Hughes, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 1992.
Mr. Friedli, Mr. Ehret, Mr. Gau, Ms. Gibbs, and Mr. Hughes are dual employees of AIM and INVESCO Institutional (N.A.), Inc.
They are assisted by the advisor's Taxable Investment Grade Bond and Taxable High Yield Teams, which are comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the teams may change from time to time. More information on these portfolio managers and the teams including biographies of members of the teams, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to
monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will
be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and, semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II
shares. The plan allows the fund to pay distribution fees to life insurance
companies and others to promote the sale and distribution of Series II shares.
The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed
as a percentage of average daily net assets of the fund). Because the fund pays
these fees out of its assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
------------------------------------------------------------------
MARCH 14, 2002
YEAR ENDED DECEMBER 31, (DATE SALES
---------------------------------------- COMMENCED) TO
DECEMBER 31,
2006 2005 2004 2003 2002
------ ------ ------ ------ ----------------------
Net asset value, beginning of period $8.36 $8.67 $8.78 $8.58 $ 8.97
--------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.44 0.38 0.33 0.40 0.42
--------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.09) (0.15) 0.08 0.37 (0.08)
================================================================================================================================
Total from investment operations 0.35 0.23 0.41 0.77 0.34
================================================================================================================================
Less dividends from net investment income (0.50) (0.54) (0.52) (0.57) (0.73)
================================================================================================================================
Net asset value, end of period $8.21 $8.36 $8.67 $8.78 $ 8.58
________________________________________________________________________________________________________________________________
================================================================================================================================
Total return(b) 4.17% 2.67% 4.69% 9.02% 3.90%
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 713 $ 902 $ 980 $ 762 $ 124
________________________________________________________________________________________________________________________________
================================================================================================================================
Ratio of expenses to average net assets 1.00%(c)(d) 1.14%(d) 1.26% 1.20% 1.19%(e)
================================================================================================================================
Ratio of net investment income to average net assets 5.22%(c) 4.29% 3.76% 4.46% 5.90%(e)
________________________________________________________________________________________________________________________________
================================================================================================================================
Portfolio turnover rate(f) 78% 92% 113% 153% 86%
________________________________________________________________________________________________________________________________
================================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $833,576.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.35% and 1.33% for the years ended December 31, 2006 and 2005, respectively.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI, or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIDIN-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. DYNAMICS FUND
PROSPECTUS
MAY 1, 2007
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Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Dynamics Fund's investment objective is long-term capital growth.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 2 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term capital growth.
The fund seeks to meet is objective by investing, normally, at least 65% of its assets in equity securities of mid-capitalization companies. The principal type of equity securities purchased by the fund is common stock.
The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell Mid Cap--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The largest capitalized company in the Russell Mid Cap--Registered Trademark-- Index during the above referenced period ended March 31, 2007, had a market capitalization of approximately $27 billion, while the smallest capitalized company had a market capitalization of approximately $694 million during such period. The Russell Mid Cap--Registered Trademark-- Index measures the performance of the 800 smallest companies with the lowest market capitalization in the Russell 1000--Registered Trademark-- Index. The Russell 1000--Registered Trademark-- is a widely recognized, unmanaged index of common stocks of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The companies in the Russell Mid Cap Index are considered representative of medium-sized companies and constitute approximately 25% of the total market capitalization of the Russell 1000--Registered Trademark-- Index.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers actively manage the fund using a two-step stock selection process that combines quantitative and fundamental analyses. The quantitative analysis involves using a stock ranking model to rank stocks based primarily upon: (1) earning, (2) quality; and (3) valuation. The fundamental analysis focuses on identifying both industries and companies that, in the portfolio managers' view, have high growth potential and are also favorably priced relative to the growth expectations for that company. The portfolio managers base their selection of stocks for the fund on analysis of individual companies. The investment process involves:
- Applying fundamental research, including financial statement analysis and management visits to identify stocks of companies believed to have large potential markets, cash-generating business models, improving balance sheets and solid management teams; and
- Using a variety of valuation techniques to determine target buy and sell prices as well as a stock's valuation upside and downside potential.
The resulting portfolio contains two types of companies: (1) consistent growth companies and (2) earnings-acceleration companies. Consistent growth companies are companies with a history of strong returns and, in the portfolio manager's opinion, are industry leaders serving growth, non-cyclical markets whose performance tends to remain constant regardless of economic conditions. Earning-acceleration companies are companies that are driven by near-term catalysts such as new products, improved processes and/or specific economic conditions that may lead to rapid sales and earnings growth.
The portfolio managers strive to control the fund's volatility and risk by varying individual stock position sizes and diversifying fund holdings across sectors.
The portfolio managers considers selling or reducing the fund's holdings in a stock if: (1) it no longer meets the investment criteria; (2) a company's fundamentals deteriorate; (3) a stock's price reaches its valuation target; (4) a company is no longer considered a mid-capitalization company; and/or (5) a more attractive investment option is identified.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio many decline in value more than the overall stock market. In general, the securities of mid-size companies are more volatile than those of large companies.
Growth Investing Risk--Growth stocks can perform differently from the market as a whole and other types of stocks and tend to be more expensive relative to their earnings or assets compared with other types of stocks. As a result, growth stocks tend to be more sensitive to changes in their earnings and can be more volatile than other types of stocks.
Equity Securities Risk--The prices of equity securities change in response to many factors including the historical and prospective earning of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
Market Capitalization Risk--Stocks fall into three broad market capitalization categories--large, medium and small. Investing primarily in one category carries the risk that, due to current market conditions, that category may be out of favor with investors. Small and mid-sized companies tend to be more vulnerable to adverse developments and more volatile than large companies. Investments in small and mid-sized companies may involve special risks, including those associated with dependence on a small management group, little or no operating history, little or no track record of success, and limited product lines, markets and financial resources. Also, there may be less publicly available information about the issuers of the securities or less market interest in such securities than in the case of larger companies, each of which can cause significant price volatility. The securities of small and mid-sized companies may be illiquid, restricted as to resale, or may trade less frequently and in smaller volume than more widely held securities, which may make it difficult for the fund to establish or close out a position in these securities at prevailing market prices.
- Foreign Securities Risk--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.
Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If a fund does trade in this way, it may incur increasing costs, which can lower the actual return of the fund. Active trading may also increase short term gains and losses, which may affect the taxes that must be paid.
Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series I shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1998................................................................... 19.35%
1999................................................................... 55.60%
2000................................................................... -3.55%
2001................................................................... -31.14%
2002................................................................... -31.90%
2003................................................................... 37.82%
2004................................................................... 13.34%
2005................................................................... 10.72%
2006................................................................... 16.11%
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During the periods shown in the bar chart, the highest quarterly return was 33.23% (quarter ended December 31, 1999) and the lowest quarterly return was -34.19% (quarter ended September 30, 2001). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------ (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE ------------------------------------------------------------------------------------ AIM V.I. Dynamics Fund(1) 16.11% 6.46% 6.12%(2) 08/22/97(2) S&P 500--Registered Trademark-- Index(3,4) 15.78 6.19 6.67(2) 08/31/97(2) Russell Midcap--Registered Trademark-- Growth Index(3,4,5) 10.66 8.22 7.15(2) 08/31/97(2) Lipper VUF Mid-Cap Growth Funds Index(3,4,6) 8.51 6.19 5.95(2) 08/31/97(2) Lipper Mid-Cap Growth Funds Index(3,4,7) 11.02 6.09 6.34(2) 08/31/97(2) ------------------------------------------------------------------------------------ |
(1) For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. 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 22, 1997. Index comparison began on August 31, 1997.
(3) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance. The fund has also included the Russell Midcap--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 Variable Underlying Funds (VUF) Mid-Cap Growth Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Mid-Cap Growth Funds Index as its peer-group index instead of the Lipper Mid-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Mid-Cap Growth Funds Index.
(4) The indices may not reflect payment of fees, expenses or taxes.
(5) The Russell Midcap--Registered Trademark-- Growth Index measures the performance of those securities in the Russell Midcap--Registered Trademark-- Index with a higher than average growth forecast. The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 smallest companies in the Russell 1000--Registered Trademark-- Index. These stocks represent approximately 25% of the total market capitalization of the Russell 1000 Index. The Russell 1000 Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1,000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock performance market. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. equity market.
(6) The Lipper VUF Mid-Cap Growth Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Mid-Cap Growth Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalization (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with the market capitalization of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic mid-cap stocks chosen for market size, liquidity, and industry group representation. It is also a market-value weighted index and was the first benchmark of mid-cap stock price movement.
(7) The Lipper Mid-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper Mid-Cap Growth Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with the market capitalization of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic midcap stocks chosen for market size, liquidity, and industry group representation. It is also a market-value weighted index and was the first benchmark of midcap stock price movement.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Other Expenses 0.38 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses 1.14 Fee Waiver and/or Expense Reimbursement(2,4) 0.01 Net Annual Fund Operating Expenses 1.13 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.745% (for average net assets up to $250 million) to 0.64% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series I shares of the funds with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Dynamics Fund $115 $361 $627 $1,385 ---------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.13% 1.14% 1.14% 1.14% 1.14%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.87% 7.88% 12.04% 16.37% 20.86%
End of Year Balance $10,387.00 $10,787.94 $11,204.35 $11,636.84 $12,086.02
Estimated Annual Expenses $ 115.19 $ 120.70 $ 125.36 $ 130.19 $ 135.22
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SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.14% 1.14% 1.14% 1.14% 1.14%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.53% 30.37% 35.40% 40.63% 46.06%
End of Year Balance $12,552.54 $13,037.07 $13,540.30 $14,062.96 $14,605.79
Estimated Annual Expenses $ 140.44 $ 145.86 $ 151.49 $ 157.34 $ 163.41
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(1) Your annual expenses may be higher or lower than these shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for the day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.74% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Paul J. Rasplicka (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 1994. As the lead manager, Mr. Rasplicka generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Rasplicka may perform these functions, and the nature of these functions, may change from time to time.
- Karl Farmer, Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1998.
- Warren Tennant, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1998.
They are assisted by the advisor's Mid Cap Growth-GARP (growth at a reasonable price) Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities--Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities--If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign
securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities--Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board of Trustees.
Short-term Securities--The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options--Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds--To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES I
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 14.77 $ 13.34 $ 11.77 $ 8.54 $ 12.54
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09) (0.04) (0.09) (0.07) (0.00)(a)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.47 1.47 1.66 3.30 (4.00)
=========================================================================================================================
Total from investment operations 2.38 1.43 1.57 3.23 (4.00)
=========================================================================================================================
Net asset value, end of period $ 17.15 $ 14.77 $ 13.34 $ 11.77 $ 8.54
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 16.11% 10.72% 13.34% 37.82% (31.90)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $120,792 $111,655 $123,609 $169,269 $116,135
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.12%(c) 1.16% 1.14% 1.14% 1.12%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.13%(c) 1.17% 1.14% 1.15% 1.12%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.51)%(c) (0.29)% (0.62)% (0.70)% (0.75)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 142% 110% 64% 129% 110%
_________________________________________________________________________________________________________________________
=========================================================================================================================
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(a) The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, which were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.08) for the year ended December 31, 2002.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $130,915,612.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
The fund's most recent portfolio holdings, as filed
on Form N-Q, have also been made available to
insurance companies issuing variable products that
invest in the fund.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VIDYN-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. DYNAMICS FUND
PROSPECTUS
MAY 1, 2007
|
Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Dynamics Fund's investment objective is long-term capital growth.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 2 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trading Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term capital growth. The fund seeks to meet is objective by investing, normally, at least 65% of its assets in equity securities of mid-capitalization companies. The principal type of equity securities purchased by the fund is common stock.
The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell Mid Cap--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The largest capitalized company in the Russell Mid Cap--Registered Trademark-- Index during the above referenced period ended March 31, 2007, had a market capitalization of approximately $27 billion, while the smallest capitalized company had a market capitalization of approximately $694 million during such period. The Russell Mid Cap--Registered Trademark-- Index measures the performance of the 800 smallest companies with the lowest market capitalization in the Russell 1000--Registered Trademark-- Index. The Russell 1000--Registered Trademark-- is a widely recognized, unmanaged index of common stocks of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The companies in the Russell Mid Cap Index are considered representative of medium-sized companies and constitute approximately 25% of the total market capitalization of the Russell 1000--Registered Trademark-- Index.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers actively manage the fund using a two-step stock selection process that combines quantitative and fundamental analyses. The quantitative analysis involves using a stock ranking model to rank stocks based primarily upon: (1) earning, (2) quality; and (3) valuation. The fundamental analysis focuses on identifying both industries and companies that, in portfolio managers' view, have high growth potential and are also favorably priced relative to growth expectations for that company. The portfolio managers base their selection of stocks for the fund on analysis of individual companies. The investment process involves:
- Applying fundamental research, including financial statement analysis and management visits to identify stocks of companies believed to have large potential markets, cash-generating business models, improving balance sheets and solid management teams; and
- Using a variety of valuation techniques to determine target buy and sell prices as well as a stock's valuation upside and downside potential.
The resulting portfolio contains two types of companies: (1) consistent growth companies and (2) earnings-acceleration companies. Consistent growth companies are companies with a history of strong returns and, in the portfolio manager's opinion, are industry leaders serving growth, non-cyclical markets whose performance tends to remain constant regardless of economic conditions. Earning-acceleration companies are companies that are driven by near-term catalysts such as new products, improved processes and/or specific economic conditions that may lead to rapid sales and earnings growth.
The portfolio managers strive to control the fund's volatility and risk by varying individual stock position sizes and diversifying fund holdings across sectors.
The portfolio managers considers selling or reducing the fund's holdings in a stock if: (1) it no longer meets the investment criteria; (2) a company's fundamentals deteriorate; (3) a stock's price reaches its valuation target; (4) a company is no longer considered a mid-capitalization company; and/or (5) a more attractive investment option is identified.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio many decline in value more than the overall stock market. In general, the securities of mid-size companies are more volatile than those of large companies.
- Growth Investing Risk--Growth stocks can perform differently from the market as a whole and other types of stocks and tend to be more expensive relative to their earnings or assets compared with other types of stocks. As a result, growth stocks tend to be more sensitive to changes in their earnings and can be more volatile than other types of stocks.
- Equity Securities Risk--The prices of equity securities change in response to many factors including the historical and prospective earning of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
- Market Capitalization Risk--Stocks fall into three broad market capitalization categories--large, medium and small. Investing primarily in one category carries the risk that, due to current market conditions, that category may be out of favor with investors. Small and mid-sized companies tend to be more vulnerable to adverse developments and more volatile than large companies. Investments in small and mid-sized companies may involve special risks, including those associated with dependence on a small management group, little or no operating history, little or no track record of success, and limited product lines, markets and financial resources. Also, there may be less publicly available information about the issuers of the securities or less market interest in such securities than in the case of larger companies, each of which can cause significant price volatility. The securities of small and mid-sized companies may be illiquid, restricted as to resale, or may trade less frequently and in smaller volume than more widely held securities, which may make it difficult for the fund to establish or close out a position in these securities at prevailing market prices.
- Foreign Securities Risk--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.
- Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If a fund does trade in this way, it may incur increasing costs, which can lower the actual return of the fund. Active trading may also increase short term gains and losses, which may affect the taxes that must be paid.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I shares and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
(PERFORMANCE GRAPH)
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1998*.................................................................. 19.05%
1999*.................................................................. 55.21%
2000*.................................................................. -3.79%
2001*.................................................................. -31.31%
2002*.................................................................. -32.07%
2003*.................................................................. 37.48%
2004*.................................................................. 13.07%
2005................................................................... 10.44%
2006................................................................... 15.84%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 33.15% (quarter ended December 31, 1999) and the lowest quarterly return was -34.23% (quarter ended September 30, 2001). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------
SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
--------------------------------------------------------------------------------------------
AIM V.I. Dynamics Fund(1) 15.84% 6.20% 5.86%(2) 08/22/97(2)
S&P 500--Registered Trademark--
Index(3,4) 15.78 6.19 6.67(2) 08/31/97(2)
Russell Midcap(R) Growth Index(3,4,5) 10.66 8.22 7.15(2) 08/31/97(2)
Lipper VUF Mid-Cap Growth Funds
Index(3,4,6) 8.51 6.19 5.95(2) 08/31/97(2)
Lipper Mid-Cap Growth Funds Index(3,4,7) 11.02 6.09 6.34(2) 08/31/97(2)
--------------------------------------------------------------------------------------------
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(1) The return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the Predecessor fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004. For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Total return figures include reinvested dividends and capital gain distributions and the effect of the fund's expenses.
(2) Series I shares of the fund commenced investment operations on August 22, 1997. Index comparison began on August 31, 1997.
(3) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance. The fund has also included the Russell Midcap--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 Variable Underlying Funds (VUF) Mid-Cap Growth Funds Index (which may or may not include the Fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Mid-Cap Growth Funds Index as its peer-group index instead of the Lipper Mid-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Mid-Cap Growth Funds Index.
(4) The indices may not reflect payment of fees, expenses or taxes.
(5) The Russell Midcap--Registered Trademark-- Growth Index measures the performance of those securities in the Russell Midcap--Registered Trademark-- Index with a higher than average growth forecast. The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000(R) Index. These stocks represent approximately 25% of the total market capitalization of the Russell 1000 Index. The Russell 1000 Index is comprised of 1000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1,000 stocks of the Russell 3000--Registered Trademark-- universe. The Russell 3000--Registered Trademark-- Index is widely regarded as the standard for measuring the U.S. stock performance market. This index includes a representative sample of 3,000 of the largest U.S. companies in leading industries and represents approximately 98% of the investable U.S. Equity market.
(6) The Lipper VUF Mid-Cap Growth Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Mid-Cap Growth Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalization (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalization of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic mid-cap stocks chosen for market size, liquidity and industry group representation. It is also a market-value weighted index and was the first benchmark of mid-cap stock price movement.
(7) The Lipper Mid-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper Mid-Cap Growth Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic mid-cap stocks chosen for market size, liquidity and industry group representation. It is also a market-value weighted index and was the first benchmark of mid-cap stock price movement.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.38 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses 1.39 Fee Waiver and/or Expense(2,4) 0.01 Net Annual Fund Operating Expenses 1.38 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the fund's advisor contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.745% (for average net assets up to $250 million) to 0.64% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected; (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on you investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Dynamics Fund $141 $439 $760 $1,668 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios; your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.38% 1.39% 1.39% 1.39% 1.39%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.62% 7.36% 11.24% 15.25% 19.41%
End of Year Balance $10,362.00 $10,736.07 $11,123.64 $11,525.20 $11,941.26
Estimated Annual Expenses $ 140.50 $ 146.63 $ 151.92 $ 157.41 $ 163.09
--------------------------------------------------------------------------------------------
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
--------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.39% 1.39% 1.39% 1.39% 1.39%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 23.72% 28.19% 32.82% 37.61% 42.58%
End of Year Balance $12,372.34 $12,818.98 $13,281.75 $13,761.22 $14,258.00
Estimated Annual Expenses $ 168.98 $ 175.08 $ 181.40 $ 187.95 $ 194.73
--------------------------------------------------------------------------------------------
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(1) Your annual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.74% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Paul J. Rasplicka (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 1994. As the lead manager, Mr. Rasplicka generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Rasplicka may perform these functions, and the nature of these functions, may change from time to time.
- Karl Farmer, Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1998.
- Warren Tennant, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1998.
They are assisted by the advisor's Mid Cap Growth-GARP (growth at a reasonable price) Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a
manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the funds will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities--Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities--If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the
price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities--Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities--The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options--Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds--To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II
shares. The plan allows the fund to pay distribution fees to life insurance
companies and others to promote the sale and distribution of Series II shares.
The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed
as a percentage of average daily net assets of the fund). Because the fund pays
these fees out of its assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These
payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES II
----------------------------------------------
APRIL 30,
2004
(DATE SALES
YEAR ENDED DECEMBER 31, COMMENCED) TO
----------------------------- DECEMBER 31,
2006 2005 2004
----------- ----------- -------------
Net asset value, beginning of period $14.71 $13.32 $11.94
------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12) (0.07) (0.07)
------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.45 1.46 1.45
============================================================================================================
Total from investment operations 2.33 1.39 1.38
============================================================================================================
Net asset value, end of period $17.04 $14.71 $13.32
============================================================================================================
Total return(a) 15.84% 10.44% 11.56%
____________________________________________________________________________________________________________
============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 14 $ 12 $ 11
____________________________________________________________________________________________________________
============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.37%(b) 1.41% 1.40%(c)
------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.38%(b) 1.42% 1.40%(c)
============================================================================================================
Ratio of net investment income (loss) to average net assets (0.76)%(b) (0.54)% (0.88)%(c)
____________________________________________________________________________________________________________
============================================================================================================
Portfolio turnover rate(d) 142% 110% 64%
____________________________________________________________________________________________________________
============================================================================================================
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(a) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(b) Ratios are based on average daily net assets of $13,333.
(c) Annualized.
(d) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
The fund's most recent portfolio holdings, as filed
on Form N-Q, have also been made available to
insurance companies issuing variable products that
invest in the fund.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VIDYN-PRO-2
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. FINANCIAL SERVICES FUND
PROSPECTUS
MAY 1, 2007
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Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Financial Services Fund's investment objective is capital growth.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is capital growth.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers engaged primarily in financial services-related industries. The principal type of equity securities purchased by the fund is common stocks.
Companies in financial services-related industries include, but are not limited to, banks, insurance companies, investment banking and brokerage companies, credit finance companies, asset management companies and companies providing other financial-related services.
The fund considers a company to be doing business in financial
services-related industries if it meets at least one of the following tests: (1)
at least 50% of its gross income or its net sales come from activities in
financial services-related industries; (2) at least 50% of its assets are
devoted to producing revenues in the financial services-related industries; or
(3) based on other available information, the portfolio managers determine that
its primary business is within the financial services-related industries.
The fund may invest up to 25% of its total assets in securities of non-U.S. issuers doing business in the financial services sector. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation.
The fund's investments in the types of securities described in this prospectus vary from time to time, and, at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting securities, the portfolio managers primarily focus on (1) companies trading at a significant discount to the portfolio managers' estimate of intrinsic value; and (2) companies that the portfolio managers expect to exhibit capital discipline by returning meaningful excess capital to shareholders through dividends and share repurchases. Emphasis is placed on financial services companies that the portfolio managers expect to profitably grow cash flows over time. The portfolio managers consider a 2 to 3-year investment horizon when selecting investments. Given the inherent limitations of investing within a single sector, not all investments will have these attributes.
The portfolio managers will consider selling a security for the following reasons: (1) a more attractive investment opportunity is identified; (2) if a stock is trading significantly above the portfolio managers' estimate of intrinsic value; or (3) if there is an adverse change in capital allocation activities or business fundamentals that is change in capital allocation activities or business fundamentals that is not adequately reflected in the stock's valuations.
The portfolio managers seek to achieve strong long-term performance by constructing a portfolio of financial companies that are significantly undervalued on an absolute basis and that exhibit superior capital discipline. The investment process is fundamental in nature and focused on individual companies rather than macro economic forecasts. The portfolio managers normally construct a portfolio of 35 to 50 stocks while striving to diversify within the financial sector. Under normal market conditions, the fund's top ten holdings may comprise over 50% of the fund's total assets.
The fund typically maintains a portion if its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability, and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of small companies are more volatile than those of mid-size companies or large companies.
- Equity Securities Risk--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. These factors will probably affect the equity securities of smaller companies more than the equity securities of larger, more-established companies. Also, because equity securities of smaller companies may not be traded as often as equity securities of larger, more-
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
- Sector Fund Risk--The fund's investments are concentrated in a comparatively narrow segment of the economy, the financial services sector. This means that the fund's investment concentration in the financial services sector is higher than most mutual funds and the broad securities market. Consequently, the fund may tend to be more volatile than other mutual funds, and the value of the fund's investments and consequently the value of an investment in the fund may tend to rise and fall more rapidly.
- Financial Services Industry Risk--The financial services sector is subject to extensive government regulation, which may change frequently. In addition, the profitability of businesses in the financial services sector depends heavily on the availability and cost of money and may fluctuate significantly in response to changes in interest rates, as well as changes in general economic conditions. The financial services industry is exposed to several risks that may impact the value of investments in the financial services sector more severely than investments outside the sector. Businesses in the financial sector often operate with substantial financial leverage.
- Concentration Risk--Since a large percentage of the fund's assets may be invested in the securities of a limited number of companies, each investment has a greater effect on the fund's overall performance and any change in the value of those securities could significantly affect the value of your investment in the fund.
- Foreign Securities Risk--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.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series I shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2000................................................................... 24.80%
2001................................................................... -9.88%
2002................................................................... -14.90%
2003................................................................... 29.58%
2004................................................................... 8.68%
2005................................................................... 5.91%
2006................................................................... 16.44%
|
During the periods shown in the bar chart, the highest quarterly return was 22.11% (quarter ended September 30, 2000) and the lowest quarterly return was -15.56% (quarter ended September 30, 2002). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE -------------------------------------------------------------------------------------------------- AIM V.I. Financial Services Fund(1) 16.44% 8.13% 8.78%(2) 09/20/99(2) S&P 500--Registered Trademark-- Index(3,4) 15.78 6.19 3.04(2) 09/30/99(2) S&P 500 Financials Index(3,4,5) 19.19 9.50 9.72(2) 09/30/99(2) Lipper VUF Financial Services Funds Category Average(3,4,6) 18.18 9.99 9.47(2) 09/30/99(2) Lipper Financial Services Funds Index(3,4,7) 15.90 10.20 10.12(2) 09/30/99(2) -------------------------------------------------------------------------------------------------- |
(1) For periods to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. 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 September 20, 1999. Index comparisons began on September 30, 1999.
(3) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. Economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance. The fund has also included the Standard & Poor's 500 Financials Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Financial Services Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Financial Services Funds Category Average as its peer-group index instead of the Lipper Financial Services Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Financial Services Funds Category Average.
(4) The indices may not reflect payment of fees, expenses or taxes.
(5) The Standard & Poor's 500 Financials Index is a market capitalization
weighted index of companies involved in activities such as banking, consumer
finance, investment banking and brokerage, asset management, insurance and
investment, and real estate, including REITs.
(6) The Lipper VUF Financial Services Funds Category Average represents the average of all the variable insurance underlying Financial Services funds tracked by Lipper Inc.
(7) The Lipper Financial Services Funds Index is an equally weighted representation of the largest funds within the Lipper Financial Services Category. These funds invest at least 65% of their portfolios in equity securities of companies engaged in providing financial services.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.75% Other Expenses 0.37 Acquired Fund Fees and Expenses(2) 0.01 Total Annual Fund Operating Expenses(3) 1.13 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series I shares of the funds with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Financial Services Fund $115 $359 $622 $1,375 ---------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.13% 1.13% 1.13% 1.13% 1.13% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.87% 7.89% 12.07% 16.40% 20.91% End of Year Balance $10,387.00 $10,788.98 $11,206.51 $11,640.20 $12,090.68 Estimated Annual Expenses $ 115.19 $ 119.64 $ 124.27 $ 129.08 $ 134.08 ----------------------------------------------------------------------------------------------- SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.13% 1.13% 1.13% 1.13% 1.13% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 25.59% 30.45% 35.49% 40.74% 46.18% End of Year Balance $12,558.59 $13,044.60 $13,549.43 $14,073.79 $14,618.45 Estimated Annual Expenses $ 139.27 $ 144.66 $ 150.26 $ 156.07 $ 162.11 ----------------------------------------------------------------------------------------------- |
(1) Your annual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for the day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.75% of average daily net assets.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Michael J. Simon (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 2001. As the lead manager, Mr. Simon generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Simon may perform these functions, and the nature of these functions, may change from time to time.
- Meggan M. Walsh, Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 1991.
They are assisted by the advisor's Financial Services Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board of Trustees.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates or its affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES I
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 15.26 $ 14.61 $ 13.54 $ 10.50 $ 12.42
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.23(a) 0.19(a) 0.15 0.08 0.08
-------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.28 0.66 1.02 3.02 (1.93)
===============================================================================================================================
Total from investment operations 2.51 0.85 1.17 3.10 (1.85)
===============================================================================================================================
Less distributions:
Dividends from net investment income (0.26) (0.20) (0.10) (0.06) (0.07)
-------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.10) -- -- -- --
===============================================================================================================================
Total distributions (0.36) (0.20) (0.10) (0.06) (0.07)
===============================================================================================================================
Net asset value, end of period $ 17.41 $ 15.26 $ 14.61 $ 13.54 $ 10.50
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(b) 16.52% 5.84% 8.68% 29.58% (14.90)%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $146,092 $141,241 $203,879 $210,352 $142,403
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets 1.12%(c) 1.12% 1.12% 1.09% 1.09%
===============================================================================================================================
Ratio of net investment income to average net assets 1.44%(c) 1.30% 0.89% 0.87% 0.57%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate 14% 22% 67% 65% 72%
_______________________________________________________________________________________________________________________________
===============================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $133,432,989.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VIFSE-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. FINANCIAL SERVICES FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Financial Services Fund's investment objective is capital growth.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trading Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is capital growth.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers engaged primarily in financial services-related industries. The principal type of equity securities purchased by the fund is common stocks.
Companies in financial services-related industries include, but are not limited to, banks, insurance companies, investment banking and brokerage companies, credit finance companies, asset management companies and companies providing other finance-related services.
The fund considers a company to be doing business in financial
services-related industries if it meets at least one of the following tests: (1)
at least 50% of its gross income or its net sales come from activities in
financial services-related industries; (2) at least 50% of its assets are
devoted to producing revenues in the financial services-related industries; or
(3) based on other available information, the portfolio managers determine that
its primary business is within the financial services-related industries.
The fund may invest up to 25% of its total assets in securities of non-U.S. issuers doing business in the financial services sector. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation.
The fund's investments in the types of securities described in this prospectus vary from time to time, and, at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting securities, the portfolio managers primarily focus on (1) companies trading at a significant discount to the portfolio managers' estimate of intrinsic value; and (2) companies that the portfolio managers expect to exhibit capital discipline by returning meaningful excess capital to shareholders through dividends and share repurchases. Emphasis is placed on financial services companies that the portfolio managers expect to profitably grow cash flows over time. The portfolio manager considers a 2 to 3-year investment horizon when selecting investments. Given the inherent limitations of investing within a single sector, not all investments will have these attributes.
The portfolio managers will consider selling a security for the following reasons: (1) a more attractive investment opportunity is identified; (2) if a stock is trading significantly above the portfolio managers' estimate of intrinsic value; or (3) if there is an adverse change in capital allocation activities or business fundamentals that is not adequately reflected in the stock's valuation.
The portfolio managers seek to achieve strong long-term performance by constructing a portfolio of financial companies that are significantly undervalued on an absolute basis and that exhibit superior capital discipline. The investment process is fundamental in nature and focused on individual companies rather than macro economic forecasts. The portfolio managers normally construct a portfolio of 35 to 50 stocks while striving to diversify within the financial sector. Under normal market conditions, the fund's top ten holdings may comprise over 50% of the fund's total assets.
The fund typically maintains a portion if its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability, and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of small companies are more volatile than those of mid-size companies or large companies.
- Equity Securities Risk--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. These factors will probably affect the equity securities of smaller companies more-than the equity securities of larger, more-established companies. Also, because equity securities of smaller
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
- Sector Fund Risk--The fund's investments are concentrated in a comparatively narrow segment of the economy, the financial services sector. This means that the fund's investment concentration in the financial services sector is higher than most mutual funds and the broad securities market. Consequently, the fund may tend to be more volatile than other mutual funds, and the value of the fund's investments and consequently the value of an investment in the fund may tend to rise and fall more rapidly.
- Financial Services Industry Risk--The financial services sector is subject to extensive government regulation, which may change frequently. In addition, the profitability of businesses in the financial services sector depends heavily on the availability and cost of money and may fluctuate significantly in response to changes in interest rates, as well as changes in general economic conditions. The financial services industry is exposed to several risks that may impact the value of investments in the financial services sector more severely than investments outside the sector. Businesses in the financial sector often operate with substantial financial leverage.
- Concentration Risk--Since a large percentage of the fund's assets may be invested in the securities of a limited number of companies, each investment has a greater effect on the fund's overall performance and any change in the value of those securities could significantly affect the value of your investment in the fund.
- Foreign Securities Risk--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.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I shares and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
(PERFORMANCE GRAPH)
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2000*.................................................................. 24.49%
2001*.................................................................. -10.11%
2002*.................................................................. -15.11%
2003*.................................................................. 29.26%
2004*.................................................................. 8.44%
2005................................................................... 5.61%
2006................................................................... 16.22%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 22.04% (quarter ended September 30, 2000) and the lowest quarterly return was -15.62% (quarter ended September 30, 2002). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
----------------------------------------------------------------------------------------
SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
----------------------------------------------------------------------------------------
AIM V.I. Financial Services Fund(1) 16.22% 7.87% 8.52%(2) 09/20/99(2)
S&P 500(R) Index(3,4) 15.78 6.19 3.04(2) 09/30/99(2)
S&P 500 Financials Index(3,4,5) 19.19 9.50 9.72(2) 09/30/99(2)
Lipper VUF Financial Services Funds
Category Average(3,4,6) 18.18 9.99 9.47 09/30/99(2)
Lipper Financial Services Funds
Index(3,4,7) 15.90 10.20 10.12(2) 09/30/99(2)
----------------------------------------------------------------------------------------
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(1) The return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the Predecessor fund's Series I (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's shares is April 30, 2004. For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Total return figures include reinvested dividends and capital gain distributions and the effect on the fund's expenses.
(2) Series I shares of the fund commenced investment operations on September 20, 1999. Index comparisons began on September 30, 1999.
(3) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance. The fund has also included the Standard & Poor's 500 Financials Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Financial Services Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Financial Services Funds Category Average as its peer-group instead of the Lipper Financial Services Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Financial Services Funds Category Average.
(4) The indices may not reflect payment of fees, expenses or taxes.
(5) The Standard & Poor's 500 Financials Index is a market capitalization
weighted index of companies involved in activities such as banking, consumer
finance, investment banking and brokerage, asset management, insurance and
investment, and real estate, including REITs.
(6) The Lipper VUF Financial Services Funds Category Average represents the average of all the variable insurance underlying Financial Services funds tracked by Lipper Inc.
(7) The Lipper Financial Services Funds Index is an equally weighted representation of the largest funds within the Lipper Financial Services Category. The funds invest at least 65% of their portfolios in equity securities of companies engaged in providing financial services.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees 0.75% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.37 Acquired Fund Fees and Expenses(2) 0.01 Total Annual Fund Operating Expenses(3) 1.38 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Financial Services Fund $141 $437 $755 $1,657 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.38% 1.38% 1.38% 1.38% 1.38%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.62% 7.37% 11.26% 15.29% 19.46%
End of Year Balance $10,362.00 $10,737.10 $11,125.79 $11,528.54 $11,945.87
Estimated Annual Expenses $ 140.50 $ 145.58 $ 150.85 $ 156.31 $ 161.97
--------------------------------------------------------------------------------------------------
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.38% 1.38% 1.38% 1.38% 1.38%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 23.78% 28.26% 32.91% 37.72% 42.70%
End of Year Balance $12,378.31 $12,826.41 $13,290.73 $13,771.85 $14,270.39
Estimated Annual Expenses $ 167.84 $ 173.91 $ 180.21 $ 186.73 $ 193.49
--------------------------------------------------------------------------------------------------
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(1) Your annual expenses may be higher or lower than these shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment
advisor and is responsible for its day-to-day management. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical
and financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.75% of average daily net assets.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Michael J. Simon (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 2001. As the lead manager, Mr. Simon generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Simon may perform these functions, and the nature of these functions, may change from time to time.
- Meggan M. Walsh, Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 1991.
They are assisted by the advisor's Financial Services Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will
use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the funds will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II
shares. The plan allows the fund to pay distribution fees to life insurance
companies and others to promote the sale and distribution of Series II shares.
The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed
as a percentage of average daily net assets of the fund). Because the fund pays
these fees out of its assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending
typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES II
-------------------------------------------
YEAR ENDED APRIL 30, 2004
DECEMBER 31, (DATE SALES
--------------------- COMMENCED) TO
2006 2005 DECEMBER 31,
------ ------ 2004
Net asset value, beginning of period $15.23 $14.59 $13.50
---------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.20(a) 0.15(a) 0.12
---------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.26 0.67 1.07
=========================================================================================================
Total from investment operations 2.46 0.82 1.19
=========================================================================================================
Less distributions:
Dividends from net investment income (0.26) (0.18) (0.10)
---------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.10) -- --
=========================================================================================================
Total distributions (0.36) (0.18) (0.10)
=========================================================================================================
Net asset value, end of period $17.33 $15.23 $14.59
_________________________________________________________________________________________________________
=========================================================================================================
Total return(b) 16.22% 5.61% 8.85%
_________________________________________________________________________________________________________
=========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,664 $ 11 $ 11
_________________________________________________________________________________________________________
=========================================================================================================
Ratio of expenses to average net assets 1.37%(c) 1.37% 1.38%(d)
=========================================================================================================
Ratio of net investment income to average net assets 1.19%(c) 1.05% 0.63%(d)
_________________________________________________________________________________________________________
=========================================================================================================
Portfolio turnover rate(e) 14% 22% 67%
_________________________________________________________________________________________________________
=========================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $332,268.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
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You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VIFSE-PRO-2
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. GLOBAL HEALTH CARE FUND
PROSPECTUS
MAY 1, 2007
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Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Global Health Care Fund's investment objective is capital growth.
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.
AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is capital growth.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of health care industry companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a health care industry company to be one that (1) derives at least 50% of its revenues or earnings from health care activities; or (2) devotes at least 50% of its assets to such activities, based on its most recent fiscal year. Such companies include those that design, manufacture, or sell products or services used for or in connection with health care or medicine (such as pharmaceutical companies, biotechnology research firms, companies that sell medical products, and companies that own or operate health care facilities). The fund may invest in debt securities issued by health care industry companies, or in equity and debt securities of other companies the portfolio managers believe will benefit from developments in the health care industry.
The fund will normally invest in the securities of companies located in at least three different countries, including the United States, and may invest a significant portion of its assets in the securities of U.S. issuers. However, the fund will invest no more than 50% of its total assets in the securities of issuers in any one country, other than the U.S.
The fund may invest up to 20% of its total assets in companies located in developing countries, i.e., those countries that are in the initial stages of their industrial cycles.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers allocate the fund's assets among securities of countries and in currency denominations that are expected to provide the best opportunities for meeting the fund's investment objective. In analyzing specific companies for possible investment, the portfolio managers ordinarily look for several of the following characteristics: above-average per share earnings growth; high return on invested capital; a healthy balance sheet; sound financial and accounting policies and overall financial strength; strong competitive advantages; effective research and product development and marketing; development of new technologies; efficient service; pricing flexibility; strong management; and general operating characteristics that will enable the companies to compete successfully in their respective markets. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political, or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
When suitable opportunities are available, the fund may invest in initial public offerings (IPOs) of securities.
There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity.
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
The principal risk of investments in synthetic instruments is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Some synthetic instruments are more sensitive to interest rate changes and market price fluctuations than others. Also, synthetic instruments are subject to counter party risk which is the risk that the other party in the transaction will not fulfill its contractual obligation to complete the transaction with the fund.
The value of the fund's shares is particularly vulnerable to factors affecting the health care industry, such as substantial government regulation. Government regulation may impact the demand for
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
products and services offered by health care companies. Also, the products and services offered by health care companies may be subject to rapid obsolescence caused by scientific advances and technological innovations.
The fund's investments are concentrated in a comparatively narrow segment of the economy. This means that the fund's investment concentration in the health care industry is higher than most mutual funds and the broad securities market. Consequently, the fund tends to be more volatile than other mutual funds, and the value of the fund's investments and consequently an investment in the fund tends to go up and down more rapidly.
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 their prices may be more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies and governments 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 devalued 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.
IPOs of securities issued by unseasoned companies with little or no operating history are risky and their prices are highly volatile, but they can result in very large gains in their initial trading. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. Attractive IPOs are often oversubscribed and may not be available to the fund, or may be available in only very limited quantities.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio manager will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The prices of IPO securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be no assurance that the fund will have favorable IPO investment opportunities
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series I shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1998................................................................... 42.85%
1999................................................................... 4.87%
2000................................................................... 30.54%
2001................................................................... -12.59%
2002................................................................... -24.45%
2003................................................................... 27.78%
2004................................................................... 7.57%
2005................................................................... 8.15%
2006................................................................... 5.24%
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During the periods shown in the bar chart, the highest quarterly return was 15.79% (quarter ended December 31, 1998) and the lowest quarterly return was -21.45% (quarter ended March 31, 2001). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE ------------------------------------------------------------------------------------- AIM V.I. Global Health Care Fund(1) 5.24% 3.40% 8.70%(2) 05/21/97(2) MSCI World Index--Servicemark--(4,5) 20.07 9.97 6.93(2) 05/31/97(2) MSCI World Health Care Index(4,5,6) 10.47 4.58 2.65(3) 12/31/98(3) Lipper VUF Health/Biotechnology Funds Category Average(4,5,7) 5.65 4.46 8.73(2) 05/31/97(2) Lipper Health/Biotechnology Funds Index(4,5,8) 4.80 4.69 10.17(2) 05/31/97(2) ------------------------------------------------------------------------------------- |
(1) For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. 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 May 21, 1997. Index comparisons began on May 31, 1997.
(3) The average annual total return given is since the inception dated of the MSCI World Health Care Index.
(4) The Morgan Stanley Capital International World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance. The fund has also included the Morgan Stanley Capital International World Healthcare Index as its style-specific index because the fund believe it better represents the global investments of the fund. In addition, the fund has elected to use the Lipper Variable Underlying Funds (VUF) Health/Biotechnology Funds Category Average (which may or may not include the fund) for comparison to a peer-group. The fund has elected to used the Lipper VUF Health/Biotechnology Funds Category Average as its peer-group instead of the Lipper Health/Biotechnology Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Health/Biotechnology Funds Category Average.
(5) The indices may not reflect payment of fees, expenses or taxes.
(6) The MSCI World Health Care Index includes health care securities from developed countries.
(7) The Lipper VUF Health/Biotechnology Funds Category Average represents the average of all the variable insurance underlying Health/Biotechnology funds tracked by Lipper Inc.
(8) The Lipper Health/Biotechnology Funds Index is an equally weighted representation of the largest funds within the Lipper Health/Biotechnology Category. These funds invest at least 65% of their portfolios in equity securities of companies engaged in healthcare, medicine, and biotechnology.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Other Expenses 0.35 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses(2,4) 1.11 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.75% (for average net assets up to $250 million) to 0.68% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series I shares of the funds with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time
periods indicated;
(ii) earn a 5% return on your investment before operating
expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Global Health Care Fund $113 $353 $612 $1,352 ---------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.11% 1.11% 1.11% 1.11% 1.11% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.89% 7.93% 12.13% 16.49% 21.02% End of Year Balance $10,389.00 $10,793.13 $11,212.98 $11,649.17 $12,102.32 Estimated Annual Expenses $ 113.16 $ 117.56 $ 122.13 $ 126.88 $ 131.82 ----------------------------------------------------------------------------------------------- SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 Annual Expense Ratio(1) 1.11% 1.11% 1.11% 1.11% 1.11% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 25.73% 30.62% 35.70% 40.98% 46.47 End of Year Balance $12,573.10 $13,062.20 $13,570.32 $14,098.20 $14,646.62 Estimated Annual Expenses $ 136.95 $ 142.28 $ 147.81 $ 153.56 $ 159.53 ----------------------------------------------------------------------------------------------- |
(1) Your annual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.75% of average daily net assets.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
Derek M. Taner, Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 2005. From 2000 to 2005, he was a portfolio manager and analyst for Franklin Advisers, Inc.
He is assisted by the advisor's Global Health Care Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on the portfolio manager and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of his compensation structure, and information regarding other accounts he manages.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board of Trustees.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES I
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 20.44 $ 18.90 $ 17.57 $ 13.75 $ 18.20
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.06) (0.03) (0.03) (0.00)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.11 1.60 1.36 3.85 (4.45)
=========================================================================================================================
Total from investment operations 1.07 1.54 1.33 3.82 (4.45)
=========================================================================================================================
Net asset value, end of period $ 21.51 $ 20.44 $ 18.90 $ 17.57 $ 13.75
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 5.24% 8.15% 7.57% 27.78% (24.45)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $235,509 $257,736 $354,889 $340,711 $232,681
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets 1.10%(d) 1.08%(e) 1.11% 1.07% 1.07%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.19)%(d) (0.24)% (0.17)% (0.20)% (0.43)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 79% 82% 175% 114% 130%
_________________________________________________________________________________________________________________________
=========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) The net investment income (loss) per share was calculated after permanent
book tax differences, such as net operating losses, which were reclassified
from accumulated net investment income (loss) to paid in capital. Had net
investment income (loss) per share been calculated using the current method,
which is before reclassification of net operating losses, net investment
income (loss) per share would have been $(0.07) for the year ended December,
31 2002.
(c) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns do not reflect charges assessed in connection
with a variable product, which if included would reduce total returns.
(d) Ratios are based on average daily net assets of $250,008,583.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.09% for the year ended December 31, 2005.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
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THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VIGHC-PRO-1
AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. GLOBAL HEALTH CARE FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Global Health Care Fund's investment objective is capital growth.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosure 8 Trading Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is capital growth.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of health care industry companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a health care industry company to be one that (1) derives at least 50% of its revenues or earnings from health care activities; or (2) devotes at least 50% of its assets to such activities, based on its most recent fiscal year. Such companies include those that design, manufacture, or sell products or services used for or in connection with health care or medicine (such as pharmaceutical companies, biotechnology research firms, companies that sell medical products, and companies that own or operate health care facilities). The fund may invest in debt securities issued by health care industry companies, or in equity and debt securities of other companies the portfolio managers believe will benefit from developments in the health care industry.
The fund will normally invest in the securities of companies located in at least three different countries, including the United States, and may invest a significant portion of its assets in the securities of U.S. issuers. However, the fund will invest no more than 50% of its total assets in the securities of issuers in any one country, other than the U.S.
The fund may invest up to 20% of its total assets in companies located in developing countries, i.e., those countries that are in the initial stages of their industrial cycles.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers allocate the fund's assets among securities of countries and in currency denominations that are expected to provide the best opportunities for meeting the fund's investment objective. In analyzing specific companies for possible investment, the portfolio managers ordinarily look for several of the following characteristics: above-average per share earnings growth; high return on invested capital; a healthy balance sheet; sound financial and accounting policies and overall financial strength; strong competitive advantages; effective research and product development and marketing; development of new technologies; efficient service; pricing flexibility; strong management; and general operating characteristics that will enable the companies to compete successfully in their respective markets. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or it there are inadequate opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect a fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of a fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
When suitable opportunities are available, the fund may invest in initial public offerings (IPOs) of securities.
There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity.
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
The principal risk of investments in synthetic instruments is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Some synthetic instruments are more sensitive to interest rate changes and mark price fluctuations than others. Also, synthetic instruments are subject to counter party risk which is the risk that the other party in the transaction will not fulfill its contractual obligation to complete the transaction with the fund.
The value of the fund's shares is particularly vulnerable to factors affecting the health care industry, such as substantial government regulation. Government regulation may impact the demand for products and services offered by health care companies. Also, the products and services offered by health care companies may be
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
subject to rapid obsolescence caused by scientific advances and technological innovations.
The fund's investments are concentrated in a comparatively narrow segment of the economy. This means that the fund's investment concentration in the health care industry is higher than most mutual funds and the broad securities market. Consequently, the fund tends to be more volatile than other mutual fund, and the value of the fund's investments and consequently an investment in the fund tends to go up and down more rapidly.
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 their prices may be more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies and governments 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 devalued 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.
IPOs of securities issued by unseasoned companies with little or no operating history are risky and their prices are highly volatile, but they can result in very large gains in their initial trading. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. Attractive IPOs are often oversubscribed and may not be available to the fund, or may be available in only very limited quantities.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The prices of IPO securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be no assurance that the fund will have favorable IPO investment opportunities.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I shares and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
(PERFORMANCE GRAPH)
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1998*.................................................................. 42.50%
1999*.................................................................. 4.60%
2000*.................................................................. 30.22%
2001*.................................................................. -12.80%
2002*.................................................................. -24.64%
2003................................................................... 27.46%
2004................................................................... 7.25%
2005................................................................... 7.90%
2006................................................................... 4.96%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 15.72% (quarter ended December 31, 1998) and the lowest quarterly return was -21.49% (quarter ended March 31, 2001). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------
SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
--------------------------------------------------------------------------
AIM V.I. Global Health Care Fund(1) 4.96% 3.13% 8.43%(2) 05/21/97(2)
MSCI World Index(SM) (4,5) 20.07 9.97 6.93(2) 05/31/97(2)
MSCI World Health Care Index(4,5,6) 10.47 4.58 2.65(3) 12/31/98(3)
Lipper VUF Health/Biotechnology Funds
Category Average(4,5,7) 5.65 4.46 8.73(2) 05/31/97(2)
Lipper Health/Biotechnology Funds
Index(4,5,8) 4.80 4.69 10.17(2) 05/31/97(2)
------------------------------------------------------------------------------------------
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(1) The return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the Predecessor fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004. For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Total return figures include reinvested dividends and capital gain distributions and the effect of the fund's expenses.
(2) Series I shares of the Fund commenced investment operations on May 21, 1997. Index comparisons began on May 31, 1997.
(3) The average annual total return given is since the inception date of the MSCI World Health Care Index.
(4) The Morgan Stanley Capital International World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance. The fund has also included the Morgan Stanley Capital International World Healthcare Index as its style-specific index because the fund believe it better represents the global investments of the fund. In addition, the fund has elected to use the Lipper Variable Underlying Funds (VUF) Health/Biotechnology Funds Category Average (which may or may not include the fund) for comparison to a peer-group. The fund has elected to used the Lipper VUF Health/Biotechnology Funds Category Average as its peer-group instead of the Lipper Health/Biotechnology Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Health/Biotechnology Funds Category Average.
(5) The indices may not reflect payment of fees, expenses or taxes.
(6) The MSCI World Health Care Index includes health care securities from developed countries.
(7) The Lipper VUF Health/Biotechnology Funds Category Average represents the average of all the variable insurance underlying Health/Biotechnology funds tracked by Lipper Inc.
(8) The Lipper Health/Biotechnology Funds Index is an equally weighted representation of the largest funds in the Lipper Health/Biotechnology Category. These funds invest at least 65% of their portfolios in equity securities of companies engaged in healthcare, medicine, and biotechnology.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.35 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses(2,4) 1.36 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the advisor contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.75% (for average net assets up to $250 million) to 0.68% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10, 000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Global Health Care Fund $138 $431 $745 $1,635 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.36% 1.36% 1.36% 1.36% 1.36%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.64% 7.41% 11.32% 15.37% 19.57%
End of Year Balance $10,364.00 $10,741.25 $11,132.23 $11,537.44 $11,957.41
Estimated Annual Expenses $ 138.48 $ 143.52 $ 148.74 $ 154.15 $ 159.76
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
--------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.36% 1.36% 1.36% 1.36% 1.36%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 23.93% 28.44% 33.11% 37.96% 42.98%
End of Year Balance $12,392.66 $12,843.75 $13,311.26 $13,795.79 $14,297.96
Estimated Annual Expenses $ 165.58 $ 171.61 $ 177.85 $ 184.33 $ 191.04
|
(1) Your annual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.75% of average daily net assets.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
Derek M. Taner, Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 2005. From 2000 to 2005, he was a portfolio manager and analyst for Franklin Advisers, Inc.
He is assisted by the advisor's Global Health Care Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on the portfolio manager and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of his compensation structure, and information regarding other accounts he manages.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the funds will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending
typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES II
----------------------------------------
APRIL 30, 2004,
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
--------------------- DECEMBER 31,
2006 2005 2004
------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 20.34 $ 18.86 $ 18.19
------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.09)(a) (0.09) (0.05)
------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.11 1.57 0.72
======================================================================================================
Total from investment operations 1.02 1.48 0.67
======================================================================================================
Net asset value, end of period $ 21.36 $ 20.34 $ 18.86
______________________________________________________________________________________________________
======================================================================================================
Total return(b) 5.01% 7.85% 3.68%
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $97,646 $ 11 $ 10
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets 1.35%(c) 1.33%(d) 1.36%(e)
======================================================================================================
Ratio of net investment income (loss) to average net assets (0.44)%(c) (0.49)% (0.42)%(e)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(f) 79% 82% 175%
______________________________________________________________________________________________________
======================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally
accepted in the United States of America and as such, the net asset value
for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Total returns are not annualized for periods less than one
year and do not reflect charges assessed in connection with a variable
product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $33,990,959.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.34% for the year ended December 31, 2005.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized for
periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
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THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN
MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN
THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the
fund's Forms N-Q and other information at the SEC's Public Reference Room in
Washington, DC; on the EDGAR database on the SEC's Internet website
(http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to
the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an
electronic mail request to publicinfo@sec.gov. Please call the SEC at
1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VIGHC-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM V.I. GLOBAL REAL ESTATE FUND
PROSPECTUS
MAY 1, 2007
Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Global Real Estate Fund's investment objective is high total return through growth of capital and current income.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM V.I. GLOBAL REAL ESTATE FUND
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisors 6 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
AIM V.I. GLOBAL REAL ESTATE FUND
The fund's investment objective is high total return through growth of capital and current income. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of real estate and real estate-related companies. In complying with this 80% investment requirement, the fund may invest in debt and equity securities, including convertible securities, and its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a real estate-related company if at least 50% of its assets, gross income or net profits are attributable to ownership, construction, management or sale of residential, commercial or industrial real estate. These companies include equity real estate investment trusts and other real estate operating companies (collectively, REITs) that own property that make short-term construction and development mortgage loans or that invest in long-term mortgages or mortgage pools, or companies whose products and services are related to the real estate industry, such as manufacturers and distributors of building supplies and financial institutions that issue or service mortgages.
The fund may invest in equity, debt or convertible securities of companies unrelated to the real estate industry that the portfolio managers believe are undervalued and have potential for growth of capital. The fund will limit its investment in debt securities unrelated to real estate to those that are investment-grade or deemed by the fund's portfolio managers to be of comparable quality.
The fund will normally invest in the securities of companies located in at least three different countries, including the United States. The fund intends to maintain a risk profile similar to the FTSE EPRA/NAREIT Global Real Estate Index which may cause a significant portion of its assets to be invested in the securities of non-U.S. issuers.
The fund may invest up to 20% of its total assets in companies located in developing countries, i.e., those countries that are in the initial stages of their industrial cycles. The fund may also invest up to 10% of its total assets in non-investment grade debt securities (commonly known as "junk bonds"). The fund may engage in short sale transactions.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers allocate the fund's assets among securities of countries and in currency denominations that are expected to provide the best opportunities for meeting the fund's investment objective. In analyzing specific companies for possible investment, the portfolio managers utilize fundamental real estate analysis and quantitative securities analysis to select investments for the fund, including analyzing a company's management and strategic focus, evaluating the location, physical attributes and cash flow generating capacity of a company's properties and calculating relative return potential among other things. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect a fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of a fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases can cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. The issuer of a debt security may default or otherwise be unable to honor a financial obligation.
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay
AIM V.I. GLOBAL REAL ESTATE FUND
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly, available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and their prices may be 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 devalued 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.
The principal risk of investments in synthetic instruments is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Some synthetic instruments are more sensitive to interest rate changes and market price fluctuations than others. Also, synthetic instruments are subject to counter party risk which is the risk that the other party in the transaction will not fulfill its contractual obligation to complete the transaction with the fund.
The fund could conceivably hold real estate directly if a company defaults on debt securities the fund owns. In that event, an investment in the fund may have additional risks relating to direct ownership in real estate, including difficulties in valuing and trading real estate, declines in value of the properties, risks relating to general and local economic conditions, changes in the climate for real estate, increases in taxes, expenses and costs, changes in laws, casualty and condemnation losses, rent control limitations and increases in interest rates.
The value of the fund's investment in REITs is affected by the factors listed above, as well as the management skill of the persons managing the REIT. Since REITs have expenses of their own, you will bear a proportionate share of those expenses in addition to those of the fund. Because the fund focuses its investments in REITs and other companies related to the real estate industry, the value of your shares may rise and fall more than the value of shares of a fund that invests in a broader range of companies.
If the fund sells a security short that it does not own, and the security increases in value, the fund will not have to pay the higher price to purchase the security. Since there is no limit on how much the price of the security can increase, the fund's exposure is unlimited. The more the fund pays to purchase the security, the more it will lose on the transaction and the more the price of your shares will be affected. If the fund sells a security short that it owns (short sale against the box), any future losses in the fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The fund will also incur transaction costs to engage short sales.
Initial Public Offerings (IPOs) of securities issued by unseasoned companies with little or no operating history are risky and their prices are highly volatile, but they can result in very large gains in their initial trading. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. Attractive IPOs are often oversubscribed and may not be available to the fund, or may be available in only very limited quantities.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
AIM V.I. GLOBAL REAL ESTATE FUND
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series I shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
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1999................................................................... 0.35%
2000................................................................... 28.63%
2001................................................................... -0.76%
2002................................................................... 6.37%
2003................................................................... 38.82%
2004................................................................... 36.58%
2005................................................................... 14.24%
2006................................................................... 42.60%
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During the periods shown in the bar chart, the highest quarterly return was 17.14% (quarter ended December 31, 2004) and the lowest quarterly return was -8.32% (quarter ended September 30, 1999). For period prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc. Additionally, effective April 30, 2004 and, again on July 3, 2006, the fund changed its investment objective. Performance shown for the fund reflects the investment objective of the fund in effect during the periods shown.
AIM V.I. GLOBAL REAL ESTATE FUND
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE ------------------------------------------------------------------------------------------ AIM V.I. Global Real Estate Fund(1) 42.60% 26.86% 15.54% 03/31/98 S&P 500--Registered Trademark-- Index(2,3,6) 15.78 6.19 4.56(4) 03/31/98(4) MSCI World Index(SM )(3,6) 20.07 9.97 5.35(4) 03/31/98(4) MSCI U.S. REIT Index(3,6,7) 35.92 23.22 14.41(4) 03/31/98(4) FTSE EPRA/NAREIT Global Real Estate Index(3,6,8) 42.35 26.79 20.02(5) 12/31/99(5) Lipper VUF Real Estate Funds Category Average(3,6,9) 35.55 23.41 14.47(4) 03/31/98(4) Lipper Real Estate Funds Index(3,6,10) 31.46 22.63 13.67(4) 03/31/98(4) ------------------------------------------------------------------------------------------ |
(1) For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Additionally, on April 30, 2004, and, again on July 3, 2006, the fund changed its investment objective. As a result, performance shown for the fund reflects the investment objective of the fund in effect during the periods shown. Total return figures include reinvested dividends and capital gain distributions and the effect of the fund's expenses.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the change in the fund's investment style from a domestically concentrated fund to a global fund of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The average annual total return given is since the month-end closest to the inception date of the fund's Series I shares.
(5) The average annual total return given is since the inception date of the FTSE EPRA/NAREIT Global Real Estate Index.
(6) The Morgan Stanley Capital Investment World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance. The fund has elected to use the MSCI World Index as its broad-based market index instead of the S&P 500 Index because of the change in the fund's investment style from a domestically concentrated fund to a global fund. The fund has elected to use the FTSE European Public Real Estate Association/National Association of Real Estate Investment Trusts Global Real Estate Index as its style-specific index instead of Morgan Stanley Capital Investment U.S. REIT Index because of the change in the fund's investment style from a domestically concentrated fund to a global fund. In addition, the Lipper Variable Underlying Funds (VUF) Real Estate Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Real Estate Funds Category Average as its peer-group index instead of the Lipper Real Estate Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Real Estate Funds Category Average.
(7) The MSCI U.S. REIT Index is a total-return index comprised of the most actively traded real estate investment trusts and is designed to be a measure of real estate equity performance.
(8) The FTSE EPRA/NAREIT Global Real Estate Index is designed to track the performance of listed real estate companies and REITs worldwide. It is compiled by FTSE Group (an independent company, originally a joint venture of the Financial Times and the London Stock Exchange, whose sole business is the creation and management of indices and associated data services).
(9) The Lipper VUF Real Estate Funds Category Average represents the average of all the variable insurance underlying Real Estate Funds tracked by Lipper Inc.
(10) The Lipper Real Estate Funds Index is an equally weighted representation of the largest funds within the Lipper Real Estate Category. These funds invest at least 65% of their portfolio in equity securities of domestic and foreign companies engaged in the real estate industry.
AIM V.I. GLOBAL REAL ESTATE FUND
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly
or indirectly, when a variable product owner buys, holds, or redeems interest in
an insurance company separate account that invests in the Series I shares of the
fund but does not represent the effect of any fees or other expenses assessed in
connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.90% Other Expenses 0.40 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund 1.31 Operating Expenses Fee Waiver and/or Expense Reimbursements(2,4) 0.15 Net Annual Fund Operating Expenses 1.16 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.75% (for average net assets up to $250 million) to 0.68% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily nets assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit are in the form or credits that the fund receives from banks where the fund or its transfer agent has deposit accounts in which it holds uninvested cash. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Global Real Estate Fund $118 $400 $704 $1,566 -------------------------------------------------------------------------------- |
AIM V.I. GLOBAL REAL ESTATE FUND
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.16% 1.31% 1.31% 1.31% 1.31%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.84% 7.67% 11.64% 15.76% 20.04%
End of Year Balance $10,384.00 $10,767.17 $11,164.48 $11,576.45 $12,003.62
Estimated Annual Expenses $ 118.23 $ 138.54 $ 143.65 $ 148.95 $ 154.45
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SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
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Annual Expense Ratio(1) 1.31% 1.31% 1.31% 1.31% 1.31%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 24.47% 29.06% 33.82% 38.76% 43.88%
End of Year Balance $12,446.55 $12,905.83 $13,382.05 $13,875.85 $14,387.87
Estimated Annual Expenses $ 160.15 $ 166.06 $ 172.19 $ 178.54 $ 185.13
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(1) Your annual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISORS
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and manages the investment operations of the fund and has agreed to perform or arrange for the performance of the fund's day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. INVESCO Institutional (N.A.), Inc. (INVESCO Real Estate) (the subadvisor) is located at Three Galleria Tower, Suite 500, 13155 Noel Road, Dallas, TX 75240. INVESCO Institutional and its subsidiaries manage investment products that span a wide range of asset classes from fixed income to value, core, and growth equities to alternative investments such as real estate and private capital. INVESCO Institutional manages more than 1,300 separate portfolios for clients located around the world. The subadvisor is responsible for the fund's day-to-day management, including the fund's investment decisions and the execution of securities transactions with respect to the fund.
The advisor has acted as an investment advisor since its organization in 1976 and the subadvisor has acted as an investment advisor and qualified professional asset manager since 1979. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York
AIM V.I. GLOBAL REAL ESTATE FUND
Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.75% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement and the sub-advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Joe V. Rodriguez, Jr. (lead manager), Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1990. As the lead manager, Mr. Rodriguez generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Rodriguez may perform these functions, and the nature of these functions, may change from time to time.
- Mark Blackburn, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1998.
- Paul S. Curbo, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the subadvisor and/or its affiliates since 1998.
- James W. Trowbridge, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1989.
- Ping-Ying Wang, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the subadvisor and/or its affiliates since 1998.
They are assisted by the subadvisor's Real Estate Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
AIM V.I. GLOBAL REAL ESTATE FUND
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the fund through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases in the insurance company's account with the fund related to such activities. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
AIM V.I. GLOBAL REAL ESTATE FUND
FAIR VALUE PRICING
Securities owned by the fund are to be valued at current market value if market quotations are readily available. All other securities and assets of the fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the fund may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset
AIM V.I. GLOBAL REAL ESTATE FUND
value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times and with different lag times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
AIM V.I. GLOBAL REAL ESTATE FUND
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
AIM V.I. GLOBAL REAL ESTATE FUND
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES I
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
2006 2005 2004 2003 2002
-------- ------- ------- ------- -------
Net asset value, beginning of period $ 21.06 $ 19.13 $ 14.34 $ 10.49 $ 9.97
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.33(a) 0.38(a) 0.32(a) 0.20 0.14
---------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 8.61 2.34 4.92 3.87 0.50
=====================================================================================================================
Total from investment operations 8.94 2.72 5.24 4.07 0.64
=====================================================================================================================
Less distributions:
Dividends from net investment income (0.28) (0.22) (0.14) (0.22) (0.12)
---------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.98) (0.57) (0.31) -- --
=====================================================================================================================
Total distributions (1.26) (0.79) (0.45) (0.22) (0.12)
=====================================================================================================================
Net asset value, end of period $ 28.74 $ 21.06 $ 19.13 $ 14.34 $ 10.49
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) 42.60% 14.24% 36.58% 38.82% 6.37%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $192,617 $99,977 $79,391 $26,087 $12,869
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.15%(c) 1.21% 1.31% 1.35% 1.36%
---------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.30%(c) 1.36% 1.42% 1.62% 1.89%
=====================================================================================================================
Ratio of net investment income to average net assets 1.32%(c) 1.91% 1.96% 3.02% 4.53%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate 84% 51% 34% 126% 191%
_____________________________________________________________________________________________________________________
=====================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $132,635,257.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIM V.I. Global Real Estate Fund Series I
AIMinvestments.com VIGRE-PRO-1
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. GLOBAL REAL ESTATE FUND
PROSPECTUS
MAY 1, 2007
Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Global Real Estate Fund's investment objective is high total return through growth of capital and current income.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
AIM V.I. GLOBAL REAL ESTATE FUND
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 9 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 11 Payments to Insurance Companies 11 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
AIM V.I. GLOBAL REAL ESTATE FUND
The fund's investment objective is high total return through growth of capital and current income. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of real estate and real estate-related companies. In complying with this 80% investment requirement, the fund may invest in debt and equity securities, including convertible securities, and its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a real estate-related company if at least 50% of its assets, gross income or net profits are attributable to ownership, construction, management or sale of residential, commercial or industrial real estate. These companies include equity real estate investment trusts and other real estate operating companies (collectively, REITs) that own property that make short-term construction and development mortgage loans or that invest in long-term mortgages or mortgage pools, or companies whose products and services are related to the real estate industry, such as manufacturers and distributors of building supplies and financial institutions that issue or service mortgages.
The fund may invest in equity, debt or convertible securities of companies unrelated to the real estate industry that the portfolio managers believe are undervalued and have potential for growth of capital. The fund will limit its investment in debt securities unrelated to real estate to those that are investment-grade or deemed by the fund's portfolio managers to be of comparable quality.
The fund will normally invest in the securities of companies located in at least three different countries, including the United States. The fund intends to maintain a risk profile similar to the FTSE EPRA/NAREIT Global Real Estate Index which may cause a significant portion of its assets to be invested in the securities of non-U.S. issuers.
The fund may invest up to 20% of its total assets in companies located in developing countries, i.e., those countries that are in the initial stages of their industrial cycles. The fund may also invest up to 10% of its total assets in non-investment grade debt securities (commonly known as "junk bonds"). The fund may engage in short sale transactions.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers allocate the fund's assets among securities of countries and in currency denominations that are expected to provide the best opportunities for meeting the fund's investment objective. In analyzing specific companies for possible investment, the portfolio managers utilize fundamental real estate analysis and quantitative securities analysis to select investments for the fund, including analyzing a company's management and strategic focus, evaluating the location, physical attributes and cash flow generating capacity of a company's properties and calculating relative return potential among other things. The portfolio managers consider whether to sell a particular security when any of these factors materially changes.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect a fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of a fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases can cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. The issuer of a debt security may default or otherwise be unable to honor a financial obligation.
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer
may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
The prices of foreign securities may be further affected by other factors, including:
- Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and their prices may be 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 devalued 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.
The principal risk of investments in synthetic instruments is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Some synthetic instruments are more sensitive to interest rate changes and market price fluctuations than others. Also, synthetic instruments are subject to counter party risk which is the risk that the other party in the transaction will not fulfill its contractual obligation to complete the transaction with the fund.
The fund could conceivably hold real estate directly if a company defaults on debt securities the fund owns. In that event, an investment in the fund may have additional risks relating to direct ownership in real estate, including difficulties in valuing and trading real estate, declines in value of the properties, risks relating to general and local economic conditions, changes in the climate for real estate, increases in taxes, expenses and costs, changes in laws, casualty and condemnation losses, rent control limitations and increases in interest rates.
The value of the fund's investment in REITs is affected by the factors listed above, as well as the management skill of the persons managing the REIT. Since REITs have expenses of their own, you will bear a proportionate share of those expenses in addition to those of the fund. Because the fund focuses its investments in REITs and other companies related to the real estate industry, the value of your shares may rise and fall more than the value of shares of a fund that invests in a broader range of companies.
If the fund sells a security short that it does not own, and the security increases in value, the fund will not have to pay the higher price to purchase the security. Since there is no limit on how much the price of the security can increase, the fund's exposure is unlimited. The more the fund pays to purchase the security, the more it will lose on the transaction and the more the price of your shares will be affected. If the fund sells a security short that it owns (short sale against the box), any future losses in the fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The fund will also incur transaction costs to engage short sales.
Initial Public Offerings (IPOs) of securities issued by unseasoned companies with little or no operating history are risky and their prices are highly volatile, but they can result in very large gains in their initial trading. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. Attractive IPOs are often oversubscribed and may not be available to the fund, or may be available in only very limited quantities.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
AIM V.I. GLOBAL REAL ESTATE FUND
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 assessed in connection with your variable product; if they did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
(PERFORMANCE CHART)
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
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1999*.................................................................. 0.10%
2000*.................................................................. 28.31%
2001*.................................................................. -1.01%
2002*.................................................................. 6.11%
2003*.................................................................. 38.48%
2004*.................................................................. 36.40%
2005................................................................... 13.90%
2006................................................................... 42.24%
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* The returns shown for these periods are the restated historical performance of the predecessor fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 17.08% (quarter ended December 31, 2004) and the lowest quarterly return was -8.38% (quarter ended September 30, 1999). For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO Funds Group, Inc., (INVESCO), an affiliate of A I M Advisors, Inc. Additionally, effective April 30, 2004 and, again on July 3, 2006, the fund changed its investment objective. Performance shown for the fund reflects the investment objective of the fund in effect during the periods shown.
AIM V.I. GLOBAL REAL ESTATE FUND
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
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SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
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AIM V.I. Global Real Estate Fund(1) 42.24% 26.56% 15.26% 03/31/98
S&P 500--Registered Trademark--
Index(2,3,6) 15.78 6.19 4.56(4) 03/31/98(4)
MSCI World Index(SM) (3,6) 20.07 9.97 5.35(4) 03/31/98(4)
MSCI U.S. REIT Index(3,6,7) 35.92 23.22 14.41(4) 03/31/98(4)
FTSE EPRA/NAREIT Global Real Estate
Index(3,6,8) 42.35 26.79 20.02(5) 12/31/99(5)
Lipper VUF Real Estate Funds Category
Average(3,6,9) 35.55 23.41 14.47(4) 03/31/98(4)
Lipper Real Estate Funds Index(3,6,10) 31.46 22.63 13.67(4) 03/31/98(4)
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(1) For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Additionally, (i) on April 30, 2004 and, again on July 3, 2006, the fund changed its investment objective (performance shown for the fund reflects the investment objective of the fund in effect during the periods shown), and (ii) the return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the funds's Series II shares since their inception and the restated historical performance of the Predecessor fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004. Total return figures include reinvested dividends and capital gain distributions and the effect of the fund's expenses.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The average annual total return given is since the month-end closest to the inception date of the fund's Series I shares.
(5) The average annual total return given is since the inception date of the FTSE EPRA/NAREIT Global Real Estate Index.
(6) The Morgan Stanley Capital Investment World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance. The fund has elected to use the MSCI World Index as its broad-based market index instead of the S&P 500 Index because of the change in the fund's investment style from a domestically concentrated fund to a global fund. The fund has elected to use the FTSE European Public Real Estate Association/National Association of Real Estate Investment Trusts Global Real Estate Index as its style-specific index instead of Morgan Stanley Capital Investment U.S. REIT Index because of the change in the fund's investment style from a domestically concentrated fund to a global fund. In addition, the Lipper Variable Underlying Funds (VUF) Real Estate Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Real Estate Funds Category Average as its peer-group index instead of the Lipper Real Estate Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Real Estate Funds Category Average.
(7) The MSCI U.S. REIT Index is a total-return index comprised of the most actively traded real estate investment trusts and is designed to be a measure of real estate equity performance.
(8) The FTSE EPRA/NAREIT Global Real Estate Index is designed to track the performance of listed real estate companies and REITs worldwide. It is compiled by FTSE Group (an independent company, originally a joint venture of the Financial Times and the London Stock Exchange, whose sole business is the creation and management of indices and associated data services).
(9) The Lipper VUF Real Estate Funds Category Average represents the average of all the variable insurance underlying Real Estate Funds tracked by Lipper Inc.
(10) The Lipper Real Estate Funds Index is an equally weighted representation of the largest funds within the Lipper Real Estate Category. These funds invest at least 65% of their portfolio in equity securities of domestic and foreign companies engaged in the real estate industry.
AIM V.I. GLOBAL REAL ESTATE 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 product owner buys, holds, or redeems interest in
an insurance company separate account that invests in the Series II shares of
the fund but does not represent the effect of any fees or other expenses
assessed in connection with your variable product, and if it did, expenses would
be higher.
SHAREHOLDER FEES ------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES ------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A ------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) ------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES ------------------------------------------------------------------------------- Management Fees(2) 0.90% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.40 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses 1.56 Fee Waiver and/or Expense Reimbursements(2,4) 0.15 Net Annual Fund Operating Expenses 1.41 ------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specific maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.75% (for average net assets up to $250 million) to 0.68% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but by the expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily nets assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Global Real Estate Fund $144 $478 $836 $1,844 -------------------------------------------------------------------------------- |
AIM V.I. GLOBAL REAL ESTATE FUND
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product, if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.41% 1.56% 1.56% 1.56% 1.56% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.59% 7.15% 10.84% 14.65% 18.60% End of Year Balance $10,359.00 $10,715.35 $11,083.96 $11,465.25 $11,859.65 Estimated Annual Expenses $ 143.53 $ 164.38 $ 170.03 $ 175.88 $ 181.93 ----------------------------------------------------------------------------------------------- SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.56% 1.56% 1.56% 1.56% 1.56% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 22.68% 26.90% 31.26% 35.78% 40.45% End of Year Balance $12,267.62 $12,689.63 $13,126.15 $13,577.69 $14,044.76 Estimated Annual Expenses $ 188.19 $ 194.67 $ 201.36 $ 208.29 $ 215.46 ----------------------------------------------------------------------------------------------- |
(1) Your annual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
AIM V.I. GLOBAL REAL ESTATE FUND
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and manages the investment operations of the fund and has agreed to perform or arrange for the performance of the fund's day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. INVESCO Institutional (N.A.), Inc. (INVESCO Real Estate) (the subadvisor) is located at Three Galleria Tower, Suite 500, 13155 Noel Road, Dallas, TX 75240. INVESCO Institutional and its subsidiaries manage investment products that span a wide range of asset classes from fixed income to value, core, and growth equities to alternative investments such as real estate and private capital. INVESCO Institutional manages more than 1,300 separate portfolios for clients located around the world. The subadvisor is responsible for the fund's day-to-day management, including the fund's investment decisions and the execution of securities transactions with respect to the fund.
The advisor has acted as an investment advisor since its organization in 1976 and the subadvisor has acted as an investment advisor and qualified professional asset manager since 1979. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.75% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement and the sub-advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Joe V. Rodriguez, Jr. (lead manager), Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1990. As the lead manager, Mr. Rodriguez generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Rodriguez may perform these functions, and the nature of these functions, may change from time to time.
- Mark Blackburn, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1998.
- Paul S. Curbo, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the subadvisor and/or its affiliates since 1998.
- James W. Trowbridge, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the subadvisor and/or its affiliates since 1989.
AIM V.I. GLOBAL REAL ESTATE FUND
- Ping-Ying Wang, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the subadvisor and/or its affiliates since 1998.
They are assisted by the subadvisor's Real Estate Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
AIM V.I. GLOBAL REAL ESTATE FUND
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the fund through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the fund. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by the fund are to be valued at current market value if market quotations are readily available. All other securities and assets of the fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the fund may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing
AIM V.I. GLOBAL REAL ESTATE FUND
methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times and with different lag times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
AIM V.I. GLOBAL REAL ESTATE FUND
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI makes these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
AIM V.I. GLOBAL REAL ESTATE FUND
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES II
--------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
-------------------- DECEMBER 31,
2006 2005 2004
------- ------ --------------
Net asset value, beginning of period $ 20.98 $19.12 $ 13.96
----------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.27(a) 0.34(a) 0.20(a)
----------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 8.58 2.31 5.41
====================================================================================================
Total from investment operations 8.85 2.65 5.61
====================================================================================================
Less distributions:
Dividends from net investment income (0.28) (0.22) (0.14)
----------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.98) (0.57) (0.31)
====================================================================================================
Total distributions (1.26) (0.79) (0.45)
====================================================================================================
Net asset value, end of period $ 28.57 $20.98 $ 19.12
____________________________________________________________________________________________________
====================================================================================================
Total return(b) 42.30% 13.85% 40.23%
____________________________________________________________________________________________________
====================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 311 $ 62 $ 14
____________________________________________________________________________________________________
====================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.40%(c) 1.45% 1.45%(d)
----------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.55%(c) 1.61% 1.66%(d)
====================================================================================================
Ratio of net investment income to average net assets 1.07%(c) 1.67% 1.82%(d)
____________________________________________________________________________________________________
====================================================================================================
Portfolio turnover rate(e) 84% 51% 34%
____________________________________________________________________________________________________
====================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $181,163.
(d) Annualized
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made available
on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON
FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE
COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE
FUND.
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You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIM V.I. Global Real Estate Fund Series II
AIMinvestments.com VIGRE-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. GOVERNMENT SECURITIES FUND
PROSPECTUS
MAY 1, 2007
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Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Government Securities Fund's investment objective is a high level of current income consistent with reasonable concern for safety of principal.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 2 ------------------------------------------------------ PERFORMANCE INFORMATION 4 ------------------------------------------------------ Annual Total Returns 4 Performance Table 5 FEE TABLE AND EXPENSE EXAMPLE 6 ------------------------------------------------------ Fees and Expenses of the Fund 6 Expense Example 6 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 7 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 7 ------------------------------------------------------ FUND MANAGEMENT 8 ------------------------------------------------------ The Advisor 8 Advisor Compensation 8 Portfolio Manager(s) 8 OTHER INFORMATION 9 ------------------------------------------------------ Purchase and Redemption of Shares 9 Excessive Short-Term Trading Activity Disclosures 9 Trade Activity Monitoring 9 Fair Value Pricing 10 Risks 10 Pricing of Shares 10 Taxes 11 Dividends and Distributions 11 Share Classes 11 Payments to Insurance Companies 11 FINANCIAL HIGHLIGHTS 13 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is a high level of current income consistent with reasonable concern for safety of principal.
The fund's investment objective may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in debt securities issued, guaranteed or otherwise backed by the U.S. Government or its agencies and instrumentalities. These securities include: (1) U.S. Treasury obligations; and (2) obligations issued or guaranteed by U.S. Government agencies and instrumentalities and supported by (a) the full faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow from the U.S. Treasury, or (c) the credit of the agency or instrumentality.
The principal type of fixed income securities purchased by the fund are callable bonds that can be redeemed by the issuer prior to their stated maturity, bullet-maturity debt bonds with a stated maturity date, mortgage-backed securities consisting of interests in underlying mortgages with maturities of up to thirty years, and Treasury and agency holdings.
The fund invests in securities of all maturities, but will maintain a weighted average effective maturity for the portfolio of between three and ten years.
The fund enters into reverse repurchase agreements and engages in dollar roll transactions to enhance the fund's return on cash. The fund may also invest in derivative instruments such as treasury futures and options on treasury futures.
The fund's investments in the types of securities described in this prospectus varies from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers use a top-down and bottom-up investment approach to construct the fund's portfolio. The top-down investment approach involves an evaluation by the portfolio managers of the overall economic environment and its potential impact on the level and direction of interest rates, and the shape of the yield curve. Based on this information, the portfolio managers develop a strategic outlook for the upcoming six to twelve months and a shorter-term tactical outlook when market opportunities arise.
The portfolio managers seek to construct a portfolio risk with risk characteristics similar to Lehman Brothers Government Index (the benchmark index). The fund seeks to limit risk through various controls, such as sector and issuer weightings and duration relative to the benchmark index. The fund uses the benchmark index as a guide in structuring the portfolio, but the fund is not an index fund. The fund typically holds a higher percentage of assets in seasoned, high-coupon, mortgage-backed securities than the benchmark index.
After the top down analysis has been completed, the portfolio managers select securities believed to be undervalued given the prevailing market environment or future developments. The security selection process includes decisions such as (1) whether to buy callable securities; (2) how many months or years of call protection (a provision that prohibits the issuer from calling back the security) the fund should have; and (3) identifying mortgage-backed securities that might exhibit faster or slower refinancing activity than other mortgage securities with the same coupon and maturity.
The portfolio managers seek to limit credit and interest rate risk by maintaining a duration of the fund's portfolio within a range around the duration of the benchmark index.
The portfolio managers will consider selling a security if they conclude (1) a change in the economic or market outlook indicates assets should be reallocated; (2) a mortgage security is prepaying faster or slower than expected; (3) a security is likely to be called and it is determined that the fund should own a security with a longer maturity date; or (4) a security has become fully valued.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A large amount of cash could negatively affect the fund's investment results in a period of rising market prices, conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the issuers whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations.
- Interest Rate Risk--Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on specific characteristics of each bond. A measure investors commonly use to determine this sensitivity is called duration. The longer the duration of a particular bond, the greater is its price sensitivity to interest rate changes. Similarly, a longer duration portfolio of securities has greater price sensitivity. Duration is determined by a number of factors including coupon rate, whether the coupon is fixed or floating, time to maturity, call or put features, and various repayment features.
- Reinvestment Risk--Reinvestment risk is the risk that a bond's cash flows (coupon income and principal repayment) will be reinvested at an interest rate below that on the original bond. If interest rates decline, the underlying bond may rise in value, but the cash flows received from that bond may have to be invested at a lower interest rate.
- U.S. Government Obligations Risk--The fund invests in obligations issued by
agencies and instrumentalities of the U.S. Government. These obligations vary
in the level of support they receive from the U.S. Government. They may be:
(i) supported by the full faith and credit of the U.S. Treasury, such as those
of the Government National Mortgage Association; (ii) supported by the right
of the issuer to borrow from the U.S. Treasury, such as those of the Federal
National Mortgage Association; (iii) supported by the discretionary authority
of the U.S. Government to purchase the issuer's obligation, such as those of
the former Student Loan Marketing Association; or (iv) supported only by the
credit of the issuer, such as those of the Federal Farm Credit Bureau. The
U.S. Government may choose not to provide financial support to the U.S.
Government sponsored agencies or instrumentalities if it is not legally
obligated to do so, in which case, if the issuer defaulted, the fund holding
securities of such issuer might not be able to recover its investment from the
U.S. Government.
- High-Coupon U.S. Government Agency Mortgage-Backed Securities Risk--High-coupon U.S. Government agency mortgage-backed securities provide a higher coupon at the time of purchase than current prevailing market interest rates. The fund may purchase such securities at a premium. If these securities experience a faster principal prepayment rate than expected, both the market value of and income from such securities will decrease. The prices of high- coupon U.S. Government agency mortgage-backed securities fall more slowly when interest rates rise than do prices of traditional fixed-rate securities. Some of the securities purchased by the fund are not guaranteed by the U.S. Government. The issuer of a security may default or otherwise be unable to honor a financial obligation.
- Derivatives Risk--The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. Derivatives may be used to create synthetic exposure to an underlying asset or to hedge portfolio risk. If the fund uses derivatives to "hedge" a portfolio risk, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
- Leverage Risk--The use of derivatives may give rise to a form of leverage. Leverage may cause the fund's portfolio to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the fund.
- Reverse Repurchase Agreement Risk--Reverse repurchase agreements are agreements that involve the sale by the fund of securities to financial institutions such as banks and broker-dealers, with an agreement that the fund will repurchase the securities at an agreed upon price and date. Reverse repurchase agreements involve the risk that the market value of securities to be purchased by the fund may decline below the price at which the fund is obligated to repurchase the securities, or that the other party may default on its obligation, so that the fund is delayed or prevented from completing the transaction. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the fund's obligation to repurchase the securities.
- Dollar Roll Transaction Risk--In a dollar roll transaction, the fund sells a mortgage-backed security held by the fund to a financial institution such as a bank or broker-dealer, and simultaneously
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
agrees to purchase a substantially similar security (same type, coupon and maturity) from the institution at an agreed upon price and future date. Dollar roll transactions involve the risk that the market value of securities to be purchased by the fund may decline below the price at which the fund is obligated to repurchase the securities, or that the other party may default on its obligation, so that the fund is delayed or prevented from completing the transaction. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the fund's obligation to repurchase the securities.
- Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives. If a fund does trade in this way, it may incur increased costs, which can lower the actual return of the fund. Active trading may also increase short term gains and losses, which may affect taxes that must be paid.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
1997.................................................................. 8.16%
1998.................................................................. 7.73%
1999.................................................................. -1.32%
2000.................................................................. 10.12%
2001.................................................................. 6.41%
2002.................................................................. 9.59%
2003.................................................................. 1.07%
2004.................................................................. 2.56%
2005.................................................................. 1.66%
2006.................................................................. 3.55%
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During the periods shown in the bar chart, the highest quarterly return was 5.11% (quarter ended September 30, 2002) and the lowest quarterly return was -1.45% (quarter ended June 30, 2004).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------- (for the periods ended INCEPTION December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE ------------------------------------------------------------------------------- AIM V.I. Government Securities Fund 3.55% 3.64% 4.89% 05/05/93 Lehman Brothers U.S. Aggregate Bond Index(1,2) 4.33 5.06 6.24 -- Lehman Brothers U.S. Government Index(1,2,3) 3.48 4.64 6.01 -- Lehman Brothers Intermediate U.S. Government and Mortgage Index(1,2,4) 4.59 4.43 5.84 -- Lipper VUF General U.S. Government Funds Index(1,2,5) 3.21 4.37 5.65 -- Lipper Intermediate U.S. Government Funds Index(1,2,6) 3.71 4.07 5.39 -- ------------------------------------------------------------------------------- |
(1) The Lehman Brothers U.S. Aggregate Bond Index measures the performance of U.S. investment-grade fixed rate bonds with components for government and corporate securities, mortgage pass-throughs and asset-backed securities. The fund also included the Lehman Brothers U.S. Government Index, which the fund has elected as its style-specific index rather than the Lehman Brothers Intermediate U.S. Government and Mortgage Index because the fund believes the Lehman Brothers U.S. Government Index is better aligned with the Government Funds' Morningstar category classification in terms of its duration profile. In addition, the Lipper Variable Underlying Funds (VUF) General U.S. Government Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF General U.S. Government Funds Index as its peer-group index instead of the Lipper Intermediate U.S. Government Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF General U.S. Government Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The Lehman Brothers U.S. Government Index consists of securities issued by the U.S. Government including public obligations of the U.S. Treasury with a remaining maturity of one year or more or publicly issued debt of U.S. Government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. Government.
(4) The Lehman Brothers Intermediate U.S. Government and Mortgage Index includes securities in the intermediate maturity range of the U.S. Government Index that must have between 1 year and 10 years to final maturity regardless of call features and fixed-rate mortgage securities with a weighted average of at least 1 year and issued by GNMA, FHLMC, or FNMA.
(5) The Lipper VUF General U.S. Government Funds Index is an unmanaged index of the largest variable insurance underlying funds, based on total year-end net asset value, in the Lipper General U.S. Government Funds Category. These funds invest at least 65% of their assets in U.S. government and agency issues.
(6) The Lipper Intermediate U.S. Government Funds Index measures the performance of the largest funds in the Lipper Intermediate U.S. Government Category. The funds invest at least 65% of their assets in securities issued or guaranteed by the United States Government, its agencies or instrumentalities with dollar weighted average maturities of 6 to 10 years.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.46% Other Expenses 0.31 Acquired Fund Fees and Expenses(2) 0.02 Total Annual Fund Operating Expenses 0.79 Fee Waiver and/or Expense Reimbursements(3,4) 0.04 Net Annual Fund Operating Expenses 0.75 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has voluntarily agreed to waive a portion of the advisory fees payable by the fund equal to 25% of the advisory fee the advisor received from certain affiliated money markets as a result of the fund's investment of its cash balances in such affiliated money market funds. This voluntary waiver resulted in an aggregate reduction in advisory fees of 0.02% of the fund for the year ended December 31, 2006.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 0.73% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Government Securities Fund $77 $248 $435 $974 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ------------------------------------------------------------------------------------------------------ Annual Expense Ratio(1) 0.75% 0.79% 0.79% 0.79% 0.79% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 4.25% 8.64% 13.21% 17.98% 22.95% End of Year Balance $10,425.00 $10,863.89 $11,321.26 $11,797.89 $12,294.58 Estimated Annual Expenses $ 76.59 $ 84.09 $ 87.63 $ 91.32 $ 95.17 ------------------------------------------------------------------------------------------------------ SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 Annual Expense Ratio(1) 0.79% 0.79% 0.79% 0.79% 0.79% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 28.12% 33.52% 39.14% 44.99% 51.10% End of Year Balance $12,812.18 $13,351.57 $13,913.67 $14,499.44 $15,109.87 Estimated Annual Expenses $ 99.17 $ 103.35 $ 107.70 $ 112.23 $ 116.96 ------------------------------------------------------------------------------------------------------ |
(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.40% of the fund's average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Jan H. Friedli (lead manager), Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1999. As the lead manager, Mr. Friedli generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Friedli may perform these functions, and the nature of these functions, may change from time to time.
- Brendan D. Gau, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1996.
Mr. Friedli and Mr. Gau are dual employees of AIM and INVESCO Institutional (N.A.), Inc.
They are assisted by the advisor's Taxable Investment Grade Bond Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional
information about the portfolio managers' investments in the fund, a description
of their compensation structure, and information regarding other accounts they
manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions will consist primarily of ordinary income.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 11.87 $ 12.07 $ 12.23 $ 12.40 $ 11.53
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.55 0.45 0.40 0.36 0.49
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.13) (0.25) (0.09) (0.23) 0.61
=========================================================================================================================
Total from investment operations 0.42 0.20 0.31 0.13 1.10
=========================================================================================================================
Less distributions:
Dividends from net investment income (0.49) (0.40) (0.47) (0.30) (0.23)
-------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.00) --
=========================================================================================================================
Total distributions (0.49) (0.40) (0.47) (0.30) (0.23)
=========================================================================================================================
Net asset value, end of period $ 11.80 $ 11.87 $ 12.07 $ 12.23 $ 12.40
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(b) 3.55% 1.66% 2.56% 1.07% 9.59%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $907,403 $812,824 $652,226 $526,482 $428,322
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.71%(c) 0.85% 0.87% 0.76% 0.81%
-------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.77%(c) 0.88% 0.87% 0.76% 0.81%
=========================================================================================================================
Ratio of net investment income to average net assets 4.62%(c) 3.68% 3.20% 2.93% 4.01%
=========================================================================================================================
Ratio of interest expense to average net assets --% 0.11% 0.09% 0.01% 0.01%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 89% 174% 95% 265% 170%
_________________________________________________________________________________________________________________________
=========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $852,103,814.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIGOV-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. GOVERNMENT SECURITIES FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Government Securities Fund's investment objective is a high level of current income consistent with reasonable concern for safety of principal.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 2 ------------------------------------------------------ PERFORMANCE INFORMATION 4 ------------------------------------------------------ Annual Total Returns 4 Performance Table 5 FEE TABLE AND EXPENSE EXAMPLE 6 ------------------------------------------------------ Fees and Expenses of the Fund 6 Expense Example 6 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 7 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 7 ------------------------------------------------------ FUND MANAGEMENT 8 ------------------------------------------------------ The Advisor 8 Advisor Compensation 8 Portfolio Manager(s) 8 OTHER INFORMATION 9 ------------------------------------------------------ Purchase and Redemption of Shares 9 Excessive Short-Term Trading Activity Disclosures 9 Trade Activity Monitoring 9 Fair Value Pricing 10 Risks 10 Pricing of Shares 10 Taxes 11 Dividends and Distributions 11 Share Classes 11 Distribution Plan 11 Payments to Insurance Companies 11 FINANCIAL HIGHLIGHTS 13 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is a high level of current income consistent with reasonable concern for safety of principal.
The fund's investment objective may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in debt securities issued, guaranteed or otherwise backed by the U.S. Government or its agencies and instrumentalities. These securities include: (1) U.S. Treasury obligations; and (2) obligations issued or guaranteed by U.S. Government agencies and instrumentalities and supported by (a) the full faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow from the U.S. Treasury, or (c) the credit of the agency or instrumentality.
The principal type of fixed income securities purchased by the fund are callable bonds that can be redeemed by the issuer prior to their stated maturity, bullet-maturity debt bonds with a stated maturity date, mortgage-backed securities consisting of interests in underlying mortgages with maturities of up to thirty years, and Treasury and agency holdings.
The fund invests in securities of all maturities, but will maintain a weighted average effective maturity for the portfolio of between three and ten years.
The fund enters into reverse repurchase agreements and engages in dollar roll transactions to enhance the fund's return on cash. The fund may also invest in derivative instruments such as treasury futures and options on treasury futures.
The fund's investments in the types of securities described in this prospectus varies from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers use a top-down and bottom-up investment approach to construct the fund's portfolio. The top-down investment approach involves an evaluation by the portfolio managers of the overall economic environment and its potential impact on the level and direction of interest rates, and the shape of the yield curve. Based on this information, the portfolio managers develop a strategic outlook for the upcoming six to twelve months and a shorter-term tactical outlook when market opportunities arise.
The portfolio managers seek to construct a portfolio risk with risk characteristics similar to Lehman Brothers Government Index (the benchmark index). The fund seeks to limit risk through various controls, such as sector and issuer weightings and duration relative to the benchmark index. The fund uses the benchmark index as a guide in structuring the portfolio, but the fund is not an index fund. The fund typically holds a higher percentage of assets in seasoned, high-coupon, mortgage-backed securities than the benchmark index.
After the top down analysis has been completed, the portfolio managers select securities believed to be undervalued given the prevailing market environment or future developments. The security selection process includes decisions such as (1) whether to buy callable securities; (2) how many months or years of call protection (a provision that prohibits the issuer from calling back the security) the fund should have; and (3) identifying mortgage-backed securities that might exhibit faster or slower refinancing activity than other mortgage securities with the same coupon and maturity.
The portfolio managers seek to limit credit and interest rate risk by maintaining a duration of the fund's portfolio within a range around the duration of the benchmark index.
The portfolio managers will consider selling a security if they conclude (1) a change in the economic or market outlook indicates assets should be reallocated; (2) a mortgage security is prepaying faster or slower than expected; (3) a security is likely to be called and it is determined that the fund should own a security with a longer maturity date; or (4) a security has become fully valued.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A large amount of cash could negatively affect the fund's investment results in a period of rising market prices, conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the issuers whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations.
- Interest Rate Risk--Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on specific characteristics of each bond. A measure investors commonly use to determine this sensitivity is called duration. The longer the duration of a particular bond, the greater is its price sensitivity to interest rate changes. Similarly, a longer duration portfolio of securities has greater price sensitivity. Duration is determined by a number of factors including coupon rate, whether the coupon is fixed or floating, time to maturity, call or put features, and various repayment features.
- Reinvestment Risk--Reinvestment risk is the risk that a bond's cash flows (coupon income and principal repayment) will be reinvested at an interest rate below that on the original bond. If interest rates decline, the underlying bond may rise in value, but the cash flows received from that bond may have to be invested at a lower interest rate.
- U.S. Government Obligations Risk--The fund invests in obligations issued by
agencies and instrumentalities of the U.S. Government. These obligations vary
in the level of support they receive from the U.S. Government. They may be:
(i) supported by the full faith and credit of the U.S. Treasury, such as those
of the Government National Mortgage Association; (ii) supported by the right
of the issuer to borrow from the U.S. Treasury, such as those of the Federal
National Mortgage Association; (iii) supported by the discretionary authority
of the U.S. Government to purchase the issuer's obligation, such as those of
the former Student Loan Marketing Association; or (iv) supported only by the
credit of the issuer, such as those of the Federal Farm Credit Bureau. The
U.S. Government may choose not to provide financial support to the U.S.
Government sponsored agencies or instrumentalities if it is not legally
obligated to do so, in which case, if the issuer defaulted, the fund holding
securities of such issuer might not be able to recover its investment from the
U.S. Government.
- High-Coupon U.S. Government Agency Mortgage-Backed Securities Risk--High-coupon U.S. Government agency mortgage-backed securities provide a higher coupon at the time of purchase than current prevailing market interest rates. The fund may purchase such securities at a premium. If these securities experience a faster principal prepayment rate than expected, both the market value of and income from such securities will decrease. The prices of high- coupon U.S. Government agency mortgage-backed securities fall more slowly when interest rates rise than do prices of traditional fixed-rate securities. Some of the securities purchased by the fund are not guaranteed by the U.S. Government. The issuer of a security may default or otherwise be unable to honor a financial obligation.
- Derivatives Risk--The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. Derivatives may be used to create synthetic exposure to an underlying asset or to hedge portfolio risk. If the fund uses derivatives to "hedge" a portfolio risk, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
- Leverage Risk--The use of derivatives may give rise to a form of leverage. Leverage may cause the fund's portfolio to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the fund.
- Reverse Repurchase Agreement Risk--Reverse repurchase agreements are agreements that involve the sale by the fund of securities to financial institutions such as banks and broker-dealers, with an agreement that the fund will repurchase the securities at an agreed upon price and date. Reverse repurchase agreements involve the risk that the market value of securities to be purchased by the fund may decline below the price at which the fund is obligated to repurchase the securities, or that the other party may default on its obligation, so that the fund is delayed or prevented from completing the transaction. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the fund's obligation to repurchase the securities.
- Dollar Roll Transaction Risk--In a dollar roll transaction, the fund sells a mortgage-backed security held by the fund to a financial institution such as a bank or broker-dealer, and simultaneously
agrees to purchase a substantially similar security (same type, coupon and maturity) from the institution at an agreed upon price and future date. Dollar roll transactions involve the risk that the market value of securities to be purchased by the fund may decline below the price at which the fund is obligated to repurchase the securities, or that the other party may default on its obligation, so that the fund is delayed or prevented from completing the transaction. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the fund's obligation to repurchase the securities.
- Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives. If a fund does trade in this way, it may incur increased costs, which can lower the actual return of the fund. Active trading may also increase short term gains and losses, which may affect taxes that must be paid.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
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1997*.................................................................. 7.89%
1998*.................................................................. 7.46%
1999*.................................................................. -1.56%
2000*.................................................................. 9.85%
2001*.................................................................. 6.13%
2002................................................................... 9.25%
2003................................................................... 0.93%
2004................................................................... 2.27%
2005................................................................... 1.41%
2006................................................................... 3.28%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 5.04% (quarter ended September 30, 2002) and the lowest quarterly return was -1.46% (quarter ended June 30, 2004).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
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SERIES I
(for the periods ended INCEPTION
December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE
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AIM V.I. Government
Securities Fund(1) 3.28% 3.38% 4.62% 05/05/93
Lehman Brothers U.S.
Aggregate Bond Index(2,3) 4.33 5.06 6.24 --
Lehman Brothers U.S.
Government Index(2,3,4) 3.48 4.64 6.01 --
Lehman Brothers Intermediate
U.S. Government and
Mortgage Index(2,3,5) 4.59 4.43 5.84 --
Lipper VUF General U.S.
Government Funds
Index(2,3,6) 3.21 4.37 5.65 --
Lipper Intermediate U.S.
Government Funds
Index(2,3,7) 3.71 4.07 5.39 --
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(1) The returns shown for the one year and five year periods are historical performance of the fund's Series II shares. The return shown for the ten year period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is September 19, 2001.
(2) The Lehman Brothers U.S. Aggregate Bond Index measures the performance of U.S. investment-grade fixed-rate bonds with components for government and corporate securities, mortgage pass-throughs and asset-backed securities of treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The fund also included the Lehman Brothers U.S. Government Index, which the fund has elected as its style-specific index rather than the Lehman Brothers Intermediate U.S. Government and Mortgage Index because the fund believes the Lehman Brothers U.S. Government Index is better aligned with the Government Funds' Morningstar category classification in terms of its duration profile. In addition, the Lipper Variable Underlying Funds (VUF) General U.S. Government Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF General U.S. Government Funds Index as its peer-group index instead of the Lipper Intermediate U.S. Government Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF General U.S. Government Funds Index.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The Lehman Brothers U.S. Government Index consists of securities issued by the U.S. Government including public obligations of the U.S. Treasury with a remaining maturity of one year or more or publicly issued debt of U.S. Government agencies, quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S. Government.
(5) The Lehman Brothers Intermediate U.S. Government and Mortgage Index includes securities in the intermediate maturity range of the U.S. Government Index that must have between 1 year and 10 years to final maturity regardless of call features, and fixed-rate mortgage securities with a weighted average of at least 1 year and issued by GNMA, FHLMC, or FNMA.
(6) The Lipper VUF U.S. General Government Funds Index is an unmanaged index of the largest variable insurance underlying funds, based on total year-end net asset value, in the Lipper General U.S. Government Funds Category. These funds invest at least 65% of their assets in U.S. government and agency issues.
(7) The Lipper Intermediate U.S. Government Funds Index measures the performance of the largest funds in the Lipper Intermediate U.S. Government Category. The funds invest at least 65% of their assets in securities issued or guaranteed by the United States Government, its agencies or instrumentalities with dollar-weighted average maturities of 6 to 10 years.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees 0.46% Distributions and/or Service (12b-1) Fees 0.25 Other Expenses 0.31 Acquired Fund Fees and Expenses(2) 0.02 Total Annual Fund Operating Expenses 1.04 Fee Waiver and/or Expense Reimbursements(3,4) 0.04 Net Annual Fund Operating Expenses 1.00 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has voluntarily agreed to waive a portion of the advisory fees payable by the fund equal to 25% of the advisory fee the advisor receives from certain affiliated money market funds as a result of the fund's investment of its cash balances in such affiliated money market funds. This voluntary waiver resulted in an aggregate reduction in advisory fees of 0.02% of the fund for the year ended December 31, 2006.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 0.98% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Government Securities Fund $102 $327 $570 $1,267 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.00% 1.04% 1.04% 1.04% 1.04%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 4.00% 8.12% 12.40% 16.85% 21.48%
End of Year Balance $10,400.00 $10,811.84 $11,239.99 $11,685.09 $12,147.82
Estimated Annual Expenses $ 102.00 $ 110.30 $ 114.67 $ 119.21 $ 123.93
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SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
--------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.04% 1.04% 1.04% 1.04% 1.04%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 26.29% 31.29% 36.49% 41.89% 47.51%
End of Year Balance $12,628.88 $13,128.98 $13,648.89 $14,189.38 $14,751.28
Estimated Annual Expenses $ 128.84 $ 133.94 $ 139.24 $ 144.76 $ 150.49
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(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.40% of the average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Jan H. Friedli (lead manager), Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1999. As the lead manager, Mr. Friedli generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Mr. Friedli may perform these functions, and the nature of these functions, may change from time to time.
- Brendan D. Gau, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1996.
Mr. Friedli and Mr. Gau are dual employees of AIM and INVESCO Institutional (N.A.), Inc.
They are assisted by the advisor's Taxable Investment Grade Bond Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. The fund expects that its distributions will consist primarily of ordinary income.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates, (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they makes these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typi-
cally on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the funds's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2006 2005 2004 2003 2002
-------- ------- ------- ------- -------
Net asset value, beginning of period $ 11.81 $ 12.01 $ 12.17 $ 12.35 $ 11.52
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.52 0.41 0.36 0.33 0.46
-----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.13) (0.24) (0.08) (0.22) 0.60
=======================================================================================================================
Total from investment operations 0.39 0.17 0.28 0.11 1.06
=======================================================================================================================
Less distributions:
Dividends from net investment income (0.46) (0.37) (0.44) (0.29) (0.23)
-----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- -- -- (0.00) --
=======================================================================================================================
Total distributions (0.46) (0.37) (0.44) (0.29) (0.23)
=======================================================================================================================
Net asset value, end of period $ 11.74 $ 11.81 $ 12.01 $ 12.17 $ 12.35
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 3.28% 1.41% 2.27% 0.93% 9.25%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 16,218 $18,863 $17,728 $22,325 $14,926
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.96%(c) 1.10% 1.12% 1.01% 1.06%
-----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.02%(c) 1.13% 1.12% 1.01% 1.06%
=======================================================================================================================
Ratio of net investment income to average net assets 4.37%(c) 3.43% 2.95% 2.68% 3.76%
=======================================================================================================================
Ratio of interest expense to average net assets --% 0.11% 0.09% 0.01% 0.01%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 89% 174% 95% 265% 170%
_______________________________________________________________________________________________________________________
=======================================================================================================================
|
(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $17,344,206.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIGOV-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. HIGH YIELD FUND
PROSPECTUS
MAY 1, 2007
|
Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. High Yield Fund's investment objective is a high level of current income.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is a high level of current income.
The fund's investment objective may be changed by the Board of Trustees (the Board) of Trustees without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in debt securities that are determined to be below investment grade quality because they are rated BB/Ba or lower by Standard & Poor's Ratings Services, Moody's Investors Service, Inc., or any other nationally recognized statistical rating organization (NRSRO), or are determined by the portfolio managers to be of comparable quality to such rated securities. These types of securities are commonly known as "junk bonds."
The fund will principally invest in junk bonds rated B or above by an NRSRO or deemed to be of comparable quality by the portfolio managers.
The fund may invest up to 25% of its total assets in foreign securities. The fund may invest up to 15% of its total assets in securities of companies located in developing countries. The fund may also invest in securities, whether or not considered foreign securities, which carry foreign credit exposure.
The fund's investments in the types of securities described in this prospectus varies from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting securities for the fund's portfolio, the portfolio managers focus on junk bonds that they believe have favorable prospects for high current income and the possibility of growth of capital. The portfolio managers conduct a bottom-up fundamental analysis of a company before its securities are purchased by the fund. The fundamental analysis involves an evaluation by a team of credit analysts of a company's financial statements in order to assess a company's financial condition. The credit analysts also assess the ability of a company to reduce its leverage (i.e. the amount of borrowed debt).
The bottom-up fundamental analysis is supplemented by (i) an ongoing review of the securities' relative value compared with other junk bonds, and (ii) a top-down analysis of sector and macro-economic trends, such as changes in interest rates.
The portfolio managers attempt to control the fund's risk by (i) limiting the portfolio's assets that are invested in any one security, and (ii) diversifying the portfolio's holdings over a number of different industries. Although the fund is actively managed, it is reviewed regularly against its benchmark index (the Lehman Brothers High Yield Bond Index) and its peer-group index (the Lipper High Current Yield Bond Funds Index) to assess the portfolio's relative risk and its positioning.
The portfolio managers will consider selling a security if (1) there appears to be deterioration in a security's risk profile, or (2) they determine that other securities offer better value.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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, which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations.
Interest Rate Risk--Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on specific characteristics of each bond. A measure investors commonly use to determine this sensitivity is called duration. The longer the duration of a particular bond, the greater is its price sensitivity to interest rate changes. Similarly, a longer duration portfolio of securities has greater price sensitivity. Duration is determined by a number of
factors including coupon rate, whether the coupon is fixed or floating, time to maturity, call or put features, and various repayment features.
Credit Risk--Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. Such a deterioration of financial health may result in a reduction of the credit rating of the issuer's securities and may lead to the issuer's inability to honor its contractual obligations including making timely payment of interest and principal. Credit ratings are a measure of credit quality. Although a downgrade or upgrade of a bond's credit ratings may or may not affect its price, a decline in credit quality may make bonds less attractive, thereby driving up the yield on the bond and driving down the price. Declines in credit quality may result in bankruptcy for the issuer and permanent loss of investment.
High Yield Bond Risk--High yield risk is a form of credit risk. High yield bonds or "junk bonds" are bonds rated below investment grade or deemed to be of comparable quality. They are considered to be speculative investments with greater risk of failure to make timely payment of interest and principal (to default on their contractual obligations) than their investment grade counterparts. High yield bonds may exhibit increased price sensitivity and reduced liquidity generally and particularly during times of economic downturn or volatility in the capital markets.
Reinvestment Risk--Reinvestment risk is the risk that a bond's cash flows (coupon income and principal repayment) will be reinvested at an interest rate below that on the original bond. If interest rates decline, the underlying bond may rise in value, but the cash flows received from that bond may have to be invested at a lower interest rate.
Foreign Securities Risk--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.
Developing Markets Securities Risk--The risk associated with investments in foreign securities may affect the value of securities issued by foreign companies located in developing countries more than those in countries with more mature economies. For example, many developing countries, in the past, have experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, causing the value of investments in companies located in the countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures.
Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives. If a fund does trade in this way, it may incur increased costs, which can lower the actual return of the fund. Active trading may also increase short term gains and losses, which may affect taxes that must be paid.
Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
1999................................................................... 10.52%
2000................................................................... -19.01%
2001................................................................... -5.00%
2002................................................................... -5.84%
2003................................................................... 28.04%
2004................................................................... 11.25%
2005................................................................... 2.72%
2006................................................................... 10.74%
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During the period shown in the bar chart, the highest quarterly return was 9.64% (quarter ended June 30, 2003) and the lowest quarterly return was -14.05% (quarter ended December 31, 2000).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ----------------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE ----------------------------------------------------------------------------------------- AIM V.I. High Yield Fund 10.74% 8.81% 2.11% 05/01/98 Lehman Brothers U.S. Aggregate Bond Index(1,2) 4.33 5.06 5.84(3) 04/30/98(3) Lehman Brothers High Yield Index(1,2,4) 11.85 10.18 5.71(3) 04/30/98(3) Lipper VUF High Current Yield Bond Funds Category Average(1,2,5) 9.92 8.91 4.14(3) 04/30/98(3) Lipper High Current Yield Bond Funds Index(1,2,6) 10.17 9.08 3.78(3) 04/30/98(3) ----------------------------------------------------------------------------------------- |
(1) The Lehman Brothers U.S. Aggregate Bond Index measures the performance of U.S. investment-grade fixed-rate bonds with components for government and corporate securities, mortgage pass-throughs and asset-backed securities. The fund has also included the Lehman Brothers High Yield Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) High Current Yield Bond Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF High Current Yield Bond Funds Category Average as its peer-group instead of the Lipper High Current Yield Bond Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF High Current Yield Bond Funds Category Average.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month-end closest to the
inception date of the fund's Series I shares.
(4) The Lehman Brothers High Yield Index covers the universe of fixed-rate, non-investment grade. Pay-in-kind bonds, Eurobonds and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging countries are included.
(5) The Lipper VUF High Current Yield Bond Funds Category Average represents the average of all the variable insurance underlying High Current Yield Bond Funds tracked by Lipper Inc.
(6) The Lipper High Current Yield Bond Funds Index is an equally weighted representation of the largest funds within the Lipper High Current Yield Funds Bond Category. The funds have no credit rating restriction, but tend to invest in fixed-income securities with lower credit ratings.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.63% Other Expenses 0.55 Acquired Fund Fees and Expenses(2) 0.01 Total Annual Fund Operating Expenses 1.19 Fee Waiver and/or Expense Reimbursements(3) 0.22 Net Annual Fund Operating Expenses() 0.97 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year
ended December 31, 2006 and are expressed as a percentage of the fund's
average daily net assets. There is no guarantee that actual expenses will
be the same as those shown in the table.
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(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 0.95% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees, and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. High Yield Fund $99 $356 $633 $1,424 ------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 0.97% 1.19% 1.19% 1.19% 1.19%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 4.03% 7.99% 12.11% 16.38% 20.81%
End of Year Balance $10,403.00 $10,799.35 $11,210.81 $11,637.94 $12,081.35
Estimated Annual Expenses $ 98.95 $ 126.15 $ 130.96 $ 135.95 $ 141.13
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SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.19% 1.19% 1.19% 1.19% 1.19%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.42% 30.19% 35.16% 40.30% 45.65%
End of Year Balance $12,541.65 $13,019.48 $13,515.53 $14,030.47 $14,565.03
Estimated Annual Expenses $ 146.51 $ 152.09 $ 157.88 $ 163.90 $ 170.14
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006 the advisor received compensation of 0.41% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Peter Ehret (co-lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2001 and has been associated with the advisor and/or its affiliates since 2001.
- Carolyn L. Gibbs (co-lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1992.
- Darren S. Hughes, Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1992.
Mr. Ehret, Ms Gibbs and Mr. Hughes are dual employees of AIM and INVESCO Institutional (N.A.), Inc.
The lead manages generally have final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which the lead manages may perform these functions, and the nature of these functions, many change from time to time.
They are assisted by the advisor's Taxable High Yield Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their contract owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by contract owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions will consist primarily of ordinary income.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates makes these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period $ 6.03 $ 6.45 $ 5.97 $ 5.00 $ 5.31
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.45 0.43 0.42 0.49 0.51
--------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.19 (0.26) 0.23 0.91 (0.82)
====================================================================================================================
Increase from payments by affiliates -- -- 0.02 -- --
====================================================================================================================
Total from investment operations 0.64 0.17 0.67 1.40 (0.31)
====================================================================================================================
Less dividends from net investment income (0.55) (0.59) (0.19) (0.43) --
====================================================================================================================
Net asset value, end of period $ 6.12 $ 6.03 $ 6.45 $ 5.97 $ 5.00
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b) 10.74% 2.72% 11.25%(c) 28.04% (5.84)%
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $58,336 $54,731 $96,602 $37,267 $24,984
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.96%(d) 1.01% 1.04% 1.20% 1.30%
--------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.18%(d) 1.16% 1.04% 1.20% 1.30%
====================================================================================================================
Ratio of net investment income to average net assets 7.22%(d) 6.58% 6.79% 8.54% 10.20%
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate 135% 69% 131% 101% 74%
____________________________________________________________________________________________________________________
====================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Total return is after reimbursement the advisor has agreed to pay for an economic loss due to a trading error. Total return before reimbursement by the advisor was 10.90%
(d) Ratios are based on average daily net assets of $52,921,198.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIM V.I. High Yield Fund Series I
SEC 1940 Act file number: 811-07452
AIMinvestments.com VIHYI-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. HIGH YIELD FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. High Yield Fund's investment objective is a high level of current income.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is a high level of current income.
The fund's investment objective may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in debt securities that are determined to be below investment grade quality because they are rated BB/Ba or lower by Standard & Poor's Ratings Services, Moody's Investors Service, Inc., or any other nationally recognized statistical rating organization (NRSRO), or are determined by the portfolio managers to be of comparable quality to such rated securities. These types of securities are commonly known as "junk bonds."
The fund will principally invest in junk bonds rated B or above by an NRSRO or deemed to be of comparable quality by the portfolio managers.
The fund may invest up to 25% of its total assets in foreign securities. The fund may invest up to 15% of its total assets in securities of companies located developing countries. The fund may also invest in securities, whether or not considered foreign securities, which carry foreign credit exposure.
The fund's investments in the types of securities described in this prospectus varies from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting securities for the fund's portfolio, the portfolio managers focus on junk bonds that they believe have favorable prospects for high current income and the possibility of growth of capital. The portfolio managers conduct a bottom-up fundamental analysis of a company before its securities are purchased by the fund. The fundamental analysis involves an evaluation by a team of credit analysts of a company's financial statements in order to assess a company's financial condition. The credit analysts also assess the ability of a company to reduce its leverage (i.e. the amount of borrowed debt).
The bottom-up fundamental analysis is supplemented by (i) an ongoing review of the securities' relative value compared with other junk bonds, and (ii) a top-down analysis of sector and macro-economic trends, such as changes in interest rates.
The portfolio managers attempt to control the fund's risk by (i) limiting the portfolio's assets that are invested in any one security, and (ii) diversifying the portfolio's holdings over a number of different industries. Although the fund is actively managed, it is reviewed regularly against its benchmark index (the Lehman Brothers High Yield Bond Index) and its peer-group index (the Lipper High Current Yield Bond Funds Index) to assess the portfolio's relative risk and its positioning.
The portfolio managers will consider selling a security if (1) there appears to be deterioration in a security's risk profile, or (2) they determine that other securities offer better value.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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, which can lower the actual return on your investment. Active trading may also increase short-term gains and losses, which may affect the taxes you have to pay.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations.
Interest Rate Risk--Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on specific characteristics of each bond. A measure investors commonly use to determine this sensitivity is called duration. The longer the duration
AIM V.I. HIGH YIELD FUND
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
of a particular bond, the greater is its price sensitivity to interest rate changes. Similarly, a longer duration portfolio of securities has greater price sensitivity. Duration is determined by a number of factors including coupon rate, whether the coupon is fixed or floating, time to maturity, call or put features, and various repayment features.
Credit Risk--Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. Such a deterioration of financial health may result in a reduction of the credit rating of the issuer's securities and may lead to the issuer's inability to honor its contractual obligations including making timely payment of interest and principal. Credit ratings are a measure of credit quality. Although a downgrade or upgrade of a bond's credit ratings may or may not affect its price, a decline in credit quality may make bonds less attractive, thereby driving up the yield on the bond and driving down the price. Declines in credit quality may result in bankruptcy for the issuer and permanent loss of investment.
High Yield Bond Risk--High yield risk is a form of credit risk. High yield bonds or "junk bonds" are bonds rated below investment grade or deemed to be of comparable quality. They are considered to be speculative investments with greater risk of failure to make timely payment of interest and principal (to default on their contractual obligations) than their investment grade counterparts. High yield bonds may exhibit increased price sensitivity and reduced liquidity generally and particularly during times of economic downturn or volatility in the capital markets.
Reinvestment Risk--Reinvestment risk is the risk that a bond's cash flows (coupon income and principal repayment) will be reinvested at an interest rate below that on the original bond. If interest rates decline, the underlying bond may rise in value, but the cash flows received from that bond may have to be invested at a lower interest rate.
Foreign Securities Risk--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.
Developing Markets Securities Risk--The risk associated with investments in foreign securities may affect the value of securities issued by foreign companies located in developing countries more than those in countries with more mature economies. For example, many developing countries, in the past, have experienced high rates of inflation or sharply devalued their currencies against the U.S. dollar, causing the value of investments in companies located in those countries to decline. Transaction costs are higher in developing countries and there may be delays in settlement procedures.
Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objectives. If a fund does trade in this way, it may incur increased costs, which can lower the actual return of the fund. Active trading may also increase short term gains and losses, which may affect taxes that must be paid.
Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
AIM V.I. HIGH YIELD FUND
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- ---------
1999*................................................................ 10.25%
2000*................................................................ -19.21%
2001*................................................................ -5.23%%
2002*................................................................ -6.08%
2003................................................................. 27.89%
2004................................................................. 11.14%
2005................................................................. 2.43%
2006................................................................. 10.41%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the period shown in the bar chart, the highest quarterly return was 9.66% (quarter ended June 30, 2003) and the lowest quarterly return was -14.11% (quarter ended December 31, 2000).
AIM V.I. HIGH YIELD FUND
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
------------------------------------------------------------------------------------------
SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund(1) 10.41% 8.59% 1.88% 05/01/98
Lehman Brothers U.S. Aggregate Bond
Index(2,3) 4.33 5.06 5.84(4) 04/30/98(4)
Lehman Brothers High Yield Index(2,3,5) 11.85 10.18 5.71(4) 04/30/98(4)
Lipper VUF High Current Yield Bond Funds
Category Average(2,3,6) 9.92 8.91 4.14(4) 04/30/98(4)
Lipper High Current Yield Bond Funds
Index(2,3,7) 10.17 9.08 3.78(4) 04/30/98(4)
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(1) The return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is March 26, 2002.
(2) The Lehman Brothers U.S. Aggregate Bond Index measures the performance of U.S. investment-grade fixed-rate bonds with components for government and corporate securities, mortgage pass-throughs and asset-backed securities. The fund has also included the Lehman Brothers High Yield Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) High Current Yield Bond Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF High Current Yield Bond Funds Category Average as its peer-group instead of the Lipper High Current Yield Bond Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF High Current Yield Bond Funds Category Average.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The average annual total return given is since the month-end closest to the
inception date of the fund's Series I shares.
(5) The Lehman Brothers High Yield Index covers the universe of fixed-rate, non-investment grade debt. Pay-in-kind bonds, Eurobonds and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-emerging countries are included.
(6) The Lipper VUF High Current Yield Bond Funds Category Average represents the average of all the variable insurance underlying High Current Yield Bond funds tracked by Lipper Inc.
(7) The Lipper High Current Yield Bond Funds Index is an equally weighted representation of the largest funds within the Lipper High Current Yield Funds Bond Category. The funds have no credit rating restriction, but tend to invest in fixed-income securities with lower credit ratings.
AIM V.I. HIGH YIELD FUND
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable contract product buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES ------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES ------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A ------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) ------------------------------------------------------------------------------- (expenses that are deducted SERIES II from Series II share assets) SHARES ------------------------------------------------------------------------------- Management Fees 0.63% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.55 Acquired Fund Fees and Expenses(2) 0.01 Total Annual Fund Operating Expenses 1.44 Fee Waiver and/or Expense Reimbursements(3) 0.22 Net Annual Fund Operating Expenses 1.22 ------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.20% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees, and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. High Yield Fund $124 $434 $766 $1,705 -------------------------------------------------------------------------------- |
AIM V.I. HIGH YIELD FUND
- You invest $10,000 in the fund and hold it for the entire 10 year period
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ----------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.22% 1.44% 1.44% 1.44% 1.44% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.78% 7.47% 11.30% 15.26% 19.37% End of Year Balance $10,378.00 $10,747.46 $11,130.07 $11,526.30 $11,936.63 Estimated Annual Expenses $ 124.31 $ 152.10 $ 157.52 $ 163.13 $ 168.93 ----------------------------------------------------------------------------------------------- SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ----------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.44% 1.44% 1.44% 1.44% 1.44% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 23.62% 28.02% 32.57% 37.29% 42.18% End of Year Balance $12,361.58 $12,801.65 $13,257.39 $13,729.35 $14,218.12 Estimated Annual Expenses $ 174.95 $ 181.18 $ 187.63 $ 194.30 $ 201.22 ----------------------------------------------------------------------------------------------- |
(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
AIM V.I. HIGH YIELD FUND
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment
advisor and is responsible for its day-to-day management. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical
and financial information to formulate and implement investment programs for the
fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006 the advisor received compensation of 0.41% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the
day-to-day management of the fund's portfolios:
- Peter Ehret (co-lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2001 and has been associated with the advisor and/or its affiliates since 2001.
- Carolyn L. Gibbs (co-lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1992.
- Darren S. Hughes, Portfolio Manager, who has been responsible for the fund since 2005 and has been associated with the advisor and/or its affiliates since 1992.
Mr. Ehret, Ms. Gibbs and Mr. Hughes are dual employees of AIM and INVESCO Institutional (N.A.), Inc.
The lead managers generally have final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which the lead managers may perform these functions, and the nature of these functions, may change from time to time.
They are assisted by the advisor's Taxable High Yield Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of Trustees of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset
value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions will consist primarily of ordinary income.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending
typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
------------------------------------------------------------
MARCH 26, 2002
YEAR ENDED DECEMBER 31, (DATE SALES
--------------------------------------- COMMENCED) TO
2006 2005 2004 2003 DECEMBER 31,
------ ------ ------ ------ 2002
Net asset value, beginning of period $ 6.00 $ 6.43 $ 5.95 $ 4.99 $ 5.27
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.43 0.41 0.41 0.49 0.38
--------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 0.19 (0.26) 0.24 0.90 (0.66)
==========================================================================================================================
Increase from payments by affiliates -- -- 0.01 -- --
==========================================================================================================================
Total from investment operations 0.62 0.15 0.66 1.39 (0.28)
==========================================================================================================================
Less dividends from net investment income (0.53) (0.58) (0.18) (0.43) --
==========================================================================================================================
Net asset value, end of period $ 6.09 $ 6.00 $ 6.43 $ 5.95 $ 4.99
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(b) 10.41% 2.43% 11.14%(c) 27.89% (5.31)%
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 919 $1,556 $1,072 $1,251 $ 142
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.21%(d) 1.22% 1.24% 1.45% 1.45%(e)
--------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.43%(d) 1.41% 1.29% 1.45% 1.55%(e)
==========================================================================================================================
Ratio of net investment income to average net assets 6.97%(d) 6.37% 6.59% 8.29% 10.05%(e)
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(f) 135% 69% 131% 101% 74%
__________________________________________________________________________________________________________________________
==========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Total return is after reimbursement the advisor has agreed to pay for an economic loss due to a trading error. Total return before reimbursement by the advisor was 10.96%
(d) Ratios are based on average daily net assets of $1,052,399.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIHYI-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. INTERNATIONAL GROWTH FUND
PROSPECTUS
MAY 1, 2007
|
Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. International Growth Fund's investment objective is long- term 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing in a diversified portfolio of international equity securities whose issuers are considered by the fund's portfolio managers to have strong earnings momentum. The fund focuses its investments in marketable equity securities of foreign companies that are listed on a recognized foreign or U.S. securities exchange or traded in a foreign or U.S. over-the-counter market. The fund will normally invest in the securities of companies located in at least four countries outside of the U.S., emphasizing investment in companies in the developed countries of Western Europe and the Pacific Basin.
At the present time, the fund's portfolio managers intend to invest no more than 20% of the fund's total assets in companies located in developing countries, i.e., those that are in the initial stages of their industrial cycles.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers employ a disciplined investment strategy that emphasizes fundamental research, supported by quantitative analysis and portfolio construction techniques. The strategy primarily focuses on identifying quality companies that have experienced, or exhibit the potential for, accelerating or above average earnings growth but whose prices do not fully reflect these attributes. Investments for the portfolio are selected "bottom-up" on a stock-by-stock basis. The focus is on the strengths of individual companies, rather than sector or country trends. The fund's portfolio managers may consider selling a security for several reasons, including (1) its fundamentals deteriorate or it posts disappointing earnings, (2) its stock price appears to be overvalued, or (3) a more attractive opportunity is identified.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect a fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of a fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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 investment 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 devalued 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.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
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1997.................................................................. 6.94%
1998.................................................................. 15.49%
1999.................................................................. 55.04%
2000.................................................................. -26.40%
2001.................................................................. -23.53%
2002.................................................................. -15.67%
2003.................................................................. 29.06%
2004.................................................................. 24.00%
2005.................................................................. 17.93%
2006.................................................................. 28.23%
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During the periods shown in the bar chart, the highest quarterly return was 41.88% (quarter ended December 31, 1999) and the lowest quarterly return was -19.80% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ----------------------------------------------------------------------------- (for the periods ended INCEPTION December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE ----------------------------------------------------------------------------- AIM V.I. International Growth Fund 28.23% 15.34% 8.20% 05/05/93 MSCI EAFE Index--Registered Trademark--(1,2) 26.34 14.98 7.71 -- MSCI EAFE Growth Index--Registered Trademark--(1,2,3) 22.33 12.27 5.07 -- Lipper VUF International Growth Funds Index(1,2,4) 25.90 12.43 7.92 -- Lipper International Multi-Cap Growth Funds Index(1,2,5) 25.50 13.90 8.73 -- ----------------------------------------------------------------------------- |
(1) The Morgan Stanley Capital International--Registered Trademark-- Europe, Australasia and Far East Index is recognized as the pre-eminent benchmark in the U.S. to measure international equity performance. It includes securities from 21 developed market countries, representing the developed markets outside North America: Europe, Australasia, and the Far East. The fund has also included the Morgan Stanley Capital International--Registered Trademark-- Europe, Australasia and Far East Growth Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) International Growth Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF International Growth Funds Index as its peer-group instead of the Lipper International Multi-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF International Growth Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The MSCI EAFE Growth Index is recognized as the pre-eminent benchmark in the U.S. to measure international "growth" equity performance (high price over book value securities). It includes securities from 21 countries, representing the developed markets outside North America, Europe, Australasia, and the Far East.
(4) The Lipper VUF International Growth Funds Index is an equally weighted representation of the largest variable insurance underlying international growth funds tracked by Lipper Inc.
(5) The Lipper International Multi-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper International Multi-Cap Growth Category. These funds invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. International Multi-cap funds typically have 25% to 75% of their assets invested in companies strictly outside of the U.S. with market capitalizations (on a three-year weighted basis) greater than the 250th-largest company in the S&P/Citigroup World ex-U.S. Broad Market Index. International Multi-cap growth funds typically have an above-average price-to-cash flow ratio, price-to-book ratio, and three-year sales-per-share growth value compared to the S&P/Citigroup World ex-U.S. BMI. The S&P/Citigroup World ex-U.S. Broad Market Index measures all of each country's available capital in stocks with capitalizations greater than $75 million (US) and represents the broad stock universe of all countries, excluding the United States.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.72% Other Expenses 0.38 Acquired Fund Fees and Expenses(2) 0.01 Total Annual Fund Operating Expenses(3) 1.11 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. International Growth Fund $113 $353 $612 $1,352 ------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.11% 1.11% 1.11% 1.11% 1.11%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.89% 7.93% 12.13% 16.49% 21.02%
End of Year Balance $10,389.00 $10,793.13 $11,212.98 $11,649.17 $12,102.32
Estimated Annual Expenses $ 113.16 $ 117.56 $ 122.13 $ 126.88 $ 131.82
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SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.11% 1.11% 1.11% 1.11% 1.11%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.73% 30.62% 35.70% 40.98% 46.47%
End of Year Balance $12,573.10 $13,062.20 $13,570.32 $14,098.20 $14,646.62
Estimated Annual Expenses $ 136.95 $ 142.28 $ 147.81 $ 153.56 $ 159.53
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.72% of the fund's average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Clas G. Olsson (lead manager with respect to the fund's investments in Europe and Canada), Senior Portfolio Manager, who has been responsible for the fund since 1997 and has been associated with the advisor and/or its affiliates since 1994.
- Barrett K. Sides (lead manager with respect to the fund's investments in Asia Pacific and Latin America), Senior Portfolio Manager, who has been responsible for the fund since 1995 and has been associated with the advisor and/or its affiliates since 1990.
- Shuxin Cao, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1997.
- Matthew W. Dennis, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 2000.
- Jason T. Holzer, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1996.
The lead managers generally have final authority over all aspects of their portions of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which the lead managers may perform these functions, and the nature of these functions, may change from time to time.
The lead managers are assisted by the advisor's Asia Pacific/Latin America and Europe/Canada Teams, which are comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to
the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the teams may change from time to time. More information on these portfolio manager(s) and the teams, including biographies of members of the teams, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely
if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will
be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over
other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of its 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
-------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 23.17 $ 19.77 $ 16.04 $ 12.49 $ 14.91
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.23 0.23 0.15 0.09 0.06
---------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 6.32 3.31 3.70 3.54 (2.40)
===========================================================================================================================
Total from investment operations 6.55 3.54 3.85 3.63 (2.34)
===========================================================================================================================
Less dividends from net investment income (0.28) (0.14) (0.12) (0.08) (0.08)
===========================================================================================================================
Net asset value, end of period $ 29.44 $ 23.17 $ 19.77 $ 16.04 $ 12.49
___________________________________________________________________________________________________________________________
===========================================================================================================================
Total return(b) 28.28% 17.93% 24.00% 29.06% (15.67)%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $563,460 $444,608 $346,605 $290,680 $247,580
___________________________________________________________________________________________________________________________
===========================================================================================================================
Ratio of expenses to average net assets 1.10%(c) 1.11% 1.14% 1.10% 1.09%
===========================================================================================================================
Ratio of net investment income to average net assets 0.90%(c) 1.11% 0.90% 0.69% 0.41%
___________________________________________________________________________________________________________________________
===========================================================================================================================
Portfolio turnover rate 34% 36% 48% 79% 71%
___________________________________________________________________________________________________________________________
===========================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $497,824,497.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI financial, reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIIGR-PRO-1
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. INTERNATIONAL GROWTH FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. International Growth Fund's investment objective is long- term growth of capital.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Distribution Plan 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing in a diversified portfolio of international equity securities whose issuers are considered by the fund's portfolio managers to have strong earnings momentum. The fund focuses its investments in marketable equity securities of foreign companies that are listed on a recognized foreign or U.S. securities exchange or traded in a foreign or U.S. over-the-counter market. The fund will normally invest in the securities of companies located in at least four countries outside of the U.S., emphasizing investment in companies in the developed countries of Western Europe and the Pacific Basin.
At the present time, the fund's portfolio managers intend to invest no more than 20% of the fund's total assets in companies located in developing countries, i.e., those that are in the initial stages of their industrial cycles.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio managers employ a disciplined investment strategy that emphasizes fundamental research, supported by quantitative analysis and portfolio construction techniques. The strategy primarily focuses on identifying quality companies that have experienced, or exhibit the potential for, accelerating or above average earnings growth but whose prices do not fully reflect these attributes. Investments for the portfolio are selected "bottom-up" on a stock-by-stock basis. The focus is on the strengths of individual companies, rather than sector or country trends. The fund's portfolio managers may consider selling a security for several reasons, including (1) its fundamentals deteriorate or it posts disappointing earnings, (2) its stock price appears to be overvalued, or (3) a more attractive opportunity is identified.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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 investment 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 devalued 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.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1997*.................................................................. 6.67%
1998*.................................................................. 15.20%
1999*.................................................................. 54.67%
2000*.................................................................. -26.59%
2001*.................................................................. -23.72%
2002................................................................... -15.89%
2003................................................................... 28.60%
2004................................................................... 23.70%
2005................................................................... 17.70%
2006................................................................... 27.88%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 41.80% (quarter ended December 31, 1999) and the lowest quarterly return was -19.89% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
-----------------------------------------------------------------------------
SERIES I
(for the periods ended INCEPTION
December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE
-----------------------------------------------------------------------------
AIM V.I. International
Growth Fund(1) 27.88% 15.03 % 7.92 % 05/05/93
MSCI EAFE--Registered
Trademark-- Index(2,3) 26.34 14.98 7.71 --
MSCI EAFE--Registered
Trademark-- Growth
Index(2,3,4) 22.33 12.27 5.07 --
Lipper VUF International
Growth Funds Index(2,3,5) 25.90 12.43 7.92 --
Lipper International
Multi-Cap Growth Funds
Index(2,3,6) 25.50 13.90 8.73 --
-----------------------------------------------------------------------------
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(1) The returns shown for the one year and five year periods are the historical performance of the fund's Series II shares. The return shown for the ten year period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is September 19, 2001.
(2) The Morgan Stanley Capital International--Registered Trademark-- Europe, Australasia and Far East Index is recognized as the pre-eminent benchmark in the U.S. to measure international equity performance. It includes securities from 21 developed market countries, representing the developed markets outside North America: Europe, Australasia, and the Far East. The fund has also included the Morgan Stanley Capital International--Registered Trademark-- Europe, Australasia and Far East Growth Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) International Growth Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF International Growth Funds Index as its peer-group instead of the Lipper International Multi-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF International Growth Funds Index.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The Morgan Stanley Capital International--Registered Trademark-- Europe, Australasia and Far East Growth Index is recognized as the pre-eminent benchmark in the U.S. to measure international "growth" equity performance (high price over book value securities). It includes securities from 21 countries, representing the developed markets outside North America, Europe, Australasia, and the Far East.
(5) The Lipper VUF International Growth Funds Index is an equally weighted representation of the largest variable insurance underlying international growth funds tracked by Lipper Inc.
(6) The Lipper International Multi-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper International Multi-Cap Growth Category. These funds invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. International Multi-cap funds typically have 25% to 75% of their assets invested in companies strictly outside the U.S. with market capitalizations (on a three-year weighted basis) greater than the 250th-largest company in the S&P/Citigroup World ex-U.S. Broad Market Index. International Multi-cap growth funds typically have an above-average price-to-cash flow ratio, price-to-book ratio, and three-year sales-per-share growth value compared to the S&P/Citigroup World ex-U.S. BMI. The S&P/Citigroup World ex-U.S. Broad Market Index measures all of each country's available capital in stocks with capitalizations greater than $75 million (US) and represents the broad stock universe of all countries, excluding the United States.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES ------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES ------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A ------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) ------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES ------------------------------------------------------------------------------- Management Fees 0.72% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.38 Acquired Fund Fees and Expenses(2) 0.01 Total Annual Fund Operating Expenses(3) 1.36 ------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. International Growth Fund $138 $431 $745 $1,635 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.36% 1.36% 1.36% 1.36% 1.36%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.64% 7.41% 11.32% 15.37% 19.57%
End of Year Balance $10,364.00 $10,741.25 $11,132.23 $11,537.44 $11,957.41
Estimated Annual Expenses $ 138.48 $ 143.52 $ 148.74 $ 154.15 $ 159.76
-----------------------------------------------------------------------------------------------
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
Annual Expense Ratio(1) 1.36% 1.36% 1.36% 1.36% 1.36%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 23.93% 28.44% 33.11% 37.96% 42.98%
End of Year Balance $12,392.66 $12,843.75 $13,311.26 $13,795.79 $14,297.96
Estimated Annual Expenses $ 165.58 $ 171.61 $ 177.85 $ 184.33 $ 191.04
-----------------------------------------------------------------------------------------------
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.72% of average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Clas G. Olsson (lead manager with respect to the fund's investments in Europe and Canada), Senior Portfolio Manager, who has been responsible for the fund since 1997 and has been associated with the advisor and/or its affiliates since 1994.
- Barrett K. Sides (lead manager with respect to the fund's investments in Asia Pacific and Latin America), Senior Portfolio Manager, who has been responsible for the fund since 1995 and has been associated with the advisor and/or its affiliates since 1990.
- Shuxin Cao, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1997.
- Matthew W. Dennis, Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 2000.
- Jason T. Holzer, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1996.
The lead managers generally have final authority over all aspects of their portions of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which the lead managers may perform these functions, and the nature of these functions, may change from time to time.
The portfolio managers are assisted by the advisor's Asia Pacific/Latin America and Europe/Canada Teams, which are comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management
responsibilities with respect to the fund's portfolio. Members of the teams may change from time to time. More information on these portfolio manager(s) and the teams, including biographies of members of the teams, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that
the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price
of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
2006 2005 2004 2003 2002
---------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.00 $ 19.65 $ 15.97 $ 12.45 $ 14.90
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income(a) 0.17 0.18 0.11 0.06 0.03
---------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 6.25 3.30 3.66 3.51 (2.40)
=====================================================================================================================
Total from investment operations 6.42 3.48 3.77 3.57 (2.37)
=====================================================================================================================
Less dividends from net investment income (0.26) (0.13) (0.09) (0.05) (0.08)
=====================================================================================================================
Net asset value, end of period $ 29.16 $ 23.00 $ 19.65 $ 15.97 $ 12.45
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(b) 27.92% 17.70% 23.63% 28.68% (15.89)%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $163,657 $54,658 $21,497 $10,972 $ 4,751
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets 1.35%(c) 1.36% 1.39% 1.35% 1.31%(d)
=====================================================================================================================
Ratio of net investment income to average net assets 0.65%(c) 0.86% 0.65% 0.44% 0.19%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Portfolio turnover rate 34% 36% 48% 79% 71%
_____________________________________________________________________________________________________________________
=====================================================================================================================
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(a)Calculated using average shares outstanding.
(b)Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c)Ratios are based on average daily net assets of $94,482,108.
(d)After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.34% for the year ended December 31, 2002.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIIGR-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. LARGE CAP GROWTH FUND
PROSPECTUS
MAY 1, 2007
|
Series I shares
Shares of the fund are currently offered only to insurance company separate accounts, funding variable annuity contracts and variable life insurance policies. AIM V.I. Large Cap Growth Fund's investment objective is long-term 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of large-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a large-capitalization company if it has a market capitalization, at the time of purchase, no smaller than the smallest capitalized company included in the Russell 1000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 1000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The smallest capitalized company included in the Russell 1000--Registered Trademark-- Index during the above-referenced period ended March 31, 2007, had a market capitalization of $694 million. The fund may invest up to 25% of its total assets in foreign securities.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The fund's portfolio managers may focus on securities of companies with market capitalizations that are within the top 50% of stocks in the Russell 1000--Registered Trademark-- Index at the time of purchase. The portfolio managers purchase securities of a limited number of large-cap companies that they believe have the potential for above-average growth in revenues and earnings. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential.
The fund typically maintains a portion if its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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.
- Foreign Securities Risk--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.
The principal risk of investments in synthetic instruments is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Some synthetic instruments are more sensitive to interest rate changes and market price fluctuations than others. Also, synthetic instruments are subject to counter party risk which is the risk that the other party in the transaction will not fulfill its contractual obligation to complete the transaction with the fund.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
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2004................................................................... 9.08%
2005................................................................... 7.30%
2006................................................................... 8.05%
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During the periods shown in the bar chart, the highest quarterly return was 8.38% (quarter ended December 31, 2004) and the lowest quarterly return was -5.32% (quarter ended June 30, 2006).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR INCEPTION DATE ------------------------------------------------------------------------------- AIM V.I. Large Cap Growth Fund 8.05% 10.14% 08/29/03 S&P 500--Registered Trademark-- Index(1,2) 15.78 12.81(3) 08/31/03(3) Russell 1000--Registered Trademark-- Growth Index(1,2,4) 9.07 9.01(3) 08/31/03(3) Lipper VUF Large-Cap Growth Funds Index(1,2,5) 6.29 9.59(3) 08/31/03(3) Lipper Large-Cap Growth Funds Index(1,2,6) 4.72 8.30(3) 08/31/03(3) ------------------------------------------------------------------------------- |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance. The fund has also included the Russell 1000--Registered Trademark-- Growth Index as its style-specific index because the fund believes the Russell 1000--Registered Trademark-- Growth Index more closely reflects the performance of the types of securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Large-Cap Growth Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Large-Cap Growth Funds Index as its peer group index instead of the Lipper Large-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Large-Cap Growth Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month-end closest to the inception of the fund's Series I shares.
(4) The Russell 1000--Registered Trademark-- Growth Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index is comprised of 1,000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1000 stocks of the Russell 3000 universe.
(5) The Lipper VUF Large-Cap Growth Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Large-Cap Growth Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
(6) The Lipper Large-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper Large-Cap Growth Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above tables means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Other Expenses 0.48 Acquired Fund Fees and Expenses(3) 0.00 Total Annual Fund Operating Expenses 1.23 Fee Waiver and/or Expense Reimbursements(2,4) 0.21 Net Annual Fund Operating Expenses 1.02 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through December 31, 2009, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.695% (for average net assets up to $250 million) to 0.52% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.01% of average daily nets assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Large Cap Growth Fund $104 $338 $624 $1,441 ------------------------------------------------------------------------------------------------------ |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.02% 1.08% 1.08% 1.23% 1.23%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.98% 8.06% 12.29% 16.53% 20.92%
End of Year Balance $10,398.00 $10,805.60 $11,229.18 $11,652.52 $12,091.82
Estimated Annual Expenses $ 104.03 $ 114.50 $ 118.99 $ 140.72 $ 146.03
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(1) Your actual expenses may be higher or lower than those shown.
SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.23% 1.23% 1.23% 1.23% 1.23%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.48% 30.21% 35.12% 40.21% 45.50%
End of Year Balance $12,547.68 $13,020.73 $13,511.61 $14,021.00 $14,549.59
Estimated Annual Expenses $ 151.53 $ 157.25 $ 163.17 $ 169.33 $ 175.71
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(1) Your actual expenses may
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The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.54% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Geoffrey V. Keeling, Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1995.
- Robert L. Shoss, Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1995.
They are assisted by the advisor's Large Cap Growth Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the fund through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the fund. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by the fund are to be valued at current market value if market quotations are readily available. All other securities and assets of the fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the fund may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset
value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times and with different lag times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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". This prospectus relates to the Series I shares.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
---------------------------------------------------
AUGUST 29, 2003
(DATE OPERATIONS
YEAR ENDED DECEMBER 31, COMMENCED) TO
------------------------------- DECEMBER 31,
2006 2005 2004 2003
-------- ------ ------ ----------------
Net asset value, beginning of period $ 12.71 $11.86 $10.90 $10.00
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.02 (0.01)(a) (0.04)(b) (0.03)
-----------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.00 0.88 1.03 0.95
=================================================================================================================
Total from investment operations 1.02 0.87 0.99 0.92
=================================================================================================================
Less distributions:
Dividends from net investment income (0.02) -- -- (0.02)
-----------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.02) (0.03) --
=================================================================================================================
Total distributions (0.02) (0.02) (0.03) (0.02)
=================================================================================================================
Net asset value, end of period $ 13.71 $12.71 $11.86 $10.90
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(c) 8.05% 7.30% 9.08% 9.16%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $120,825 $4,352 $ 596 $ 546
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.02%(d) 1.13% 1.33% 1.33%(e)
-----------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.23%(d) 7.30% 9.88% 14.54%(e)
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of net investment income (loss) to average net assets 0.06%(d) (0.06)% (0.35)%(b) (0.73)%(e)
_________________________________________________________________________________________________________________
=================================================================================================================
Portfolio turnover rate(f) 76% 99% 104% 37%
_________________________________________________________________________________________________________________
=================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $(0.06) and
(0.51)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(d) Ratios are based on average daily net assets of $69,892,709.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year. For the period ending December 31, 2006, the portfolio turnover calculation excludes the value of securities purchased of $108,317,858 and sold of $79,126,179 in the effort to realign the Fund's portfolio holdings after the reorganization of AIM V.I. Blue Chip Fund into the Fund.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VILCG-PRO-1
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. LARGE CAP GROWTH FUND
PROSPECTUS
MAY 1, 2007
|
Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Large Cap Growth Fund's investment objective is long-term growth of capital.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 2 ------------------------------------------------------ Annual Total Returns 2 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE LIMITATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 Portfolio Manager(s) 6 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Distribution Plan 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in securities of large-capitalization companies. In complying with this 80% investment requirement, the fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a large-capitalization company if it has a market capitalization, at the time of purchase, no smaller than the smallest capitalized company included in the Russell 1000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 1000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 1,000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. The smallest capitalized company included in the Russell 1000--Registered Trademark-- Index during the above-referenced period ended March 31, 2007, had a market capitalization of $694 million. The fund may invest up to 25% of its total assets in foreign securities.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The fund's portfolio managers may focus on securities of companies with market capitalizations that are within the top 50% of stocks in the Russell 1000--Registered Trademark-- Index at the time of purchase. The portfolio managers purchase securities of a limited number of large-cap companies that they believe have the potential for above-average growth in revenues and earnings. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential.
The fund typically maintains a portion if its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
There is a risk that you could lose all or a portion of your investment in the fund. 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.
- Foreign Securities Risk--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.
The principal risk of investments in synthetic instruments is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Some synthetic instruments are more sensitive to interest rate changes and market price fluctuations than others. Also, synthetic instruments are subject to counter party risk which is the risk that the other party in the transaction will not fulfill its contractual obligation to complete the transaction with the fund.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series II shares form year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- --------
2004................................................................... 8.89%
2005................................................................... 7.15%
2006................................................................... 7.81%
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During the periods shown in the bar chart, the highest quarterly return was 8.30% (quarter ended December 31, 2004) and the lowest quarterly return was -5.34% (quarter ended June 30, 2006).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ---------------------------------------------------------------------------------- (for the periods ended SINCE December 31, 2006) 1 YEAR INCEPTION INCEPTION DATE ---------------------------------------------------------------------------------- AIM V.I. Large Cap Growth Fund 7.81% 9.94% 08/29/03 S&P 500--Registered Trademark-- Index(1,2) 15.78 12.81(3) 08/31/03(3) Russell 1000--Registered Trademark-- Growth Index(1,2,4) 9.07 9.01(3) 08/31/03(3) Lipper VUF Large-Cap Growth Funds Index(1,2,5) 6.29 9.59(3) 08/31/03(3) Lipper Large-Cap Growth Funds Index(1,2,6) 4.72 8.30(3) 08/31/03(3) ---------------------------------------------------------------------------------- |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance. The fund has also included the Russell 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 Variable Underlying Funds (VUF) Large-Cap Growth Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Large-Cap Growth Funds Index as its peer-group instead of the Lipper Large-Cap Growth Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Large-Cap Growth Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month-end closest to the
inception date of the fund's Series II shares.
(4) The Russell 1000--Registered Trademark-- Growth Index measures the performance of those Russell 1000--Registered Trademark-- Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index is comprised of 1,000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1,000 stocks of the Russell 3000 universe.
(5) The Lipper VUF Large-Cap Growth Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Large-Cap Growth Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
(6) The Lipper Large-Cap Growth Funds Index is an equally weighted representation of the largest funds in the Lipper Large-Cap Growth Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Large-Cap Growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P 500 index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.48 Acquired Fund Fees and Expenses(3) 0.00 Total Annual Fund Operating Expenses 1.48 Fee Waivers and/or Expense Reimbursements(2,4) 0.21 Net Annual Fund Operating Expenses 1.27 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through December 31, 2009, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.695% (for average net assets up to $250 million) to 0.52% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.26% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
The example also does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------------------------------------------------------------------- AIM V.I. Large Cap Growth Fund $129 $416 $757 $1,722 ---------------------------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.27% 1.33% 1.33% 1.48% 1.48%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.73% 7.54% 11.48% 15.41% 19.47%
End of Year Balance $10,373.00 $10,753.69 $11,148.35 $11,540.77 $11,947.01
Estimated Annual Expenses $ 129.37 $ 140.49 $ 145.65 $ 167.90 $ 173.81
-----------------------------------------------------------------------------------------------
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.48% 1.48% 1.48% 1.48% 1.48%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 23.68% 28.03% 32.54% 37.20% 42.03%
End of Year Balance $12,367.54 $12,802.88 $13,253.54 $13,720.06 $14,203.01
Estimated Annual Expenses $ 179.93 $ 186.26 $ 192.82 $ 199.60 $ 206.63
-----------------------------------------------------------------------------------------------
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.54% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Geoffrey V. Keeling, Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1995.
- Robert L. Shoss, Senior Portfolio Manager, who has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1995.
They are assisted by the advisor's Large Cap Growth Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly of indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the fund through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the fund. AIM Affiliates will
use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by the fund are to be valued at current market value if market quotations are readily available. All other securities and assets of the fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the fund may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor,
pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times and with different lag times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays this fee out of its assets on an ongoing basis, over time this fee will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments
because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
-------------------------------------------------
AUGUST 29, 2003
YEAR ENDED (DATE OPERATIONS
DECEMBER 31, COMMENCED) TO
----------------------------- DECEMBER 31,
2006 2005 2004 2003
------ ------ ------ ----------------
Net asset value, beginning of period $12.67 $11.84 $10.90 $10.00
---------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01) (0.03)(a) (0.06)(b) (0.03)
---------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.00 0.88 1.03 0.94
===============================================================================================================
Total from investment operations 0.99 0.85 0.97 0.91
===============================================================================================================
Less distributions:
Dividends from net investment income -- -- -- (0.01)
---------------------------------------------------------------------------------------------------------------
Distributions from net realized gains -- (0.02) (0.03) --
===============================================================================================================
Total distributions -- (0.02) (0.03) (0.01)
===============================================================================================================
Net asset value, end of period $13.66 $12.67 $11.84 $10.90
_______________________________________________________________________________________________________________
===============================================================================================================
Total return(c) 7.81% 7.15% 8.89% 9.11%
_______________________________________________________________________________________________________________
===============================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,949 $ 636 $ 594 $ 546
_______________________________________________________________________________________________________________
===============================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.27%(d) 1.33% 1.48% 1.48%(e)
---------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.48%(d) 7.55% 10.13% 14.79%(e)
===============================================================================================================
Ratio of net investment income (loss) to average net assets (0.19)%(d) (0.26)% (0.50)%(b) (0.88)%(e)
_______________________________________________________________________________________________________________
===============================================================================================================
Portfolio turnover rate(f) 76% 99% 104% 37%
_______________________________________________________________________________________________________________
===============================================================================================================
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(a) Calculated using average shares outstanding.
(b) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $(0.08) and
(0.66)%, respectively.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(d) Ratios are based on average daily net assets of $1,390,637.
(e) Annualized.
(f) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year. For the period ending December 31, 2006, the portfolio turnover calculation excludes the value of securities purchased of $108,317,858 and sold of $79,126,179 in the effort to realign the Fund's portfolio holdings after the reorganization of AIM V.I. Blue Chip Fund into the Fund.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
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THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VILCG-PRO-2
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. LEISURE FUND
PROSPECTUS
MAY 1, 2007
|
Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Leisure Fund's investment objective is capital growth.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is capital growth.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers that are engaged in the design, production and distribution of products and services related to leisure activities of individuals (the leisure sector). The principal type of equity securities purchased by the fund is common stocks.
Companies in the leisure sector include, but are not limited to, those involved in the design, production and distribution of products or services related to the leisure activities of individuals. These companies operate in the following industries: hotel, gaming, publishing, advertising, beverage, audio/video, broadcasting-radio/television, cable and satellite, motion picture, recreation services and entertainment, retail and toy.
The fund considers a company to be doing business in the leisure sector if it meets at least one of the following tests: (1) at least 50% of its gross income or its net sales come from products or services related to leisure activities of individuals; (2) at least 50% of its assets are devoted to producing revenues through products or services related to leisure activities of individuals; or (3) based on other available information, the portfolio manager determines that its primary business is in products or services related to leisure activities of individuals.
The fund may invest up to 25% of its total assets in securities of non-U.S. issuers doing business in the leisure-related industries. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation.
The fund's investments in the types of securities described in this prospectus vary from time to time, and, at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio manager believes that investment opportunities are driven by long-term themes that support growth of the leisure sector such as demographic and income trends, and technology innovation and integration and globalization. The portfolio manager seeks to invest in companies with growth potential regardless of the economic environment, and also seeks to diversify the fund across the leisure sector. The portfolio manager intends to adjust portfolio weightings depending on prevailing economic conditions and relative valuations of securities.
In selecting securities for the fund, the portfolio manager uses a bottom-up investment approach using a combination of quantitative, fundamental and valuation analyses. The portfolio manager focuses on businesses related to leisure activities of individuals with (1) strong fundamentals and promising growth potential; (2) valuations below those of the broad market and (3) managements that have long-term visions for their companies and the skills needed to grow their market share and earnings at faster rates than their competitors. The fund invests in companies of all market capitalizations, but favors mid-to-large capitalization companies. In general, the fund emphasizes companies that the portfolio manager believes are strongly managed and will generate above average long-term capital appreciation.
The portfolio manager will consider selling a security if: (1) there is a negative change in the company's or industry's fundamentals, or (2) the investment reaches the portfolio manager's target price.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's adviser. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
When suitable opportunities are available, the fund may invest in initial public offerings (IPOs) of securities.
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. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of small companies are more volatile than those of mid-size companies or large companies.
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
- Equity Securities Risk--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. These factors will probably affect the equity securities of smaller companies more than the equity securities of larger, more-established companies. Also, because equity securities of smaller companies may not be traded as often as equity securities of larger, more- established companies, it may be difficult or impossible for the fund to sell these securities at a desirable price.
- Sector Fund Risk--The fund's investments are concentrated in a comparatively narrow segment of the economy, the leisure sector. This means that the fund's investment concentration in the leisure sector is higher than most mutual funds and the broad securities market. Consequently, the fund tends to be more volatile than other mutual funds, and the value of the fund's investments and consequently the value of an investment in the fund tends to rise and fall more rapidly.
- Leisure Industry Risk--The leisure sector depends on consumer discretionary spending, which generally falls during economic downturns. Securities of gambling casinos are often subject to high price volatility and are considered speculative. Video and electronic games are subject to the risk of rapid obsolescence.
- Foreign Securities Risk--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.
- Derivatives Risk--The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. If the fund uses derivatives to "hedge" the overall risk of its portfolio, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
- Leverage Risk--The use of synthetic securities and derivatives may give rise to a form of leverage. Leverage may cause the fund's portfolio to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the fund.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio manager will produce the desired results.
An investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The prices of IPO securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be no assurance that the fund will have favorable IPO investment opportunities.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series I shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
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2003................................................................... 28.64%
2004................................................................... 13.40%
2005................................................................... -1.19%
2006................................................................... 24.61%
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During the periods shown in the bar chart, the highest quarterly return was 15.13% (quarter ended June 30, 2003) and the lowest quarterly return was -3.05% (quarter ended March 31, 2003). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of an unmanaged broad-based securities market index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ----------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR INCEPTION DATE ----------------------------------------------------------------- AIM V.I. Leisure Fund(1) 24.61% 9.54%(2) 04/30/02(2) S&P 500--Registered Trademark-- Index(3,4) 15.78 8.02(2) 04/30/02(2) --------------------------------------------------------------------------------- |
(1) For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. 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 April 30, 2002. Index comparisons began on April 30, 2002.
(3) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance.
(4) The index may not reflect payment of fees, expenses or taxes.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly
or indirectly, when a variable product owner buys, holds, or redeems interest in
an insurance company separate account that invests in the Series I shares of the
fund but does not represent the effect of any fees or other expenses assessed in
connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.75% Other Expenses 0.51 Acquired Fund Fees and Expenses(2) 0.01 Total Annual Fund Operating Expenses 1.27 Fee Waiver and/or Expense Reimbursement(3) 0.25 Net Annual Fund Operating Expenses 1.02 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.01% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series I shares of the funds with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Leisure Fund $104 $378 $673 $1,512 ---------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.02% 1.27% 1.27% 1.27% 1.27%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.98% 7.86% 11.88% 16.05% 20.38%
End of Year Balance $10,398.00 $10,785.85 $11,188.16 $11,605.48 $12,038.36
Estimated Annual Expenses $ 104.03 $ 134.52 $ 139.53 $ 144.74 $ 150.14
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SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
--------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.27% 1.27% 1.27% 1.27% 1.27%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 24.87% 29.53% 34.36% 39.37% 44.57%
End of Year Balance $12,487.39 $12,953.17 $13,436.32 $13,937.50 $14,457.37
Estimated Annual Expenses $ 155.74 $ 161.55 $ 167.57 $ 173.82 $ 180.31
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(1) Your annual expenses may be higher or lower than these shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and
related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.50% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
Mark D. Greenberg, Senior Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1996.
He is assisted by the advisor's Leisure Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of his compensation structure, and information regarding other accounts he manages.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless
remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the
Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board of Trustees.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES I
---------------------------------------------------------------
APRIL 30, 2002
(DATE OPERATIONS
YEAR ENDED DECEMBER 31, COMMENCED) TO
------------------------------------------- DECEMBER 31,
2006 2005 2004 2003 2002
------- ------- ------- ------- ----------------
Net asset value, beginning of period $ 11.86 $ 12.38 $ 10.96 $ 8.52 $ 10.00
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.07 0.04 0.00 (0.00) (0.00)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.83 (0.19) 1.47 2.44 (1.48)
=============================================================================================================================
Total from investment operations 2.90 (0.15) 1.47 2.44 (1.48)
=============================================================================================================================
Less distributions:
Dividends from net investment income (0.16) (0.14) (0.04) -- --
-----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.78) (0.23) (0.01) -- --
=============================================================================================================================
Total distributions (0.94) (0.37) (0.05) -- --
=============================================================================================================================
Net asset value, end of period $ 13.82 $ 11.86 $ 12.38 $ 10.96 $ 8.52
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 24.61% (1.19)% 13.40% 28.64% (14.80)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $52,820 $54,192 $55,967 $34,424 $ 6,097
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.01%(c) 1.16% 1.29% 1.26% 1.29%(d)
-----------------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.26%(c) 1.31% 1.34% 1.64% 3.96%(d)
=============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.54%(c) 0.34% 0.00% (0.14)% (0.30)%(d)
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate(e) 14% 32% 15% 22% 15%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
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(a) The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.01) for the period April 30, 2002 (date operations commenced) to December 31, 2002.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $51,949,711.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VILEI-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. LEISURE FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Leisure Fund's investment objective is capital growth.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosure 8 Trading Activity Monitoring 8 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is capital growth.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers that are engaged in the design, production and distribution of products and services related to leisure activities of individuals (the leisure sector). The principal type of equity securities purchased by the fund is common stocks.
Companies in the leisure sector include, but are not limited to, those involved in the design, production and distribution of products or services related to the leisure activities of individuals. These companies operate in the following industries: hotel, gaming, publishing, advertising, beverage, audio/video, broadcasting-radio/television, cable and satellite, motion picture, recreation services and entertainment, retail and toy.
The fund considers a company to be doing business in the leisure sector if it meets at least one of the following tests: (1) at least 50% of its gross income or its net sales come from products or services related to leisure activities of individuals; (2) at least 50% of its assets are devoted to producing revenues through products or services related to leisure activities of individuals; or (3) based on other available information, the portfolio manager determines that its primary business is in products or services related to leisure activities of individuals.
The fund may invest up to 25% of its total assets in securities of non-U.S. issuers doing business in the leisure-related industries. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation.
The fund's investments in the types of securities described in this prospectus vary from time to time, and, at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The portfolio manager believes that investment opportunities are driven by long-term themes that support growth of the leisure sector such as demographic and income trends, and technology innovation and integration and globalization. The portfolio manager seeks to invest in companies with growth potential regardless of the economic environment, and also seeks to diversify the fund across the leisure sector. The portfolio manager intends to adjust portfolio weightings depending on prevailing economic conditions and relative valuations of securities.
In selecting securities for the fund, the portfolio manager uses a bottom-up investment approach using a combination of quantitative, fundamental and valuation analyses. The portfolio manager focuses on businesses related to leisure activities of individuals with (1) strong fundamentals and promising growth potential; (2) valuations below those of the broad market and (3) managements that have long-term visions for their companies and the skills needed to grow their market share and earnings at faster rates than their competitors. The fund invests in companies of all market capitalizations, but favors mid-to-large capitalization companies. In general, the fund emphasizes companies that the portfolio manager believes are strongly managed and will generate above average long-term capital appreciation.
The portfolio manager will consider selling a security if: (1) there is a negative change in the company's or industry's fundamentals, or (2) the investment reaches the portfolio manager's target price.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's adviser. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
When suitable opportunities are available, the fund may invest in initial public offerings (IPOs) of securities.
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. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of small companies are more volatile than those of mid-size companies or large companies.
- Equity Securities Risk--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. These factors will probably affect the equity securities of smaller companies more than the equity securities of larger, more-established companies. Also, because equity securities of smaller companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the fund to sell these securities at a desirable price.
- Sector Fund Risk--The fund's investments are concentrated in a comparatively narrow segment of the economy, the leisure sector. This means that the fund's investment concentration in the leisure sector is higher than most mutual funds and the broad securities market. Consequently, the fund tends to be more volatile than other mutual funds, and the value of the fund's investments and consequently the value of an investment in the fund tends to rise and fall more rapidly.
- Leisure Industry Risk--The leisure sector depends on consumer discretionary spending, which generally falls during economic downturns. Securities of gambling casinos are often subject to high price volatility and are considered speculative. Video and electronic games are subject to the risk of rapid obsolescence.
- Foreign Securities Risk--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.
- Derivatives Risk--The value of "derivatives"--so called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. If the fund uses derivatives to "hedge" the overall risk of its portfolio, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
- Leverage Risk--The use of synthetic securities and derivatives may give rise to a form of leverage. Leverage may cause the fund's portfolio to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the fund.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio manager will produce the desired results.
An investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The prices of IPO securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be no assurance that the fund will have favorable IPO investment opportunities.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I shares and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2003*.................................................................. 28.32%
2004*.................................................................. 13.22%
2005................................................................... -1.37%
2006................................................................... 24.28%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 15.06% (quarter ended June 30, 2003) and the lowest quarterly return was -3.11% (quarter ended March 31, 2003). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of an unmanaged broad-based securities market index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------
SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR INCEPTION DATE
-------------------------------------------------------------------------------
AIM V.I. Leisure Fund(1) 24.28% 9.30%(2) 04/30/02(2)
S&P 500--Registered Trademark--
Index(3,4) 15.78 8.02(2) 04/30/02(2)
-------------------------------------------------------------------------------
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(1) The return shown for the one year period is the historical performance of the fund's Series II shares. The return shown for other period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the predecessor fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004. For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Total return figures include reinvested dividends and capital gain distributions and the effect of the fund's expenses.
(2) Series I shares of the fund commenced investment operations on April 30, 2002. Index comparisons began on April 30, 2002.
(3) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance.
(4) The index may not reflect payment of fees, expenses or taxes.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees 0.75% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.51 Acquired Fund Fees and Expenses(2) 0.01 Total Annual Fund Operating Expenses 1.52 Fee Waiver and/or Expense Reimbursements(3) 0.25 Net Annual Fund Operating Expenses 1.27 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.26% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Leisure Fund $129 $456 $805 $1,791 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------------
Annual Expenses Ratio(1) 1.27% 1.52% 1.52% 1.52% 1.52%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.73% 7.34% 11.08% 14.94% 18.94%
End of Year Balance $10,373.00 $10,733.98 $11,107.52 $11,494.06 $11,894.06
Estimated Annual Expenses $ 129.37 $ 160.41 $ 166.00 $ 171.77 $ 177.75
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SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
--------------------------------------------------------------------------------------------------
Annual Expenses Ratio(1) 1.52% 1.52% 1.52% 1.52% 1.52%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 23.08% 27.36% 31.80% 36.38% 41.13%
End of Year Balance $12,307.97 $12,736.29 $13,179.51 $13,638.16 $14,112.77
Estimated Annual Expenses $ 183.94 $ 190.34 $ 196.96 $ 203.81 $ 210.91
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(1) Your annual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and
related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.50% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
Mark D. Greenberg, Senior Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2002 and has been associated with the advisor and/or its affiliates since 1996.
He is assisted by the advisor's Leisure Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of his compensation structure, and information regarding other accounts he manages.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund
could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the funds will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are
readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information
from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they makes these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by
the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payment for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES II
--------------------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
-------------------------------- DECEMBER 31,
2006 2005 2004
---------------- ------------ --------------
Net asset value, beginning of period $11.84 $12.37 $11.09
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.04 0.02 (0.02)
------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.82 (0.19) 1.35
==================================================================================================================
Total from investment operations 2.86 (0.17) 1.33
==================================================================================================================
Less distributions:
Dividends from net investment income (0.14) (0.13) (0.04)
------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.78) (0.23) (0.01)
==================================================================================================================
Total distributions (0.92) (0.36) (0.05)
==================================================================================================================
Net asset value, end of period $13.78 $11.84 $12.37
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(a) 24.28% (1.37)% 11.98%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 14 $ 11 $ 11
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.26%(b) 1.36% 1.45%(c)
------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.51%(b) 1.56% 1.60%(c)
==================================================================================================================
Ratio of net investment income (loss) to average net assets 0.29%(b) 0.14% (0.16)%(c)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(d) 14% 32% 15%
__________________________________________________________________________________________________________________
==================================================================================================================
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(a) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(b) Ratios are based on average daily net assets of $11,911.
(c) Annualized.
(d) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VILEI-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. MID CAP CORE EQUITY FUND
PROSPECTUS
MAY 1, 2007
|
SERIES I SHARES
SHARES OF THE FUND ARE CURRENTLY OFFERED ONLY TO INSURANCE COMPANY SEPARATE ACCOUNTS FUNDING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. AIM V.I. MID CAP CORE EQUITY FUND'S INVESTMENT OBJECTIVE IS LONG-TERM 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 4 ------------------------------------------------------ Annual Total Returns 4 Performance Table 5 FEE TABLE AND EXPENSE EXAMPLE 6 ------------------------------------------------------ Fees and Expenses of the Fund 6 Expense Example 6 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 7 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 7 ------------------------------------------------------ FUND MANAGEMENT 8 ------------------------------------------------------ The Advisor 8 Advisor Compensation 8 Portfolio Manager(s) 8 OTHER INFORMATION 9 ------------------------------------------------------ Purchase and Redemption of Shares 9 Excessive Short-Term Trading Activity Disclosures 9 Trade Activity Monitoring 9 Fair Value Pricing 10 Risks 10 Pricing of Shares 10 Taxes 11 Dividends and Distributions 11 Share Classes 11 Payments to Insurance Companies 11 FINANCIAL HIGHLIGHTS 13 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The fund's investment objective may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in equity securities, including convertible securities, of mid- capitalization companies. In complying with this 80% investment requirement, the fund's investments may include synthetic and derivative instruments. Synthetic and derivative instruments are investments that have economic characteristics similar to the fund's direct investments. Synthetic and derivative instruments that the fund may invest in may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. Synthetic and derivative instruments may have the effect of leveraging the fund's portfolio.
The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell Midcap--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 companies with the lowest market capitalization in the Russell 1000--Registered Trademark-- Index. The Russell 1000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks of the 1000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3000 largest U.S. companies based on total market capitalization. The companies in the Russell Midcap--Registered Trademark-- Index are considered representative of medium-sized companies.
In selecting securities for the fund's portfolio, the portfolio managers
normally seek to identify those companies that are, in their view, undervalued
relative to current or projected earnings, or to the current market value of
assets owned by the company. The portfolio managers perform significant due
diligence and fundamental research on companies under consideration. The primary
emphasis of the portfolio managers' search for undervalued equity securities is
normally in five categories: (1) out of favor cyclical growth companies; (2)
established growth companies that are undervalued compared to historical
relative valuation parameters; (3) companies where there is early but tangible
evidence of improving prospects which are not yet reflected in the value of the
companies' equity securities; (4) companies whose equity securities are selling
at prices that do not yet reflect the current market value of their assets; and
(5) companies that the portfolio managers believe will translate high or
increasing returns on invested capital into improving levels of free cash flow
and value for shareholders.
The portfolio managers consider selling a security if the price target set by the portfolio managers is exceeded, there is deterioration in fundamentals over an 18 to 24 month period, or more compelling investment opportunities exist.
The fund may invest up to 25% of its total assets in foreign securities. The fund may also invest up to 20% of its assets in equity securities of companies that have market capitalizations, at the time of purchase, in other market capitalization ranges. The fund may invest up to 20% of its assets in investment-grade debt securities, U.S. government securities, and high-quality money market instruments, including shares of affiliated money market funds. The fund employs a risk management strategy to reduce volatility. Pursuant to this strategy, the fund generally invests a substantial amount of its assets in cash and cash equivalents. 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 increase the portion of its assets held in cash, cash equivalents (including shares of affiliated money market funds) or high quality debt instruments. As a result, the fund may not achieve its investment objective.
The fund's investment in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of mid-size companies are more volatile than those of large companies.
- Equity Securities Risk--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.
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
- Foreign Securities Risk--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.
- Convertible Securities Risk--The values of convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and a price that is unfavorable to the fund.
- Interest Rate Risk--Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on specific characteristics of each bond. A measure investors commonly use to determine this sensitivity is called duration. The longer the duration of a particular bond, the greater is its price sensitivity to interest rates. Similarly, a longer duration portfolio of securities has greater price sensitivity. Duration is determined by a number of factors including coupon rate, whether the coupon is fixed or floating, time to maturity, call or put features, and various repayment features.
- Credit Risk--Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. Such a deterioration of financial health may result in a reduction of the credit rating of the issuer's securities and may lead to the issuer's inability to honor its contractual obligations including making timely payment of interest and principal. Credit ratings are a measure of credit quality. Although a downgrade or upgrade of a bond's credit ratings may or may not affect its price, a decline in credit quality may make bonds less attractive, thereby driving up the yield on the bond and driving down the price. Declines in credit quality can result in bankruptcy for the issuer and permanent loss of investment.
- U.S. Government Obligations Risk--The fund may invest in obligations issued by
agencies and instrumentalities of the U.S. Government. These obligations vary
in the level of support they receive from the U.S. Government. They may be:
(i) supported by the full faith and credit of the U.S. Treasury, such as those
of the Government National Mortgage Association; (ii) supported by the right
of the issuer to borrow from the U.S. Treasury, such as those of the Federal
National Mortgage Association; (iii) supported by the discretionary authority
of the U.S. Government to purchase the issuer's obligations, such as those of
the former Student Loan Marketing Association; or (iv) supported only by the
credit of the issuer, such as those of the Federal Farm Credit Bureau. The
U.S. Government may choose not to provide financial support to U.S. Government
sponsored agencies or instrumentalities if it is not legally obligated to do
so, in which case, if the issuer defaulted, the underlying fund holding
securities of such issuer might not be able to recover its investment from the
U.S. Government.
- Market Capitalization Risk--Stocks fall into three broad market capitalization categories--large, medium and small. Investing primarily in one category carries the risk that, due to current market conditions, that category may be out of favor with investors. Small and mid-sized companies tend to be more vulnerable to adverse developments and more volatile than larger companies. Investments in small and mid-sized companies may involve special risks, including those associated with dependence on a small management group, little or no operating history, little or no track record of success, and limited product lines, markets and financial resources. Also, there may be less publicly available information about the issuers of the securities or less market interest in such securities than in the case of larger companies, each of which can cause significant price volatility. The securities of small and mid-sized may be illiquid, restricted as to resale, or may trade less
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
frequently and in smaller volume than more widely held securities, which may make it difficult for a fund to establish or close out a position in these securities at prevailing market prices.
- Derivatives Risk--The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. Derivatives may be used to create a synthetic exposure to an underlying asset or to hedge a portfolio risk. If the fund uses derivatives to "hedge" a portfolio risk, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
- Leveraging Risk--The use of derivatives may give rise to a form of leverage. Leverage may cause the fund to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the fund.
- Cash/Cash Equivalents Risk--To the extent the fund holds cash or cash equivalents rather than equity securities, the fund may not achieve its investment objective and it may under perform its peer group and benchmark index, particularly during periods of strong market performance.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
2002................................................................... -11.10%
2003................................................................... 27.31%
2004................................................................... 13.82%
2005................................................................... 7.62%
2006................................................................... 11.24%
|
During the period shown in the bar chart, the highest quarterly return was 16.45% (quarter ended June 30, 2003) and the lowest quarterly return was -14.37% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ----------------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE ----------------------------------------------------------------------------------------- AIM V.I. Mid Cap Core Equity Fund 11.24% 9.05% 9.97% 09/10/01 S&P 500--Registered Trademark-- Index(1,2) 15.78 6.19 6.13(3) 08/31/01(3) Russell Midcap--Registered Trademark-- Index(1,2,4) 15.26 12.88 12.66(3) 08/31/01(3) Lipper VUF Mid-Cap Core Funds Index(1,2,5) 13.06 11.39 11.32(3) 08/31/01(3) Lipper Mid-Cap Core Funds Index(1,2,6) 13.44 10.10 10.03(3) 08/31/01(3) ----------------------------------------------------------------------------------------- |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell Midcap--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Mid-Cap Core Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Mid-Cap Core Funds Index as its peer-group index instead of the Lipper Mid-Cap Core Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Mid-Cap Core Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month end closest to the
inception date of the fund's Series I shares.
(4) The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 smallest companies in the Russell 1000--Registered Trademark-- Index. These stocks represent approximately 25% of the total market capitalization of the Russell 1000--Registered Trademark-- Index. The Russell 1000--Registered Trademark-- Index is comprised of 1,000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1,000 stocks of the Russell 3000 universe.
(5) The Lipper VUF Mid-Cap Core Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Mid-Cap Core Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic midcap stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index and was the first benchmark of midcap stock price movement.
(6) The Lipper Mid-Cap Core Funds Index is an equally weighted representation of the largest funds in the Lipper Mid-Cap Core Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic midcap stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index and was the first benchmark of midcap stock price movement.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.72% Other Expenses 0.32 Acquired Fund Fees and Expenses(2) 0.02 Total Annual Fund Operating Expenses(3) 1.06 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Mid Cap Core Equity Fund $108 $337 $585 $1,294 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ------------------------------------------------------------------------------------------------------ Annual Expense Ratio(1) 1.06% 1.06% 1.06% 1.06% 1.06% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.94% 8.04% 12.29% 16.72% 21.31% End of Year Balance $10,394.00 $10,803.52 $11,229.18 $11,671.61 $12,131.47 Estimated Annual Expenses $ 108.09 $ 112.35 $ 116.77 $ 121.37 $ 126.16 ------------------------------------------------------------------------------------------------------ SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ------------------------------------------------------------------------------------------------------ Annual Expense Ratio(1) 1.06% 1.06% 1.06% 1.06% 1.06% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 26.09% 31.06% 36.23% 41.59% 47.17% End of Year Balance $12,609.45 $13,106.27 $13,622.65 $14,159.39 $14,717.27 Estimated Annual Expenses $ 131.13 $ 136.29 $ 141.66 $ 147.24 $ 153.05 ------------------------------------------------------------------------------------------------------ |
(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.72% of the fund's average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
- Ronald S. Sloan (lead manager), Senior Portfolio Manager, who has been responsible for the fund since its inception in 2001 and has been associated with the advisor and/or its affiliates since 1998.
- Brian Nelson, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, Mr. Nelson was a senior telecommunications analyst for RCM Global Investors.
- Douglas Asiello, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2001.
They are assisted by the advisor's Mid/Large Cap Core Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in
the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor,
pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based
Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
-------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 13.61 $ 13.11 $ 12.06 $ 9.53 $ 10.72
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.14 0.06 0.03(a) 0.00(a) (0.02)(a)
---------------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.39 0.94 1.63 2.60 (1.17)
=================================================================================================================================
Total from investment operations 1.53 1.00 1.66 2.60 (1.19)
=================================================================================================================================
Less distributions:
Dividends from net investment income (0.14) (0.07) (0.02) -- --
---------------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.48) (0.43) (0.59) (0.07) --
=================================================================================================================================
Total distributions (1.62) (0.50) (0.61) (0.07) --
=================================================================================================================================
Net asset value, end of period $ 13.52 $ 13.61 $ 13.11 $ 12.06 $ 9.53
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b) 11.24% 7.62% 13.82% 27.31% (11.10)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $581,154 $584,860 $496,606 $293,162 $68,271
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets 1.04%(c) 1.03% 1.04% 1.07% 1.30%
=================================================================================================================================
Ratio of net investment income (loss) to average net assets 0.93%(c) 0.50% 0.25% 0.01% (0.22)%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate 83% 70% 55% 37% 36%
_________________________________________________________________________________________________________________________________
=================================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $581,807,492.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIMCCE-PRO-1
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. MID CAP CORE EQUITY FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Mid Cap Core Equity Fund's investment objective is long-term growth of capital.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 4 ------------------------------------------------------ Annual Total Returns 4 Performance Table 5 FEE TABLE AND EXPENSE EXAMPLE 6 ------------------------------------------------------ Fees and Expenses of the Fund 6 Expense Example 6 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 7 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 7 ------------------------------------------------------ FUND MANAGEMENT 8 ------------------------------------------------------ The Advisor 8 Advisor Compensation 8 Portfolio Manager(s) 8 OTHER INFORMATION 9 ------------------------------------------------------ Purchase and Redemption of Shares 9 Excessive Short-Term Trading Activity Disclosures 9 Trade Activity Monitoring 9 Fair Value Pricing 10 Risks 10 Pricing of Shares 10 Taxes 11 Dividends and Distributions 11 Share Classes 11 Distribution Plan 11 Payments to Insurance Companies 11 FINANCIAL HIGHLIGHTS 13 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The fund's investment objective may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in equity securities, including convertible securities, of mid- capitalization companies. In complying with this 80% investment requirement, the fund's investments may include synthetic and derivative instruments. Synthetic and derivative instruments are investments that have economic characteristics similar to the fund's direct investments. Synthetic and derivative instruments that the fund may invest in may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. Synthetic and derivative instruments may have the effect of leveraging the fund's portfolio.
The fund considers a company to be a mid-capitalization company if it has a market capitalization, at the time of purchase, within the range of the largest and smallest capitalized companies included in the Russell Midcap--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 companies with the lowest market capitalization in the Russell 1000--Registered Trademark-- Index. The Russell 1000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks of the 1000 largest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3000 largest U.S. companies based on total market capitalization. The companies in the Russell Midcap--Registered Trademark-- Index are considered representative of medium-sized companies.
In selecting securities for the fund's portfolio, the portfolio managers
normally seek to identify those companies that are, in their view, undervalued
relative to current or projected earnings, or to the current market value of
assets owned by the company. The portfolio managers perform significant due
diligence and fundamental research on companies under consideration. The primary
emphasis of the portfolio managers' search for undervalued equity securities is
normally in five categories: (1) out of favor cyclical growth companies; (2)
established growth companies that are undervalued compared to historical
relative valuation parameters; (3) companies where there is early but tangible
evidence of improving prospects which are not yet reflected in the value of the
companies' equity securities; (4) companies whose equity securities are selling
at prices that do not yet reflect the current market value of their assets; and
(5) companies that the portfolio managers believe will translate high or
increasing returns on invested capital into improving levels of free cash flow
and value for shareholders.
The portfolio managers consider selling a security if the price target set by the portfolio managers is exceeded, there is deterioration in fundamentals over an 18 to 24 month period, or more compelling investment opportunities exist.
The fund may invest up to 25% of its total assets in foreign securities. The fund may also invest up to 20% of its assets in equity securities of companies that have market capitalizations, at the time of purchase, in other market capitalization ranges. The fund may invest up to 20% of its assets in investment-grade debt securities, U.S. government securities, and high-quality money market instruments, including shares of affiliated money market funds. The fund employs a risk management strategy to reduce volatility. Pursuant to this strategy, the fund generally invests a substantial amount of its assets in cash and cash equivalents. 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 increase the portion of its assets held in cash, cash equivalents (including shares of affiliated money market funds) or high quality debt instruments. As a result, the fund may not achieve its investment objective.
The fund's investment in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
There is a risk that you could lose all or a portion of your investment in the fund. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of mid-size companies are more volatile than those of large companies.
- Equity Securities Risk--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 Risk--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.
- Convertible Securities Risk--The values of convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and a price that is unfavorable to the fund.
- Interest Rate Risk--Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on specific characteristics of each bond. A measure investors commonly use to determine this sensitivity is called duration. The longer the duration of a particular bond, the greater is its price sensitivity to interest rates. Similarly, a longer duration portfolio of securities has greater price sensitivity. Duration is determined by a number of factors including coupon rate, whether the coupon is fixed or floating, time to maturity, call or put features, and various repayment features.
- Credit Risk--Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. Such a deterioration of financial health may result in a reduction of the credit rating of the issuer's securities and may lead to the issuer's inability to honor it's contractual obligations including making timely payment of interest and principal. Credit ratings are a measure of credit quality. Although a downgrade or upgrade of a bond's credit ratings may or may not affect its price, a decline in credit quality may make bonds less attractive, thereby driving up the yield on the bond and driving down the price. Declines in credit quality can result in bankruptcy for the issuer and permanent loss of investment.
- U.S. Government Obligations Risk--The fund may invest in obligations issued by
agencies and instrumentalities of the U.S. Government. These obligations vary
in the level of support they receive from the U.S. Government. They may be:
(i) supported by the full faith and credit of the U.S. Treasury, such as those
of the Government National Mortgage Association; (ii) supported by the right
of the issuer to borrow from the U.S. Treasury, such as those of the Federal
National Mortgage Association; (iii) supported by the discretionary authority
of the U.S. Government to purchase the issuer's obligations, such as those of
the former Student Loan Marketing Association; or (iv) supported only by the
credit of the issuer, such as those of the Federal Farm Credit Bureau. The
U.S. Government may choose not to provide financial support to U.S. Government
sponsored agencies or instrumentalities if it is not legally obligated to do
so, in which case, if the issuer defaulted, the underlying fund holding
securities of such issuer might not be able to recover its investment from the
U.S. Government.
- Market Capitalization Risk--Stocks fall into three broad market capitalization categories--large, medium and small. Investing primarily in one category carries the risk that, due to current market conditions, that category may be out of favor with investors. Small and mid-sized companies tend to be more vulnerable to adverse developments and more volatile than larger companies. Investments in small and mid-sized companies may involve special risks, including those associated with dependence on a small management group, little or no operating history, little or no track record of success, and limited product lines, markets and financial resources. Also, there may be less publicly available information about the issuers of the securities or less market interest in such securities than in the case of larger companies, each of which can cause significant price volatility. The securities of small and mid-sized may be illiquid, restricted as to resale, or may trade less frequently and in smaller volume than more widely held securities, which may make it difficult for a fund to establish or close out a position in these securities at prevailing market prices.
- Derivatives Risk--The value of "derivatives"--so-called because their value "derives" from the value of an underlying asset (including an underlying security), reference rate or index--may rise or fall more rapidly than other investments. For some derivatives, it is possible to lose more than the amount invested in the derivative. Derivatives may be used to create synthetic exposure to an underlying asset or to hedge a portfolio risk. If the fund uses derivatives to "hedge" a portfolio risk, it is possible that the hedge may not succeed. This may happen for various reasons, including unexpected changes in the value of the rest of the fund's portfolio. Over the counter derivatives are also subject to counterparty risk, which is the risk that the other party to the contract will not fulfill its contractual obligation to complete the transaction with the fund.
- Leveraging Risk--The use of derivatives may give rise to a form of leverage. Leverage may cause the fund to be more volatile than if the portfolio had not been leveraged because leverage can exaggerate the effect of any increase or decrease in the value of securities held by the fund.
- Cash/Cash Equivalents Risk--To the extent the fund holds cash or cash equivalents rather than equity securities, the fund may not achieve its investment objective and it may underperform its peer group and benchmark index, particularly during periods of strong market performance.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series II shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2002................................................................... -11.20%
2003................................................................... 27.05%
2004................................................................... 13.57%
2005................................................................... 7.27%
2006................................................................... 10.98%
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During the period shown in the bar chart, the highest quarterly return was 16.39% (quarter ended June 30, 2003) and the lowest quarterly return was -14.48% (quarter ended September 30, 2002).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ----------------------------------------------------------------------------------------- (for the periods ended 5 SINCE INCEPTION December 31, 2006) 1 YEAR YEARS INCEPTION DATE ----------------------------------------------------------------------------------------- AIM V.I. Mid Cap Core Equity Fund 10.98% 8.81% 9.71% 09/10/01 S&P 500--Registered Trademark-- Index(1,2) 15.78 6.19 6.13(3) 08/31/01(3) Russell Midcap--Registered Trademark-- Index(1,2,4) 15.26 12.88 12.66(3) 08/31/01(3) Lipper VUF Mid-Cap Core Funds Index(1,2,5) 13.06 11.39 11.32(3) 08/31/01(3) Lipper Mid-Cap Core Funds Index(1,2,6) 13.44 10.10 10.03(3) 08/31/01(3) ----------------------------------------------------------------------------------------- |
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell Midcap--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Mid-Cap Core Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Mid-Cap Core Funds Index as its peer-group index instead of the Lipper Mid-Cap Core Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Mid-Cap Core Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month end closest to the
inception date of the fund's Series II shares.
(4) The Russell Midcap--Registered Trademark-- Index measures the performance of the 800 smallest companies in the Russell 1000--Registered Trademark-- Index. These stocks represent approximately 25% of the total market capitalization of the Russell 1000--Registered Trademark-- Index. The Russell 1000--Registered Trademark-- Index is comprised of 1,000 of the largest capitalized U.S. domiciled companies whose common stock is traded in the United States. This index makes up the largest 1,000 stocks of the Russell 3000 universe.
(5) The Lipper VUF Mid-Cap Core Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Mid-Cap Core Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic midcap stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index and was the first benchmark of midcap stock price movement.
(6) The Lipper Mid-Cap Core Funds Index is an equally weighted representation of the largest funds in the Lipper Mid-Cap Core Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Mid-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three year sales-per-share growth value, compared to the S&P MidCap 400 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P MidCap 400 Index consists of 400 domestic midcap stocks chosen for market size, liquidity, and industry group representation. It is a market-value weighted index and was the first benchmark of midcap stock price movement.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees 0.72% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.32 Acquired Fund Fees and Expenses(2) 0.02 Total Annual Fund Operating Expenses(3) 1.31 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Mid Cap Core Equity Fund $133 $415 $718 $1,579 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ------------------------------------------------------------------------------------------------------ Annual Expense Ratio(1) 1.31% 1.31% 1.31% 1.31% 1.31% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.69% 7.52% 11.48% 15.60% 19.86% End of Year Balance $10,369.00 $10,751.62 $11,148.35 $11,559.72 $11,986.28 Estimated Annual Expenses $ 133.42 $ 138.34 $ 143.44 $ 148.74 $ 154.23 ------------------------------------------------------------------------------------------------------ SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 ------------------------------------------------------------------------------------------------------ Annual Expense Ratio(1) 1.31% 1.31% 1.31% 1.31% 1.31% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 24.29% 28.87% 33.63% 38.56% 43.67% End of Year Balance $12,428.57 $12,887.19 $13,362.72 $13,855.81 $14,367.09 Estimated Annual Expenses $ 159.92 $ 165.82 $ 171.94 $ 178.28 $ 184.86 ------------------------------------------------------------------------------------------------------ |
(1) Your actual expenses may be higher or lower than those shown above.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.72% of average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
- Ronald S. Sloan (lead manager), Senior Portfolio Manager, who has been responsible for the fund since its inception in 2001 and has been associated with the advisor and/or its affiliates since 1998.
- Brian Nelson, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, Mr. Nelson was a senior telecommunications analyst for RCM Global Investors.
- Douglas Asiello, Portfolio Manager, who has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 2001.
They are assisted by the advisor's Mid/Large Cap Core Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays this fee out of its assets on an ongoing basis, over time this fee will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typi-
cally on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profit on these payments for those services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period $ 13.52 $ 13.04 $ 12.01 $ 9.51 $ 10.71
-----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) 0.10 0.03 (0.00)(a) (0.03)(a) (0.04)(a)
-----------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.38 0.92 1.62 2.60 (1.16)
=============================================================================================================================
Total from investment operations 1.48 0.95 1.62 2.57 (1.20)
=============================================================================================================================
Less distributions:
Dividends from net investment income (0.10) (0.04) (0.00) -- --
-----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (1.48) (0.43) (0.59) (0.07) --
=============================================================================================================================
Total distributions (1.58) (0.47) (0.59) (0.07) --
=============================================================================================================================
Net asset value, end of period $ 13.42 $ 13.52 $ 13.04 $ 12.01 $ 9.51
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Total return(b) 10.98% 7.27% 13.57% 27.05% (11.20)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $56,766 $50,380 $33,495 $ 4,874 $ 1,214
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Ratio of expenses to average net assets 1.29%(c) 1.28% 1.29% 1.32% 1.45%(d)
=============================================================================================================================
Ratio of net investment income (loss) to average net assets 0.68%(c) 0.25% (0.00)% (0.24)% (0.37)%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
Portfolio turnover rate 83% 70% 55% 37% 36%
_____________________________________________________________________________________________________________________________
=============================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $53,987,158.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.55% for the year ended December 31, 2002.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
The fund's most recent portfolio holdings, as filed
on Form N-Q, have also been made available to
insurance companies issuing variable products that
invest in the fund.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIMCCE-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. MONEY MARKET FUND
PROSPECTUS
MAY 1, 2007
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Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Money Market Fund's investment objective is to provide as high a level of current income as is consistent with the preservation of capital and liquidity.
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.
There can be no assurance that the fund will be able to maintain a stable net asset value of $1.00 per share.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is to provide as high a level of current income as is consistent with the preservation of capital and liquidity.
The fund's investment objective may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund invests only in high-quality U.S. dollar-denominated short term
debt obligations, including: (i) securities issued by the U.S. Government or its
agencies; (ii) bankers' acceptances, certificates of deposit, and time deposits
from U.S. or foreign banks; (iii) repurchase agreements; (iv) commercial paper;
(v) taxable municipal securities; (vi) master notes; and (vii) cash equivalents.
The fund invests in accordance with industry-standard requirements for money market funds for the quality, maturity and diversification of investments.
The fund may invest up to 50% of its assets in U.S. dollar-denominated foreign securities.
The fund may invest in securities issued or guaranteed by companies in the financial services industry.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting securities for the fund's portfolio, the portfolio managers focus on securities that offer safety, liquidity, and a competitive yield. The portfolio managers conduct a credit analysis of each potential issuer prior to the purchase of its securities.
The portfolio managers normally hold portfolio securities to maturity. The portfolio managers consider selling a security: (i) if the issuer's credit quality declines, (ii) as a result of interest rate changes, or (iii) to enhance yield.
The fund typically maintains a portion of its assets in cash. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash is likely to negatively affect the fund's investment results. As a result, the fund may not achieve its investment objective.
Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Additionally, the fund's yield will vary as the short-term securities in its portfolio mature or are sold, and the proceeds are reinvested in other securities.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the issuers whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations.
- Money Market Fund Risk--The fund is a money market fund and an investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in the fund. Additionally, the fund's yield will vary as the short-term securities in its portfolio mature or are sold and the proceeds are reinvested in other securities.
- Interest Rate Risk--Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on specific characteristics of each bond. A measure investors commonly use to determine this sensitivity is called duration. The longer the duration of a particular bond the greater is its price sensitivity to interest rate changes. Similarly, a longer duration portfolio of securities has greater price sensitivity. Duration is determined by a number of factors including coupon rate, whether the coupon is fixed or floating, time to maturity, call or put features, and various repayment features.
- Credit Risk--Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. Such a deterioration of financial health may result in a reduction of the credit rating of the issuer's securities and may lead to the issuer's inability to honor its contractual obligations including making timely payment of interest and principal. Credit ratings are a measure of credit quality. Although a downgrade or upgrade of a bond's credit ratings may or may not affect its price, a decline in credit quality may make bonds less attractive, thereby driving up the yield on the bond and driving down the price. Declines in credit quality may result in bankruptcy for the issuer and permanent loss of investment. Changes in the credit quality of financial institutions providing liquidity and credit enhancements could cause the fund to experience a loss and may affect its share price.
- U.S. Government Obligations Risk--The fund may invest in obligations issued by
agencies and instrumentalities of the U.S. Government. These obligations vary
in the level of support they receive from the U.S. Government. They may be:
(i) supported by the full faith and credit of the U.S. Treasury, such as those
of the Government National Mortgage Association; (ii) supported by the right
of the issuer to borrow from the U.S. Treasury, such as those of the Federal
National Mortgage Association; (iii) supported by the
AIM V.I. MONEY MARKET FUND
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
discretionary authority of the U.S. Government to purchase the issuer's
obligation, such as those of the former Student Loan Marketing Association; or
(iv) supported only by the credit of the issuer, such as those of the Federal
Farm Credit Bureau. The U.S. Government may choose not to provide financial
support to the U.S. Government sponsored agencies or instrumentalities if it
is not legally obligated to do so, in which case, if the issuer defaulted, the
fund holding securities of such issuer might not be able to recover its
investment from the U.S. Government.
- Municipal Securities Risk--The value of, payment of interest and repayment of principal with respect to, and the ability of the fund to sell, a municipal security may be affected by constitutional amendments, legislative enactments, executive orders, administrative regulations and voter initiatives as well as the economics of the regions in which the issuers in which the fund invests are located. Revenue bonds are generally not backed by the taxing power of the issuing municipality. To the extent that a municipal security in which the fund invests is not heavily followed by the investment community or such security issue is relatively small, the security may be difficult to value or sell at a fair price.
- Foreign Securities Risk--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.
- Repurchase Agreement Risk--The fund enters into repurchase agreements. 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 a decline in the value of those securities, reduced levels of income and expenses of enforcing its rights.
- Risks Relating to Banking and Financial Services Industries--To the extent that the fund invests in securities issued or guaranteed by companies in the banking and financial services industries, the fund's performance will depend to a greater extent on the overall condition of those industries. Financial services companies are highly dependent on the supply of short-term financing. The value of securities of issuers in the banking and financial services industry can be sensitive to changes in government regulation and interest rates and to economic downturns in the United States and abroad.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart shown below provides 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 assumes the reinvestment of dividends and capital gains. The bar chart shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
1997................................................................... 5.13%
1998................................................................... 5.06%
1999................................................................... 4.66%
2000................................................................... 5.83%
2001................................................................... 3.61%
2002................................................................... 1.19%
2003................................................................... 0.58%
2004................................................................... 0.69%
2005................................................................... 2.51%
2006................................................................... 4.27%
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During the periods shown in the bar chart, the highest quarterly return was 1.49% (quarters ended September 30, 2000 and December 31, 2000) and the lowest quarterly return was 0.09% (quarters ended June 30, 2004).
PERFORMANCE TABLE
The following performance table reflects the fund's performance over the periods
indicated.
The fund is not managed to track the performance of any particular index. A
fund's past performance is not necessarily an indication of its future
performance. The performance table shown below does not reflect charges assessed
in connection with your variable product; if it did, the performance shown would
be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------- (for the periods ended INCEPTION December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE ------------------------------------------------------------------------------- AIM V.I. Money Market Fund 4.27% 1.84% 3.34% 05/05/93 ------------------------------------------------------------------------------- |
The AIM V.I. Money Market Fund's seven day yield on December 29, 2006 was 4.56%. For the current seven day yield, call (800) 347-4246.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.40% Other Expenses 0.50 Acquired Fund Fees and Expenses(2) None Total Annual Fund Operating Expenses(3) 0.90 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Money Market Fund $92 $287 $498 $1,108 ------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 0.90% 0.90% 0.90% 0.90% 0.90%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 4.10% 8.37% 12.81% 17.44% 22.25%
End of Year Balance $10,410.00 $10,836.81 $11,281.12 $11,743.65 $12,225.13
Estimated Annual Expenses $ 91.85 $ 95.61 $ 99.53 $ 103.61 $ 107.86
-----------------------------------------------------------------------------------------------
SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 0.90% 0.90% 0.90% 0.90% 0.90%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 27.26% 32.48% 37.91% 43.57% 49.45%
End of Year Balance $12,726.37 $13,248.15 $13,791.32 $14,356.76 $14,945.39
Estimated Annual Expenses $ 112.28 $ 116.89 $ 121.68 $ 126.67 $ 131.86
-----------------------------------------------------------------------------------------------
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable
products that invest in the fund.
A description of the fund's policies and procedures with respect to the
disclosure of the fund's portfolio holdings is available in the fund's Statement
of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.40% of average daily net assets.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activity in the
insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund value portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor,
pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund values all its securities at amortized cost.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent a fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund determines its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open for business.
TAXES
The amount, timing and character of distributions to the separate account may be
affected by special tax rules applicable to certain investments purchased by the
fund. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products and should consult their tax advisors before investing.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares on each business day and pays any dividends, if any, monthly to separate accounts of insurance companies issuing the variable products. The fund expects that its distributions will consist primarily of ordinary income.
CAPITAL GAINS DISTRIBUTIONS
The fund may distribute long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management
and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES I
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
2006 2005 2004 2003
------- ------- ------- ------- 2002
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04 0.02 0.01 0.01 0.01
=====================================================================================================================
Less dividends from net investment income (0.04) (0.02) (0.01) (0.01) (0.01)
=====================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_____________________________________________________________________________________________________________________
=====================================================================================================================
Total return(a) 4.27% 2.51% 0.69% 0.58% 1.19%
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $43,568 $44,923 $54,008 $77,505 $119,536
_____________________________________________________________________________________________________________________
=====================================================================================================================
Ratio of expenses to average net assets 0.90%(b) 0.82% 0.75% 0.66% 0.67%
=====================================================================================================================
Ratio of net investment income to average net assets 4.20%(b) 2.46% 0.67% 0.59% 1.18%
_____________________________________________________________________________________________________________________
=====================================================================================================================
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(a) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(b) Ratios are based on average daily net assets of $45,897,600.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIMKT-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. MONEY MARKET FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Money Market Fund's investment objective is to provide as high a level of current income as is consistent with the preservation of capital and liquidity.
This prospectus contains important information about the Series II class shares (Series II 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.
There can be no assurance that the fund will be able to maintain a stable net asset value of $1.00 per share.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 3 FEE TABLE AND EXPENSE EXAMPLE 4 ------------------------------------------------------ Fees and Expenses of the Fund 4 Expense Example 4 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 5 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 5 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 6 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 7 Trade Activity Monitoring 7 Fair Value Pricing 8 Risks 8 Pricing of Shares 8 Taxes 9 Dividends and Distributions 9 Share Classes 9 Distribution Plan 9 Payments to Insurance Companies 9 FINANCIAL HIGHLIGHTS 11 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is to provide as high a level of current income as is consistent with the preservation of capital and liquidity.
The fund's investment objective may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund invests only in high-quality U.S. dollar-denominated short term
debt obligations, including: (i) securities issued by the U.S. Government or its
agencies; (ii) bankers' acceptances, certificates of deposit, and time deposits
from U.S. or foreign banks; (iii) repurchase agreements; (iv) commercial paper;
(v) taxable municipal securities; (vi) master notes; and (vii) cash equivalents.
The fund invests in accordance with industry-standard requirements for money market funds for the quality, maturity and diversification of investments.
The fund may invest up to 50% of its assets in U.S. dollar-denominated foreign securities.
The fund may invest in securities issued or guaranteed by companies in the financial services industry.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
In selecting securities for the fund's portfolio, the portfolio managers focus on securities that offer safety, liquidity, and a competitive yield. The portfolio managers conduct a credit analysis of each potential issuer prior to the purchase of its securities.
The portfolio managers normally hold portfolio securities to maturity. The portfolio managers consider selling a security: (i) if the issuer's credit quality declines, (ii) as a result of interest rate changes, or (iii) to enhance yield.
The fund typically maintains a portion of its assets in cash. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash is likely to negatively affect the fund's investment results. As a result, the fund may not achieve its investment objective.
Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Additionally, the fund's yield will vary as the short-term securities in its portfolio mature or are sold, and the proceeds are reinvested in other securities.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the issuers whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations.
- Money Market Fund Risk--The fund is a money market fund and an investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of an investment at $1.00 per share, it is possible to lose money by investing in the fund. Additionally, the fund's yield will vary as the short-term securities in its portfolio mature or are sold and the proceeds are reinvested in other securities.
- Interest Rate Risk--Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. Specific bonds differ in their sensitivity to changes in interest rates depending on specific characteristics of each bond. A measure investors commonly use to determine this sensitivity is called duration. The longer the duration of a particular bond the greater is its price sensitivity to interest rate changes. Similarly, a longer duration portfolio of securities has greater price sensitivity. Duration is determined by a number of factors including coupon rate, whether the coupon is fixed or floating, time to maturity, call or put features, and various repayment features.
- Credit Risk--Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. Such a deterioration of financial health may result in a reduction of the credit rating of the issuer's securities and may lead to the issuer's inability to honor its contractual obligations including making timely payment of interest and principal. Credit ratings are a measure of credit quality. Although a downgrade or upgrade of a bond's credit ratings may or may not affect its price, a decline in credit quality may make bonds less attractive, thereby driving up the yield on the bond and driving down the price. Declines in credit quality may result in bankruptcy for the issuer and permanent loss of investment. Changes in the credit quality of financial institutions providing liquidity and credit enhancements could cause the fund to experience a loss and may affect its share price.
- U.S. Government Obligations Risk--The fund may invest in obligations issued by
agencies and instrumentalities of the U.S. Government. These obligations vary
in the level of support they receive from the U.S. Government. They may be:
(i) supported by the full
faith and credit of the U.S. Treasury, such as those of the Government National
Mortgage Association; (ii) supported by the right of the issuer to borrow from
the U.S. Treasury, such as those of the Federal National Mortgage Association;
(iii) supported by the discretionary authority of the U.S. Government to
purchase the issuer's obligation, such as those of the former Student Loan
Marketing Association; or (iv) supported only by the credit of the issuer,
such as those of the Federal Farm Credit Bureau. The U.S. Government may
choose not to provide financial support to the U.S. Government sponsored
agencies or instrumentalities if it is not legally obligated to do so, in
which case, if the issuer defaulted, the fund holding securities of such
issuer might not be able to recover its investment from the U.S. Government.
- Municipal Securities Risk--The value of, payment of interest and repayment of principal with respect to, and the ability of the fund to sell, a municipal security may be affected by constitutional amendments, legislative enactments, executive orders, administrative regulations and voter initiatives as well as the economics of the regions in which the issuers in which the fund invests are located. Revenue bonds are generally not backed by the taxing power of the issuing municipality. To the extent that a municipal security in which the fund invests is not heavily followed by the investment community or such security issue is relatively small, the security may be difficult to value or sell at a fair price.
- Foreign Securities Risk--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.
- Repurchase Agreement Risk--The fund enters into repurchase agreements. 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 a decline in the value of those securities, reduced levels of income and expenses of enforcing its rights.
- Risks Relating to Banking and Financial Services Industries--To the extent that the fund invests in securities issued or guaranteed by companies in the banking and financial services industries, the fund's performance will depend to a greater extent on the overall condition of those industries. Financial services companies are highly dependent on the supply of short-term financing. The value of securities of issuers in the banking and financial services industry can be sensitive to changes in government regulation and interest rates and to economic downturns in the United States and abroad.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The bar chart shown below provides 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 assumes the reinvestment of dividends and capital gains. The bar chart shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1997*................................................................... 4.87%
1998*................................................................... 4.80%
1999*................................................................... 4.40%
2000*................................................................... 5.57%
2001*................................................................... 3.36%
2002.................................................................... 0.93%
2003.................................................................... 0.33%
2004.................................................................... 0.44%
2005.................................................................... 2.26%
2006.................................................................... 4.01%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 1.43% (quarter ended December 31, 2000) and the lowest quarterly return was 0.03% (quarter ended June 30, 2004).
PERFORMANCE TABLE
The following performance table reflects the fund's performance over the periods indicated. The fund is not managed to track the performance of any particular index. A fund's past performance is not necessarily an indication of its future performance. The performance tables shown below do not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
-------------------------------------------------------------------------------
SERIES I
(for the periods ended INCEPTION
December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE
-------------------------------------------------------------------------------
AIM V.I. Money Market Fund 4.01% 1.58% 3.08% 05/05/93(1)
-------------------------------------------------------------------------------
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The AIM V.I. Money Market Fund's seven day yield on December 29, 2006 was 4.31%. For the current seven day yield, call (800) 347-4246.
(1) The returns shown for the one year and five year periods are the historical performance of the fund's Series II shares. The return shown for the ten year period is the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date shown in the table is that of the fund's Series I shares. The inception date of the fund's Series II shares is December 16, 2001.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly
or indirectly, when a variable product owner buys, holds, or redeems interest in
an insurance company separate account that invests in the Series II shares of
the fund but does not represent the effect of any fees or other expenses
assessed in connection with your variable product, and if it did, expenses would
be higher.
SHAREHOLDER FEES ------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES ------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A ------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) ------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES ------------------------------------------------------------------------------- Management Fees 0.40% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.50 Acquired Fund Fees and Expenses(2) None Total Annual Fund Operating Expenses(3) 1.15 ------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees, and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the
Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------------------------------------------------- AIM V.I. Money Market Fund $117 $365 $633 $1,398 ---------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.15% 1.15% 1.15% 1.15% 1.15%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.85% 7.85% 12.00% 16.31% 20.79%
End of Year Balance $10,385.00 $10,784.82 $11,200.04 $11,631.24 $12,079.04
Estimated Annual Expenses $ 117.21 $ 121.73 $ 126.41 $ 131.28 $ 136.33
--------------------------------------------------------------------------------------------------
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
--------------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.15% 1.15% 1.15% 1.15% 1.15%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.44% 30.27% 35.29% 40.49% 45.90%
End of Year Balance $12,544.09 $13,027.03 $13,528.57 $14,049.42 $14,590.33
Estimated Annual Expenses $ 141.58 $ 147.03 $ 152.69 $ 158.57 $ 164.68
--------------------------------------------------------------------------------------------------
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable
products that invest in the fund.
A description of the fund's policies and procedures with respect to the
disclosure of the fund's portfolio holdings is available in the fund's Statement
of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fund's fiscal year ended December 31, 2006, the advisor received compensation of 0.40% of average daily net assets.
A discussion regarding the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund values all its securities at amortized cost.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent a fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund determines its net asset value as of 12:00 noon Eastern Time on each day the NYSE is open for business.
TAXES
The amount, timing and character of distributions to the separate account may be affected by special tax rules applicable to certain investments purchased by the fund. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products and should consult their tax advisors before investing.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares on each business day and pays any dividends, if any, monthly to separate accounts of insurance companies issuing the variable products. The fund expects that its distributions will consist primarily of ordinary income.
CAPITAL GAINS DISTRIBUTIONS
The fund may distribute long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent
insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the fund's financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
SERIES II
---------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------
2006 2005 2004 2003 2002
------ ------ ------- ------- ------
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.04 0.02 0.004 0.003 0.01
=================================================================================================================
Less dividends from net investment income (0.04) (0.02) (0.004) (0.003) (0.01)
=================================================================================================================
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________________________________________________________________________________________________________________
=================================================================================================================
Total return(a) 4.01% 2.26% 0.44% 0.33% 0.93%
_________________________________________________________________________________________________________________
=================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,341 $3,080 $ 6,076 $ 2,382 $7,831
_________________________________________________________________________________________________________________
=================================================================================================================
Ratio of expenses to average net assets 1.15%(b) 1.07% 1.00% 0.91% 0.92%
=================================================================================================================
Ratio of net investment income to average net assets 3.95%(b) 2.21% 0.42% 0.34% 0.93%
_________________________________________________________________________________________________________________
=================================================================================================================
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(a) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(b) Ratios are based on average daily net assets of $2,490,676.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
|
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VIMKT-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. SMALL CAP EQUITY FUND
PROSPECTUS
MAY 1, 2007
|
SERIES I SHARES
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Small Cap Equity Fund's investment objective is long-term 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 8 Risks 8 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in equity securities, including convertible securities, of small-capitalization companies. In complying with this 80% investment requirement, the fund's investments may include synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a small-capitalization company if it has a market capitalization, at the time of purchase, no larger than the largest capitalized company included in the Russell 2000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 2000--Registered Trademark-- Index measures the performance of the 2,000 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies. The Russell 2000--Registered Trademark-- Index is widely regarded as representative of small-cap stocks. The largest capitalized company included in the Russell 2000--Registered Trademark--Index during the above-referenced period ended March 31, 2007, had a market capitalization of $5.6 billion. Under normal conditions, the top 10 holdings may comprise up to 25% of the fund's total assets. The fund may also invest up to 25% of its total assets in foreign securities.
Among factors which the portfolio managers may consider when purchasing securities are (1) the growth prospects for a company's products; (2) the economic outlook for its industry; (3) a company's new product development; (4) its operating management capabilities; (5) the relationship between the price of the security and its estimated value; (6) relevant market, economic and political environments; and (7) financial characteristics, such as a balance sheet analysis and return on assets. The portfolio managers consider whether to sell a particular security when any one of these factors materially changes.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The fund typically maintains a portion if its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
When suitable opportunities are available, the fund may invest in initial public offerings (IPOs) of securities.
There is a risk that you could lose all or a portion of your investment in the fund. 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. This is especially true with respect to equity securities of small-cap companies, whose prices may go up and down more than equity securities of larger, more- established companies. Also, since equity securities of small-cap companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
- Foreign Securities Risk--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.
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
Because a large percentage of the fund's assets may be invested in a limited number of securities, a change in the value of these securities could significantly affect the value of your investment in the fund.
The principal risk of investments in synthetic instruments is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Some synthetic instruments are more sensitive to interest rate changes and market price fluctuations than others. Also, synthetic instruments are subject to counter party risk which is the risk that the other party in the transaction will not fulfill its contractual obligation to complete the transaction with the fund.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The prices of IPO securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be no assurance that the fund will have favorable IPO investment opportunities.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
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
----------- -------
2004................................................................... 9.4l%
2005................................................................... 8.11%
2006................................................................... 17.44%
|
(1) The fund's return during certain periods was positively impacted by its investments in IPOs. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. For additional information regarding the fund's performance, please see the "Financial Highlights" section of this prospectus.
During the periods shown in the bar chart, the highest quarterly return was 11.66% (quarter ended December 31, 2004) and the lowest quarterly return was -7.24% (quarter ended September 30, 2004).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS* ------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR INCEPTION DATE ------------------------------------------------------------------------------- AIM V.I. Small Cap Equity Fund 17.44% 14.72% 08/29/03 S&P 500--Registered Trademark-- Index(1,2) 15.78 12.81(3) 08/31/03(3) Russell 2000(R) Index(1,2,4) 18.37 16.13(3) 08/31/03(3) Lipper VUF Small-Cap Core Funds Index(1,2,5) 14.60 14.07(3) 08/31/03(3) Lipper Small-Cap Core Funds Index(1,2,6) 13.70 15.71(3) 08/31/03(3) ------------------------------------------------------------------------------- |
* The fund's return during certain periods was positively impacted by its investments in IPOs. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. For additional information regarding the fund's performance, please see the "Financial Highlights" section of this prospectus.
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell 2000--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Small-Cap Core Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Small-Cap Core Funds Index as its peer-group instead of the Lipper Small-Cap Core Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Small-Cap Core Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month-end closest to the
inception date of the fund's Series I shares.
(4) The Russell 2000--Registered Trademark-- Index is comprised of the smallest
2,000 stocks in the Russell 3000 Index. This index is widely regarded as
representative of small-cap stocks. The Russell 3000 Index is widely
regarded as the standard for measuring the U.S. stock market performance.
This index includes a representative sample of 3,000 of the largest U.S.
companies in leading industries and represents approximately 98% of the
investable U.S. Equity market.
(5) The Lipper VUF Small-Cap Core Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Small-Cap Core Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 250% of the dollar-weighted median market capitalization of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Small-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SmallCap 600 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P SmallCap 600 Index consists of 600 small cap domestic stocks chosen for market size, liquidity, (bid-asked spread, ownership, share turnover and number of no trade days) and industry group representation. It is a market-value weighted index, with each stock's weight in the Index proportionate to its market value.
(6) The Lipper Small-Cap Core Funds Index is an equally weighted representation of the largest funds in the Lipper Small-Cap Core Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 250% of the dollar-weighted median market capitalization of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Small-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SmallCap 600 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P SmallCap 600 Index consists of 600 small cap domestic stocks chosen for market size, liquidity, (bid-asked spread, ownership, share turnover and number of no trade days) and industry group representation. It is a market-value weighted index, with each stock's weight in the index proportionate to its market value.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above tables means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees(2) 0.75% Other Expenses 0.53 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses 1.29 Fee Waiver and/or Expense Reimbursements(2,4) 0.13 Net Annual Fund Operating Expenses 1.16 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.745% (for average net assets up to $250 million) to 0.64% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) As a result of a reorganization which will occur on or about May 1, 2007,
the fund's Total Annual Fund Operating Expenses have been restated to
reflect such reorganization. The advisor for AIM V.I. Small Cap Equity Fund
has contractually agreed to waive advisory 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) of Series I shares to
1.15% of average daily net assets. In determining the advisor's obligation
to waive advisory 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 number reflected above: (i) interest; (ii) taxes;
(iii) dividend expense on short sales; (iv) extraordinary items; (v)
expenses related to a merger or reorganization, as approved by the fund's
Board of Trustees; and (vi) expenses that the fund has incurred but did not
actually pay because of an expense offset arrangement. Currently, the
expense offset arrangements from which the fund may benefit 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. In addition,
the fund may also benefit from a one time credit to be used to offset future
custodian expenses. These credits are used to pay certain expenses incurred
by the fund. This expense limitation agreement is in effect through at least
April 30, 2008.
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.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Small Cap Equity Fund $118 $396 $695 $1,545 --------------------------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 -------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.16% 1.29% 1.29% 1.29% 1.29% Cumulative Return Before Expenses 5.00% 10.25% 15.76% 21.55% 27.63% Cumulative Return After Expenses 3.84% 7.69% 11.69% 15.83% 20.13% End of Year Balance $10,384.00 $10,769.25 $11,168.79 $11,583.15 $12,012.88 Estimated Annual Expenses $ 118.23 $ 136.44 $ 141.50 $ 146.75 $ 152.19 -------------------------------------------------------------------------------------------- SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10 -------------------------------------------------------------------------------------------- Annual Expense Ratio(1) 1.29% 1.29% 1.29% 1.29% 1.29% Cumulative Return Before Expenses 34.01% 40.71% 47.75% 55.13% 62.89% Cumulative Return After Expenses 24.59% 29.21% 34.00% 38.97% 44.13% End of Year Balance $12,458.56 $12,920.77 $13,400.13 $13,897.28 $14,412.87 Estimated Annual Expenses $ 157.84 $ 163.70 $ 169.77 $ 176.07 $ 182.60 -------------------------------------------------------------------------------------------- |
(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to
the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.57% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Juliet S. Ellis (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, she was Managing Director and from 1993 to 2004, she was a senior portfolio manager with JPMorgan Fleming Asset Management. As the lead manager, Ms. Ellis generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Ms. Ellis may perform these functions, and the nature of these functions, may change from time to time.
- Juan R. Hartsfield, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, he was co-portfolio manager with JPMorgan Fleming Asset Management.
They are assisted by the advisor's Small Cap Core/Growth Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment companies or series thereof that offer their shares exclusively to insurance companies, their separate accounts and/or qualified plans). The fund plans to offer its shares to fund of funds following receipt of the requested regulatory relief. Due to differences in tax treatment and other considerations, the interests of fund shareholders, including variable product owners and plan participants investing in the fund (whether directly or indirectly through fund of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of the variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the fund through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the fund. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by the fund are to be valued at current market value if market quotations are readily available. All other securities and assets of the fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of
long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the fund may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times and with different lag times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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". This prospectus relates to the Series I shares.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product own-
ers' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
For a discussion of how investments in IPOs affected the fund's performance, see the "Performance Information" section of this prospectus.
SERIES I
----------------------------------------------------
AUGUST 29, 2003
(DATE OPERATIONS
YEAR ENDED DECEMBER 31, COMMENCED) TO
-------------------------------- DECEMBER 31,
2006 2005 2004 2003
------- ------- ------- ----------------
Net asset value, beginning of period $ 13.46 $ 12.45 $ 11.38 $ 10.00
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.01)(a) (0.06)(a) (0.06)(a) (0.01)
------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.37 1.07 1.13 1.41
==================================================================================================================
Total from investment operations 2.36 1.01 1.07 1.40
==================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.00) (0.01)
------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.63) -- -- (0.01)
==================================================================================================================
Total distributions (0.63) -- (0.00) (0.02)
==================================================================================================================
Net asset value, end of period $ 15.19 $ 13.46 $ 12.45 $ 11.38
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 17.44% 8.11% 9.41% 13.94%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $93,243 $42,752 $25,964 $ 2,231
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.15%(c) 1.22% 1.30% 1.32%(d)
------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.33%(c) 1.57% 2.01% 12.86%(d)
==================================================================================================================
Ratio of net investment income (loss) to average net assets (0.06)%(c) (0.44)% (0.56)% (0.44)%(d)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(e) 52% 70% 156% 26%
__________________________________________________________________________________________________________________
==================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $66,208,932.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VISCE-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. SMALL CAP EQUITY FUND
PROSPECTUS
MAY 1, 2007
|
Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Small Cap Equity Fund's investment objective is long-term growth of capital.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 6 ------------------------------------------------------ The Advisor 6 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 7 ------------------------------------------------------ Purchase and Redemption of Shares 7 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 8 Risks 8 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
The fund's investment objective is long-term growth of capital. The investment objective of the fund may be changed by the Board of Trustees (the Board) without shareholder approval.
The fund seeks to meet its objective by investing, normally, at least 80% of its assets in equity securities, including convertible securities, of small-capitalization companies. In complying with this 80% investment requirement, the fund's investments may include synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund's direct investments, and may include warrants, futures, options, exchange-traded funds and American Depositary Receipts. The fund considers a company to be a small-capitalization company if it has a market capitalization, at the time of purchase, no larger than the largest capitalized company included in the Russell 2000--Registered Trademark-- Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. The Russell 2000--Registered Trademark-- Index measures the performance of the 2,000 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies. The Russell 2000--Registered Trademark-- Index is widely regarded as representative of small-cap stocks. The largest capitalized company included in the Russell 2000--Registered Trademark--Index during the above-referenced period ended March 31, 2007, had a market capitalization of $5.6 billion. Under normal conditions, the top 10 holdings may comprise up to 25% of the fund's total assets. The fund may also invest up to 25% of its total assets in foreign securities.
Among factors which the portfolio managers may consider when purchasing securities are (1) the growth prospects for a company's products; (2) the economic outlook for its industry; (3) a company's new product development; (4) its operating management capabilities; (5) the relationship between the price of the security and its estimated value; (6) relevant market, economic and political environments; and (7) financial characteristics, such as a balance sheet analysis and return on assets. The portfolio managers consider whether to sell a particular security when any one of these factors materially changes.
The fund's investments in the types of securities described in this prospectus vary from time to time, and at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
The fund typically maintains a portion if its assets in cash, which is generally invested in money market funds advised by the fund's advisor. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
When suitable opportunities are available, the fund may invest in initial public offerings (IPOs) of securities.
There is a risk that you could lose all or a portion of your investment in the fund. 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. This is especially true with respect to equity securities of small-cap companies, whose prices may go up and down more than equity securities of larger, more- established companies. Also, since equity securities of small-cap companies may not be traded as often as equity securities of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
- Foreign Securities Risk--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 gener-
ally 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.
The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund.
Because a large percentage of the fund's assets may be invested in a limited number of securities, a change in the value of these securities could significantly affect the value of your investment in the fund.
The principal risk of investments in synthetic instruments is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Some synthetic instruments are more sensitive to interest rate changes and market price fluctuations than others. Also, synthetic instruments are subject to counter party risk which is the risk that the other party in the transaction will not fulfill its contractual obligation to complete the transaction with the fund.
There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The prices of IPO securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be no assurance that the fund will have favorable IPO investment opportunities.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series II shares from year to year.
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
2004................................................................... 9.23%
2005................................................................... 7.97%
2006................................................................... 17.12%
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(1) The fund's return during certain periods was positively impacted by its investments in IPOs. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. For additional information regarding the fund's performance, please see the "Financial Highlights" section of this prospectus.
During the periods shown in the bar chart, the highest quarterly return was 11.68% (quarter ended December 31, 2004) and the lowest quarterly return was -7.33% (quarter ended September 30, 2004).
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS(*) ------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR INCEPTION DATE ------------------------------------------------------------------------------- AIM V.I. Small Cap Equity Fund 17.12% 14.50% 08/29/03 S&P 500--Registered Trademark-- Index(1,2) 15.78 12.81(3) 08/31/03(3) Russell 2000--Registered Trademark-- Index(1,2,4) 18.37 16.13(3) 08/31/03(3) Lipper VUF Small-Cap Core Funds Index(1,2,5) 14.60 14.07(3) 08/31/03(3) Lipper Small-Cap Core Funds Index(1,2,6) 13.70 15.71(3) 08/31/03(3) ------------------------------------------------------------------------------- |
* The fund's return during certain periods was positively impacted by its investments in IPOs. There can be no assurance that the fund will have favorable IPO investment opportunities in the future. For additional information regarding the fund's performance, please see the "Financial Highlights" section of this prospectus.
(1) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The fund has also included the Russell 2000--Registered Trademark-- Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Small-Cap Core Funds Index (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Small-Cap Core Funds Index as its peer-group instead of the Lipper Small-Cap Core Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Small-Cap Core Funds Index.
(2) The indices may not reflect payment of fees, expenses or taxes.
(3) The average annual total return given is since the month-end closest to the
inception date of the fund's Series II shares.
(4) The Russell 2000--Registered Trademark-- Index is comprised of the smallest
2,000 stocks in the Russell 3000 Index. This index is widely regarded as
representative of small-cap stocks. The Russell 3000 Index is widely
regarded as the standard for measuring the U.S. stock market performance.
This index includes a representative sample of 3,000 of the largest U.S.
companies in leading industries and represents approximately 98% of the
investable U.S. Equity market.
(5) The Lipper VUF Small-Cap Core Funds Index is an equally weighted representation of the largest variable insurance underlying funds in the Lipper Small-Cap Core Funds Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 250% of the dollar-weighted median market capitalization of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Small-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SmallCap 600 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P SmallCap 600 Index consists of 600 small cap domestic stocks chosen for market size, liquidity, (bid-asked spread, ownership, share turnover and number of no trade days) and industry group representation. It is a market-value weighted index, with each stock's weight in the Index proportionate to its market value.
(6) The Lipper Small-Cap Core Funds Index is an equally weighted representation of the largest funds in the Lipper Small-Cap Core Category. These funds, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) less than 250% of the dollar-weighted median market capitalization of the smallest 500 of the middle 1,000 securities of the S&P SuperComposite 1500 Index. Small-Cap Core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SmallCap 600 Index. The S&P SuperComposite 1500 Index is a market cap weighted index made up of 1,500 liquid securities of companies with market capitalizations of $300 million and above, and represents the small-, mid-, and large-cap markets. The S&P SmallCap 600 Index consists of 600 small cap domestic stocks chosen for market size, liquidity, (bid-asked spread, ownership, share turnover and number of no trade days) and industry group representation. It is a market-value weighted index, with each stock's weight in the Index proportionate to its market value.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES ------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES ------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A ------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) ------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES ------------------------------------------------------------------------------- Management Fees(2) 0.75% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.53 Acquired Fund Fees and Expenses(3) 0.01 Total Annual Fund Operating Expenses 1.54 Fee Waiver and/or Expense Reimbursements(2,4) 0.13 Net Annual Fund Operating Expenses 1.41 ------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Through April 30, 2008, the fund's advisor has contractually agreed to waive a portion of its advisory fees to the extent necessary so that the advisory fees payable by the fund does not exceed a specified maximum annual advisory fee rate, wherein the fee rate includes breakpoints and is based upon net asset levels. The fund's maximum annual advisory fee rate ranges from 0.745% (for average net assets up to $250 million) to 0.64% (for average net assets over $10 billion).
(3) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(4) As a result of a reorganization which will occur on or about May 1, 2007, the fund's Total Annual Fund Operating Expenses have been restated to reflect such reorganization. The advisor for AIM V.I. Small Cap Equity Fund has contractually agreed to waive advisory 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) of Series II shares to 1.40% of average daily nets assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. The Fee Waiver has been restated to reflect this agreement. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------- AIM V.I. Small Cap Equity Fund $144 $474 $ 827 $1,823 ---------------------------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.41% 1.54% 1.54% 1.54% 1.54%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.59% 7.17% 10.88% 14.72% 18.69%
End of Year Balance $10,359.00 $10,717.42 $11,088.24 $11,471.90 $11,868.83
Estimated Annual Expenses $ 143.53 $ 162.29 $ 167.90 $ 173.71 $ 179.72
-----------------------------------------------------------------------------------------------
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.54% 1.54% 1.54% 1.54% 1.54%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 22,79% 27.04% 31.44% 35.99% 40.69%
End of Year Balance $12,279.49 $12,704.36 $13,143.93 $13,598.71 $14,069.22
Estimated Annual Expenses $ 185.94 $ 192.38 $ 199.03 $ 205.92 $ 213.04
-----------------------------------------------------------------------------------------------
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(1) Your actual expenses may be higher or lower than those shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and
related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.57% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board's approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
The following individuals are jointly and primarily responsible for the day-to-day management of the fund's portfolio:
- Juliet S. Ellis (lead manager), Senior Portfolio Manager, who has been responsible for the fund since 2004 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, she was Managing Director and from 1993 to 2004, she was a senior portfolio manager with JPMorgan Fleming Asset Management. As the lead manager, Ms. Ellis generally has final authority over all aspects of the fund's investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction techniques, portfolio risk assessment, and the management of daily cash flows in accordance with portfolio holdings. The degree to which Ms. Ellis may perform these functions, and the nature of these functions, may change from time to time.
- Juan R. Hartsfield, Portfolio Manager, who has been responsible for the fund since 2006 and has been associated with the advisor and/or its affiliates since 2004. From 2000 to 2004, he was co-portfolio manager with JPMorgan Fleming Asset Management.
They are assisted by the advisor's Small Cap Core/Growth Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio managers' investments in the fund, a description of their compensation structure, and information regarding other accounts they manage.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the
future, the fund may offer them to pension and retirement plans that qualify for special federal income tax treatment. The fund and AIM have applied for regulatory relief to enable the fund's shares to be sold to and held by one or more fund of funds (open-end management investment companies or series thereof that offer their shares exclusively to insurance companies, their separate accounts and/or qualified plans). The fund plans to offer its shares to fund of funds following receipt of the requested regulatory relief. Due to differences in tax treatment and other considerations, the interests of fund shareholders, including variable product owners and plan participants investing in the fund (whether directly or indirectly through fund of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of the variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the fund through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the fund. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by the fund are to be valued at current market value if market quotations are readily available. All other securities and assets of the fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the
tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the fund may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund, the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times and with different lag times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. 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 insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays this fee out of its assets on an ongoing basis, over time this fee will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those
investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
The information for the fiscal years ended 2006 and 2005 has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request. Information prior to fiscal year 2005 was audited by other public accountants.
For a discussion of how investments in IPOs affected the fund's performance, see the "Performance Information" section of this prospectus.
SERIES II
----------------------------------------------------
AUGUST 29, 2003
(DATE OPERATIONS
COMMENCED) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------- ----------------
2006 2005 2004 2003
------- ------- ------- ----------------
Net asset value, beginning of period $ 13.41 $ 12.43 $ 11.38 $ 10.00
------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04)(a) (0.08)(a) (0.08)(a) (0.02)
------------------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 2.36 1.06 1.13 1.41
==================================================================================================================
Total from investment operations 2.32 0.98 1.05 1.39
==================================================================================================================
Less distributions:
Dividends from net investment income -- -- (0.00) (0.00)
------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.63) -- -- (0.01)
==================================================================================================================
Total distributions (0.63) -- (0.00) (0.01)
==================================================================================================================
Net asset value, end of period $ 15.10 $ 13.41 $ 12.43 $ 11.38
__________________________________________________________________________________________________________________
==================================================================================================================
Total return(b) 17.20% 7.88% 9.23% 13.88%
__________________________________________________________________________________________________________________
==================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 854 $ 679 $ 622 $ 569
__________________________________________________________________________________________________________________
==================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.40%(c) 1.42% 1.45% 1.47%(d)
------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 1.58%(c) 1.82% 2.26% 13.11%(d)
==================================================================================================================
Ratio of net investment income (loss) to average net assets (0.31)%(c) (0.64)% (0.71)% (0.59)%(d)
__________________________________________________________________________________________________________________
==================================================================================================================
Portfolio turnover rate(e) 52% 70% 156% 26%
__________________________________________________________________________________________________________________
==================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $769,948.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable products, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
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THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com VISCE-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. TECHNOLOGY FUND
PROSPECTUS
MAY 1, 2007
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Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Technology Fund's investment objective is capital growth.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 2 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's Investment objective is capital growth.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers engaged primarily in technology-related industries. The principal type of equity securities purchased by the fund is common stocks.
Companies in technology-related industries include, but are not limited to, those involved in the design, manufacture, distribution, licensing, or provision of various applied technologies, hardware, software, semiconductors, telecommunications equipment, as well as services and service-related companies in information technology.
The fund considers a company to be doing business in technology-related industries if it meets at least one of the following tests: (1) at least 50% of its gross income or its net sales come from activities in technology-related industries; (2) at least 50% of its assets are devoted to producing revenues in technology-related industries; or (3) based on other available information, the portfolio manager determines that its primary business is within technology-related industries.
The fund may invest up to 25% of its total assets in securities of non-U.S. issuers doing business in technology-related industries. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation.
The fund's investments in the types of securities described in this prospectus vary from time to time, and, at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
A majority of the fund's assets are invested in the securities of market-leading technology companies doing business in various subsectors in the technology universe (the "core holdings"). The portfolio manager believes that the securities that comprise the fund's core holdings will maintain or improve their market share regardless of overall economic conditions. These companies are believed to have a strategic advantage over many of their competitors. The portfolio manager believes that these core holdings will provide attractive long-term investment returns.
The remainder of the fund's assets are invested in the securities of faster-growing, more volatile technology companies that the portfolio manager believes to be emerging leaders in their fields (the "tactical holdings"). The fund will typically hold tactical holdings for a shorter period of time than the fund's core holdings. The portfolio manager believes that these tactical holdings will provide attractive near-term investment returns.
The fund is driven by two investment themes: (1) increasing usage of information technology in business and consumer products will continue over the long-term, yielding the potential for above-average growth rates for the sector; and (2) technology will continue to create new market opportunities through continual innovation that create periodic exceptional growth opportunities for investors in technology.
In selecting securities for the fund, the portfolio manager uses a research oriented investment approach using a combination of quantitative, fundamental and valuation analysis. The portfolio manager focuses on attractively valued, well-managed companies in the information-technology sector with the potential to deliver attractive returns. While the portfolio manager may invest in stocks of any market capitalization, the portfolio manager tends to favor mid- and large-cap stocks to avoid liquidity problems that can be associated with some small-cap stocks.
The portfolio manager will consider selling the security of a company if, among other things, (1) its fundamentals change; (2) its earnings are disrupted or disappoint; (3) its management or strategic direction changes; (4) its valuation becomes excessive compared to similar investment opportunities; (5) its technical analysis turns negative; or (6) a more attractive investment opportunity is identified.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's adviser. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective.
When suitable opportunities are available, the fund may invest in initial public offerings (IPOs) of securities.
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. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of small companies are more volatile than those of mid-size companies or large companies.
- Equity Securities Risk--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. These factors will probably affect the equity securities of smaller companies more than the equity securities of larger, more-established companies. Also, because equity securities of smaller companies may not be traded as often as equity securities of larger, more- established companies, it may be difficult or impossible for the fund to sell these securities at a desirable price.
- Sector Fund Risk--The fund's investments are concentrated in a comparatively narrow segment of the economy, the technology sector. This means that the fund's investment concentration in the technology sector is higher than most mutual funds and the broad securities market. Consequently, the fund may tend to be more volatile than other mutual funds, and the value of the fund's investments and consequently the value of an investment in the fund may tend to rise and fall more rapidly.
- Technology Industry Risk--Many of the products and services offered in technology-related industries are subject to rapid obsolescence, which may lower the value of the securities of the companies in this sector.
- Foreign Securities Risk--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.
- Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If a fund does trade in this way, it may incur increased costs, which can lower the actual return of the fund. Active trading may also increase short term gains and losses, which may affect the taxes that must be paid.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio manager will produce the desired results.
An investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The prices of IPO securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be no assurance that the fund will have favorable IPO investment opportunities.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series I shares from year to year.
BAR CHART
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1998................................................................... 25.69%
1999................................................................... 158.93%
2000................................................................... -23.42%
2001................................................................... -45.82%
2002................................................................... -46.84%
2003................................................................... 45.29%
2004................................................................... 4.63%
2005................................................................... 2.17%
2006................................................................... 10.48%
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During the periods shown in the bar chart, the highest quarterly return was 66.65% (quarter ended December 31, 1999) and the lowest quarterly return was -42.18% (quarter ended September 30, 2001). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------- (for the periods ended SINCE INCEPTION December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE ------------------------------------------------------------------------------------------- AIM V.I. Technology Fund(1) 10.48% -1.82% 3.67%(2) 05/20/97(2) S&P 500--Registered Trademark-- Index(3,4) 15.78 6.19 7.18(2) 05/31/97(2) Goldman Sachs Technology Composite Index(3,4,5) 8.37 0.65 4.95(2) 05/31/97(2) Lipper VUF Science & Technology Funds Category Average(3,4,6) 9.67 1.68 6.93(2) 05/31/97(2) Lipper Science & Technology Funds Index(3,4,7) 6.37 0.76 4.44(2) 05/31/97(2) ------------------------------------------------------------------------------------------- |
(1) For the periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Total return figures include re-invested dividends and capital gain distributions and the effect of the fund's expenses.
(2) The fund commenced investment operations on May 20, 1997. Index comparisons began on May 31, 1997.
(3) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance. The fund has also included the Goldman Sachs Technology Composite Index, which the fund believes more closely reflects the performance of the securities in which the fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Science & Technology Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Science & Technology Funds Category Average as its peer-group instead of the Lipper Science & Technology Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Science & Technology Funds Category Average.
(4) The indices may not reflect payment of fees, expenses or taxes.
(5) The Goldman Sachs Technology Composite Index is a modified capitalization-weighted index currently composed of companies involved in the technology industry. The index is rebalanced semiannually and becomes effective after the close of business on expiration Friday, or the third Friday, of January and July.
(6) The Lipper VUF Science & Technology Funds Category Average represents the average of all the variable insurance underlying science and technology funds tracked by Lipper Inc.
(7) The Lipper Science & Technology Funds Index is an equally weighted representation of the largest funds that make up the Lipper Science & Technology Category. These funds invest more than 65% of their portfolios in science and technology stocks.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series I shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.75% Other Expenses 0.37 Acquired Fund Fees and Expenses(2) 0.00 Total Annual Fund Operating Expenses(3) 1.12 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series I shares of the funds with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Technology Fund $114 $356 $617 $1,363 ---------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.12% 1.12% 1.12% 1.12% 1.12%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.88% 7.91% 12.10% 16.45% 20.96%
End of Year Balance $10,388.00 $10,791.05 $11,209.75 $11,644.69 $12,096.50
Estimated Annual Expenses $ 114.17 $ 118.60 $ 123.20 $ 127.98 $ 132.95
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(1) Your actual expenses may be higher or lower than these shown.
SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
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Annual Expense Ratio(1) 1.12% 1.12% 1.12% 1.12% 1.12%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.66% 30.53% 35.60% 40.86% 46.33%
End of Year Balance $12,565.84 $13,053.40 $13,559.87 $14,085.99 $14,632.53
Estimated Annual Expenses $ 138.11 $ 143.47 $ 149.03 $ 154.82 $ 160.82
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(1) Your actual expenses may
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The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.75% of average daily net assets.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
Lanny H. Sachnowitz, Senior Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1987.
He is assisted by the advisor's Technology Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of his compensation structure, and information regarding other accounts he manages.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the
Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the fund will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board of Trustees.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payment may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES I
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period $ 12.69 $ 12.42 $ 11.87 $ 8.17 $ 15.37
-------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.08) (0.07) (0.04)(a) (0.08) (0.00)(b)
-------------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 1.41 0.34 0.59 3.78 (7.20)
=========================================================================================================================
Total from investment operations 1.33 0.27 0.55 3.70 (7.20)
=========================================================================================================================
Net asset value, end of period $ 14.02 $ 12.69 $ 12.42 $ 11.87 $ 8.17
_________________________________________________________________________________________________________________________
=========================================================================================================================
Total return(c) 10.48% 2.17% 4.63% 45.29% (46.84)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $173,321 $190,700 $200,556 $171,546 $105,508
_________________________________________________________________________________________________________________________
=========================================================================================================================
Ratio of expenses to average net assets 1.12%(d) 1.12% 1.15% 1.10% 1.11%
=========================================================================================================================
Ratio of net investment income (loss) to average net assets (0.54)%(d) (0.60)% (0.39)%(a) (0.85)% (0.96)%
_________________________________________________________________________________________________________________________
=========================================================================================================================
Portfolio turnover rate 116% 114% 137% 89% 92%
_________________________________________________________________________________________________________________________
=========================================================================================================================
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(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $(0.09) and
(0.82)%, respectively.
(b) The net investment income (loss) per share was calculated after permanent book tax differences, such as net operating losses, which were reclassified from accumulated net investment income (loss) to paid in capital. Had net investment income (loss) per share been calculated using the current method, which is before reclassification of net operating losses, net investment income (loss) per share would have been $(0.12) for the year ended December 31, 2002.
(c) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(d) Ratios are based on average daily net assets of $181,889,717.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VITEC-PRO-1 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. TECHNOLOGY FUND
PROSPECTUS
MAY 1, 2007
|
Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Technology Fund's investment objective is capital growth.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVE AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 2 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trading Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVE AND STRATEGIES
The fund's investment objective is capital growth.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers engaged primarily in technology-related industries. The principal type of equity securities purchased by the fund is common stocks.
Companies in technology-related industries include, but are not limited to, those involved in the design, manufacture, distribution, licensing, or provision of various applied technologies, hardware, software, semiconductors, telecommunications equipment, as well as services and service-related companies in information technology.
The fund considers a company to be doing business in technology- related industries if it meets at least one of the following tests: (1) at least 50% of its gross income or its net sales come from activities in technology-related industries; (2) at least 50% of its assets are devoted to producing revenues in technology-related industries; or (3) based on other available information, the portfolio manager determines that its primary business is within technology-related industries.
The fund may invest up to 25% of its total assets in securities of non-U.S. issuers doing business in technology-related industries. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation.
The fund's investments in the types of securities described in this prospectus vary from time to time, and, at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
A majority of the fund's assets are invested in the securities of market-leading technology companies doing business in various subsectors in the technology universe (the "core holdings"). The portfolio manager believes that the securities that comprise the fund's core holdings will maintain or improve their market share regardless of overall economic conditions. These companies are believed to have a strategic advantage over many of their competitors. The portfolio manager believes that these core holdings will provide attractive long-term investment returns.
The remainder of the fund's assets are invested in the securities of faster-growing, more volatile technology companies that the portfolio manager believes to be emerging leaders in their fields (the "tactical holdings"). The fund will typically hold tactical holdings for a shorter period of time than the fund's core holdings. The portfolio manager believes that these tactical holdings will provide attractive near-term investment returns.
The fund is driven by two investment themes: (1) increasing usage of information technology in business and consumer products will continue over the long-term, yielding the potential for above-average growth rates for the sector; and (2) technology will continue to create new market opportunities through continual innovation that create periodic exceptional growth opportunities for investors in technology.
In selecting securities for the fund, the portfolio manager uses a research oriented investment approach using a combination of quantitative, fundamental and valuation analysis. The portfolio manager focuses on attractively valued, well-managed companies in the information-technology sector with the potential to deliver attractive returns. While the portfolio manager may invest in stocks of any market capitalization, the portfolio manager tends to favor mid- and large-cap stocks to avoid liquidity problems that can be associated with some small-cap stocks.
The portfolio manager will consider selling the security of a company if, among other things, (1) its fundamentals change; (2) its earnings are disrupted or disappoint; (3) its management or strategic direction changes; (4) its valuation becomes excessive compared to similar investment opportunities; (5) its technical analysis turns negative; or (6) a more attractive investment opportunity is identified.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's adviser. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective.
When suitable opportunities are available, the fund may invest in initial public offerings (IPOs) of securities.
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. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of small companies are more volatile than those of mid-size companies or large companies.
- Equity Securities Risk--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. These factors will probably affect the equity securities of smaller companies more than the equity securities of larger, more-established companies. Also, because equity securities of smaller companies may not be traded as often as equity securities of larger, more- established companies, it may be difficult or impossible for the fund to sell these securities at a desirable price.
- Sector Fund Risk--The fund's investments are concentrated in a comparatively narrow segment of the economy, the technology sector. This means that the fund's investment concentration in the technology sector is higher than most mutual funds and the broad securities market. Consequently, the fund may tend to be more volatile than other mutual funds, and the value of the fund's investments and consequently the value of an investment in the fund may tend to rise and fall more rapidly.
- Technology Industry Risk--Many of the products and services offered in technology-related industries are subject to rapid obsolescence, which may lower the value of the securities of the companies in this sector.
- Foreign Securities Risk--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.
- Active Trading Risk--The fund may engage in active and frequent trading of portfolio securities to achieve its investment objective. If a fund does trade in this way, it may incur increased costs, which can lower the actual return of the fund. Active trading may also increase short term gains and losses, which may affect the taxes that must be paid.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio manager will produce the desired results.
An investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
The prices of IPO securities may go up and down more than prices of equity securities of companies with longer trading histories. In addition, companies offering securities in IPOs may have less experienced management or limited operating histories. There can be no assurance that the fund will have favorable IPO investment opportunities.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I shares and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1998*.................................................................. 25.37%
1999*.................................................................. 158.29%
2000*.................................................................. -23.61%
2001*.................................................................. -45.96%
2002*.................................................................. -46.98%
2003................................................................... 44.93%
2004................................................................... 4.21%
2005................................................................... 1.94%
2006................................................................... 10.22%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 66.55% (quarter ended December 31, 1999) and the lowest quarterly return was -42.22% (quarter ended September 30, 2001). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO Funds Group, Inc. (INVESCO), an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index, style-specific index and peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------------------------------------------------
SERIES I
(for the periods ended SINCE INCEPTION
December 31, 2006) 1 YEAR 5 YEARS INCEPTION DATE
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AIM V.I. Technology Fund(1) 10.22% (2.09)% 3.39%(2) 05/20/97(2)
S&P 500--Registered Trademark--
Index(3,4) 15.78 6.19 7.18(2) 05/31/97(2)
Goldman Sachs Technology Composite
Index(3,4,5) 8.37 0.65 4.95(2) 05/31/97(2)
Lipper VUF Science & Technology Funds
Category Average(3,4,6) 9.67 1.68 6.93(2) 05/31/97(2)
Lipper Science & Technology Funds
Index(3,4,7) 6.73 0.76 4.44(2) 05/31/97(2)
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(1) The return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the Fund's Series II shares since their inception and the restated historical performance of the predecessor Fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the Fund's Series II shares is April 30, 2004. For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Total return figures include reinvested dividends and capital gain distributions and the effect of the Fund's expenses.
(2) Series I shares of the Fund commenced investment operations on May 20, 1997. Index comparisons began on May 31, 1997.
(3) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. The Fund has also included the Goldman Sachs Technology Composite Index, which the Fund believes more closely reflects the performance of the securities in which the Fund invests. In addition, the Lipper Variable Underlying Funds (VUF) Science & Technology Funds Category Average (which may or may not include the Fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Science & Technology Funds Category Average as its peer-group instead of the Lipper Science & Technology Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Science & Technology Funds Category Average.
(4) The indices may not reflect payment of fees, expenses or taxes.
(5) The Goldman Sachs Technology Composite Index is a modified capitalization-weighted index currently composed of companies involved in the technology industry. The index is rebalanced semiannually and becomes effective after the close of business on expiration Friday, or the third Friday, of January and July.
(6) The Lipper VUF Science & Technology Funds Category Average represents the average of all the variable insurance underlying science and technology funds tracked by Lipper Inc.
(7) The Lipper Science & Technology Funds Index is an equally weighted representation of the largest funds that make up the Lipper Science & Technology Category. These funds invest more than 65% of their portfolios in science and technology stocks.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees 0.75% Distribution and/or Service 12b-1 Fees 0.25 Other Expenses 0.37 Acquired Fund Fees and Expenses(2) 0.00 Total Annual Fund Operating Expenses(3) 1.37 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.45% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Technology Fund $139 $434 $750 $1,646 -------------------------------------------------------------------------------- |
The settlement agreement between A I M Advisors, Inc. and certain of its affiliates and the New York Attorney General requires A I M Advisors, Inc. and certain of its affiliates to provide certain hypothetical information regarding investment and expense information. The chart below is intended to reflect the annual and cumulative impact of the fund's expenses, including investment advisory fees and other fund costs, on the fund's return over a 10-year period. The example reflects the following:
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliate makes any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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Annual Expense Ratio(1) 1.37% 1.37% 1.37% 1.37% 1.37%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.63% 7.39% 11.29% 15.33% 19.52%
End of Year Balance $10,363.00 $10,739.18 $11,129.01 $11,532.99 $11,951.64
Estimated Annual Expenses $ 139.49 $ 144.55 $ 149.80 $ 155.23 $ 160.87
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(1) Your annual expenses may be higher or lower than those shown.
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
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Annual Expense Ratio(1) 1.37% 1.37% 1.37% 1.37% 1.37%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 23.85% 28.35% 33.01% 37.84% 42.84%
End of Year Balance $12,385.48 $12,835.08 $13,300.99 $13,783.82 $14,284.17
Estimated Annual Expenses $ 166.71 $ 172.76 $ 179.03 $ 185.53 $ 192.27
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(1) Your annual expenses may
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The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.75% of average daily net assets.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
Lanny H. Sachnowitz, Senior Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2007 and has been associated with the advisor and/or its affiliates since 1987.
He is assisted by the advisor's Technology Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of his compensation structure, and information regarding other accounts he manages.
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. Insurance companies
participating in the fund serve as the fund's designee for receiving orders of
separate accounts that invest in the fund. The fund may postpone the right of
redemption only under unusual circumstances, as allowed by the SEC, such as when
the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are
not designed to accommodate excessive short-term trading activity in violation
of our policies described below. Excessive short-term trading activity in the
fund's shares (i.e., purchases of fund shares followed shortly thereafter by
redemptions of such shares, or vice versa) may hurt the long-term performance of
the fund by requiring it to maintain an excessive amount of cash or to liquidate
portfolio holdings at a disadvantageous time, thus interfering with the
efficient management of the fund by causing it to incur increased brokerage and
administrative costs. Where excessive short-term trading activity seeks to take
advantage of arbitrage opportunities from stale prices for portfolio securities,
the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will
monitor, on a daily basis, selected aggregate purchase, or redemption trade
orders placed by insurance companies and/or their separate accounts. The AIM
Affiliates will seek to work with insurance companies to discourage variable
product owners from engaging in abusive trading practices. However, the ability
of the AIM Affiliates to monitor trades that are placed by variable product
owners is severely if not completely limited due to the fact that the insurance
companies trade with the funds through omnibus accounts, and maintain the
exclusive relationship with, and are responsible for maintaining the account
records of, their variable product owners. There may also be legal and
technological limitations on the ability of insurance companies to impose
restrictions on the trading practices of their variable product owners. As a
result, there can be no guarantee that the AIM Affiliates will be able to detect
or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market
quotations are readily available. All other securities and assets of a fund for
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of the fund.
Fair value pricing may reduce the ability of frequent traders to take advantage
of arbitrage opportunities resulting from potentially "stale" prices of
portfolio holdings. However, it cannot eliminate the possibility of frequent
trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective
in whole or in part to detect or prevent excessive short-term trading. Although
these policies and procedures, including the tools described above, are designed
to discourage excessive short-term trading, they do not eliminate the
possibility that excessive short-term trading activity in the funds will occur.
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities
in a manner that they believe is consistent with the best interests of long-term
investors. However, there can be no assurance that the AIM Affiliates will be
able to gain access to any or all of the information necessary to detect or
prevent excessive short-term trading by a variable product owner. While the AIM
Affiliates and the funds may seek to take actions with the assistance of the
insurance companies that invest in the fund, there is the risk that neither the
AIM Affiliates nor the fund will be successful in their efforts to minimize or
eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of the day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable
products for information regarding the tax consequences of owning such variable
products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II
shares. The plan allows the fund to pay distribution fees to life insurance
companies and others to promote the sale and distribution of Series II shares.
The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed
as a percentage of average daily net assets of the fund). Because the fund pays
these fees out of its assets on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typi-
cally on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets.
Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES II
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APRIL 30, 2004
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
------------------- DECEMBER 31,
2006 2005 2004
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Net asset value, beginning of period $12.62 $12.39 $11.09
------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.12) (0.11) (0.05)(a)
------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 1.41 0.34 1.35
======================================================================================================
Total from investment operations 1.29 0.23 1.30
======================================================================================================
Net asset value, end of period $13.91 $12.62 $12.39
______________________________________________________________________________________________________
======================================================================================================
Total return(b) 10.22% 1.86% 11.72%
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 134 $ 142 $ 166
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets 1.37%(c) 1.37% 1.40%(d)
======================================================================================================
Ratio of net investment income (loss) to average net assets (0.79)%(c) (0.85)% (0.64)%(a)(d)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(e) 116% 114% 137%
______________________________________________________________________________________________________
======================================================================================================
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(a) Net investment income (loss) per share and the ratio of net investment
income (loss) to average net assets include a special cash dividend received
of $3.00 per share owned of Microsoft Corp. on December 2, 2004. Net
investment income (loss) per share and the ratio of net investment income
(loss) to average net assets excluding the special dividend are $(0.10) and
(1.07)%, respectively.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $144,092.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED
ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO
INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT
INVEST IN THE FUND.
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You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VITEC-PRO-2 [AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
AIM V.I. UTILITIES FUND
PROSPECTUS
MAY 1, 2007
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Series I shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Utilities Fund's investment objectives are capital growth and income.
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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVES AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosures 8 Trade Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's investment objectives are capital growth and income.
The fund seeks to meet its objective by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers engaged primarily in utilities-related industries. The principal type of equity securities purchased by the fund is common stocks.
Companies in utilities-related industries may include, but are not limited to, those that provide, generate, transmit, store or distribute natural gas, oil, water or electricity as well as companies that provide telecommunications services, including local, long distance and wireless services.
The fund considers a company to be doing business in utilities-related industries if it meets at least one of the following tests: (1) at least 50% of its gross income or its net sales come from activities in utilities-related industries; (2) at least 50% of its assets are devoted to producing revenues in the utilities-related industries; or (3) based on other available information, the portfolio manager determines that its primary business is within the utilities-related industries.
The fund may invest up to 25% of its total assets in securities of non-U.S. issuers doing business in the utilities-related industries. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation.
The fund's investments in the types of securities described in this prospectus vary from time to time, and, at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
Normally, the portfolio manager seeks to keep the portfolio divided among the electric utility, natural gas, water and telecommunications industries. Weightings within the various segments are continually monitored, and the portfolio manager adjusts the portfolio weightings depending on current economic conditions. The portfolio manager constructs a portfolio of generally less than 70 stocks. Under normal market conditions, the fund's top ten holdings may comprise over 40% of the fund's total assets.
In selecting securities for the fund, the portfolio manger uses a "bottom-up" investment approach using a combination of quantitative, fundamental and valuation analysis. The portfolio manager focuses on natural gas, electricity, oil, water and telecommunications services companies with some or all of the following attributes: positive cash flows, predictable earnings, solid balance sheets, current and sustainable dividends, strong management, competitive position, and/or current and potential financial position. The investment strategy focuses on companies that (1) could potentially benefit from industry trends, such as increased demand for certain products and deregulation of state markets, and (2) are attractively valued relative to the rest of the market. The portfolio manager also monitors and may adjust industry and security position weights according to prevailing economic trends such as gross domestic product (GDP) growth and interest rate changes.
The portfolio manager will consider selling a security of a company if, among other things, its (1) earnings growth are threatened by deterioration in its fundamentals or change in the operating environment, (2) valuation becomes too high, (3) corporate strategy changes.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's adviser. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability, and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of small companies are more volatile than those of mid-size companies or large companies.
- Equity Securities Risk--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. These factors will probably affect the equity securities of smaller companies more than the equity securities of larger, more-established companies. Also, because equity securities of smaller compa-
PRINCIPAL RISKS OF INVESTING IN THE FUND (CONTINUED)
nies may not be traded as often as equity securities of larger, more- established companies, it may be difficult or impossible for the fund to sell securities at a desirable price.
- Sector Fund Risk--The fund's investments are concentrated in a comparatively narrow segment of the economy, the utilities sector. This means that the fund's investment concentration in the utilities sector is higher than most mutual funds and the broad securities market. Consequently, the fund may tend to be more volatile than other mutual funds, and consequently the value of an investment in the fund may tend to rise and fall more rapidly.
- Utilities Industry Risk--Governmental regulation, difficulties in obtaining adequate financing and investment return, environmental issues, prices of fuel for generation of electricity, availability of natural gas, risk associated with power marketing and trading, and risks associated with nuclear power facilities may adversely affect the market value of the fund's holdings. The recent trend towards deregulation in the utility industries presents special risks. Some companies may be faced with increased competition and may become less profitable.
- Foreign Securities Risk--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.
- Concentration Risk--Since a large percentage of the fund's assets may be invested in the securities of a limited number of companies, each investment has a greater effect on the fund's overall performance and any change in the value of those securities could significantly affect the value of your investment in the fund.
- Management Risk--There is no guarantee that the investment techniques and risk analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
The following bar chart shows changes in the performance of the fund's Series I shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1997................................................................... 23.41%
1998................................................................... 25.48%
1999................................................................... 19.13%
2000................................................................... 5.28%
2001................................................................... -32.41%
2002................................................................... -20.32%
2003................................................................... 17.47%
2004................................................................... 23.56%
2005................................................................... 16.83%
2006................................................................... 25.46%
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During the periods shown in the bar chart, the highest quarterly return was 17.18% (quarter ended December 31, 1998) and the lowest quarterly return was -21.60% (quarter ended September 30, 2001). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO, an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an unmanaged broad-based securities market index and a peer-group index. The fund is not managed to track the performance of any particular index, including the indices shown below, and consequently, the performance of the fund may deviate significantly from the performance of the indices shown below. A fund's past performance is not necessarily an indication of its future performance. The performance table shown below does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS ------------------------------------------------------------------------------------------ (for the periods ended INCEPTION December 31, 2006) 1 YEAR 5 YEARS 10 YEARS DATE ------------------------------------------------------------------------------------------ AIM V.I. Utilities Fund(1) 25.46% 11.13% 8.33% 12/30/94 S&P 500--Registered Trademark-- Index(2,3) 15.78 6.19 8.42 -- Lipper VUF Utility Funds Category Average(2,3,4) 27.74 11.05 9.55 -- Lipper Utility Funds Index(2,3,5) 26.89 11.18 9.48 -- ------------------------------------------------------------------------------------------ |
(1) For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. Total return figures include re-invested dividends and capital gain distributions and the effect of the fund's expenses.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 Index is considered one of the best overall indicators of market performance. In addition, the Lipper Variable Underlying Funds (VUF) Utility Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Utility Funds Category Average as its peer-group instead of the Lipper Utility Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Utility Funds Category Average.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The Lipper VUF Utility Funds Category Average represents the average of all the variable insurance underlying utility funds tracked by Lipper Inc.
(5) The Lipper Utility Funds Index is an equally weighted representation of the largest funds in the Lipper Utility Category. These funds invest at least 65% of their equity portfolios in utility shares.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly
or indirectly, when a variable product owner buys, holds, or redeems interest in
an insurance company separate account that invests in the Series I shares of the
fund but does not represent the effect of any fees or other expenses assessed in
connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES I SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES I SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series I share assets) SERIES I SHARES -------------------------------------------------------------------------------- Management Fees 0.60% Other Expenses 0.36 Acquired Fund Fees and Expenses(2) 0.00 Total Annual Fund Operating Expenses 0.96 Fee Waiver and/or Expense Reimbursements(3) 0.03 Net Annual Fund Operating Expenses 0.93 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series I shares to 0.93% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series I shares of the funds with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series I shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii) incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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. Utilities Fund $95 $303 $528 $1,175 ------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed. There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES I YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
--------------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 0.93% 0.96% 0.96% 0.96% 0.96%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 4.07% 8.27% 12.65% 17.20% 21.93%
End of Year Balance $10,407.00 $10,827.44 $11,264.87 $11,719.97 $12,193.46
Estimated Annual Expenses $ 94.89 $ 101.93 $ 106.04 $ 110.33 $ 114.78
--------------------------------------------------------------------------------------------------
SERIES I YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
--------------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 0.96% 0.96% 0.96% 0.96% 0.96%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 26.86% 31.99% 37.32% 42.87% 48.64%
End of Year Balance $12,686.07 $13,198.59 $13,731.82 $14,286.58 $14,863.76
Estimated Annual Expenses $ 119.42 $ 124.25 $ 129.27 $ 134.49 $ 139.92
--------------------------------------------------------------------------------------------------
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(1) Your annual expenses may be higher or lower than these shown.
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant. In consultation with AIM and the Independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing, and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IPG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.57% of average daily net assets, after fee waivers and/or expense.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
John S. Segner, Senior Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1997.
He is assisted by the Energy/Gold/Utilities Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of his compensation structure, and information regarding other accounts he manages.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the fund will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board of Trustees.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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.
PAYMENTS TO INSURANCE COMPANIES
ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make cash payments to the insurance company that issued your variable product or its affiliates in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typically on the level and/or type of considerations provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profit on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES I
---------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- ------- -------
Net asset value, beginning of period $ 17.83 $ 15.61 $ 12.95 $ 11.16 $ 14.08
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.47(a) 0.42(a) 0.42(a) 0.33(a) 0.19
-----------------------------------------------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 4.06 2.21 2.57 1.60 (3.05)
=======================================================================================================================
Total from investment operations 4.53 2.63 2.99 1.93 (2.86)
=======================================================================================================================
Less distributions:
Dividends from net investment income (0.70) (0.41) (0.33) (0.14) (0.06)
-----------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.43) -- -- -- --
=======================================================================================================================
Total distributions (1.13) (0.41) (0.33) (0.14) (0.06)
=======================================================================================================================
Net asset value, end of period $ 21.23 $ 17.83 $ 15.61 $ 12.95 $ 11.16
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b) 25.46% 16.83% 23.65% 17.38% (20.32)%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $139,080 $114,104 $159,554 $62,510 $31,204
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 0.93%(c) 0.93% 1.01% 1.08% 1.15%
-----------------------------------------------------------------------------------------------------------------------
Without fee waivers and/or expense reimbursements 0.96%(c) 0.96% 1.01% 1.08% 1.15%
=======================================================================================================================
Ratio of net investment income to average net assets 2.40%(c) 2.49% 3.09% 2.84% 2.59%
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate 38% 49% 52% 58% 102%
_______________________________________________________________________________________________________________________
=======================================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $119,343,568.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
|
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VIUTI-PRO-1
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
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AIM V.I. UTILITIES FUND
PROSPECTUS
MAY 1, 2007
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Series II shares
Shares of the fund are currently offered only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies. AIM V.I. Utilities Fund's investment objectives are capital growth and income.
This prospectus contains important information about the Series II class shares (Series II 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.
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
INVESTMENT OBJECTIVES AND STRATEGIES 1 ------------------------------------------------------ PRINCIPAL RISKS OF INVESTING IN THE FUND 1 ------------------------------------------------------ PERFORMANCE INFORMATION 3 ------------------------------------------------------ Annual Total Returns 3 Performance Table 4 FEE TABLE AND EXPENSE EXAMPLE 5 ------------------------------------------------------ Fees and Expenses of the Fund 5 Expense Example 5 HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION 6 ------------------------------------------------------ DISCLOSURE OF PORTFOLIO HOLDINGS 6 ------------------------------------------------------ FUND MANAGEMENT 7 ------------------------------------------------------ The Advisor 7 Advisor Compensation 7 Portfolio Manager(s) 7 OTHER INFORMATION 8 ------------------------------------------------------ Purchase and Redemption of Shares 8 Excessive Short-Term Trading Activity Disclosure 8 Trading Activity Monitoring 8 Fair Value Pricing 9 Risks 9 Pricing of Shares 9 Taxes 10 Dividends and Distributions 10 Share Classes 10 Distribution Plan 10 Payments to Insurance Companies 10 FINANCIAL HIGHLIGHTS 12 ------------------------------------------------------ OBTAINING ADDITIONAL INFORMATION Back Cover ------------------------------------------------------ |
The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con DISCIPLINA, Invest with DISCIPLINE, The AIM College Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our solutions. 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 and myaim.com are service marks of A I M Management Group Inc. AIM Trimark is a registered service mark of A I M Management Group Inc. and AIM Funds Management 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.
Shares of the fund are used as investment vehicles for variable annuity contracts and variable life insurance policies (variable products) issued by certain insurance companies. You cannot purchase shares of the fund directly. As an owner of a variable product (variable product owner) that offers the fund as an investment option, however, you may allocate your variable product values to a separate account of the insurance company that invests in shares of the fund.
Your variable product is offered through its own prospectus, which contains information about your variable product, including how to purchase the variable product and how to allocate variable product values to the fund.
INVESTMENT OBJECTIVES AND STRATEGIES
The fund's investment objectives are capital growth and income.
The fund seeks to meet its objectives by investing, normally, at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in equity securities of issuers engaged primarily in utilities-related industries. The principal type of equity securities purchased by the fund is common stocks.
Companies in utilities-related industries may include, but are not limited to, those that produce, generate, transmit, store or distribute natural gas, oil, water or electricity as well as companies that provide telecommunications services, including local, long distance and wireless services.
The fund considers a company to be doing business in utilities-related industries if it meets at least one of the following tests: (1) at least 50% of its gross income or its net sales come from activities in utilities-related industries; (2) at least 50% of its assets are devoted to producing revenues in utilities-related industries; or (3) based on other available information, the portfolio managers determine that its primary business is within utilities-related industries.
The fund may invest up to 25% of its total assets in securities of non-U.S. issuers doing business in utilities-related industries. Securities of Canadian issuers and American Depositary Receipts are not subject to this 25% limitation.
The fund's investments in the types of securities described in this prospectus vary from time to time, and, at any time, the fund may not be invested in all types of securities described in this prospectus. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.
Normally, the portfolio manager seeks to keep the portfolio divided among the electric utility, natural gas, water and telecommunications industries. Weightings within the various segments are continually monitored, and the portfolio manager adjusts the portfolio weightings depending on current economic conditions. The portfolio manager constructs a portfolio of generally less than 70 stocks. Under normal market conditions, the fund's top ten holdings may comprise over 40% of the fund's total assets.
In selecting securities for the fund, the portfolio manager uses a "bottom-up" investment approach using a combination of quantitative, fundamental and valuation analysis. The portfolio manager focuses on natural gas, electricity, oil, water and telecommunication services companies with some or all of the following attributes: positive cash flows, predictable earnings, solid balance sheets, current and sustainable dividends, strong management, competitive position, and/or current and potential financial position. The investment strategy focuses on companies that (1) could potentially benefit from industry trends, such as increased demand for certain products and deregulation of state markets, and (2) are attractively valued relative to the rest of the market. The portfolio manager also monitors and may adjust industry and security position weights according to prevailing economic trends such as gross domestic product (GDP) growth and interest rate changes.
The portfolio manager will consider selling a security of a company if, among other things, its (1) earnings growth are threatened by deterioration in its fundamentals or change in the operating environment, (2) valuation becomes too high, (3) corporate strategy changes.
The fund typically maintains a portion of its assets in cash, which is generally invested in money market funds advised by the fund's adviser. The fund holds cash to handle its daily cash needs, which include payment of fund expenses, redemption requests and securities transactions. The amount of cash held by the fund may increase if the fund takes a temporary defensive position. The fund may take a temporary defensive position when it receives unusually large redemption requests, or if there are inadequate investment opportunities due to adverse market, economic, political or other conditions. A larger amount of cash could negatively affect the fund's investment results in a period of rising market prices; conversely it could reduce the magnitude of the fund's loss in the event of falling market prices and provide liquidity to make additional investments or to meet redemptions. As a result, the fund may not achieve its investment objective.
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. 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 historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity.
The principal risks of investing in the fund are:
- Market Risk--The prices of and the income generated by securities held by the fund may decline in response to certain events, including those directly involving the companies whose securities are owned by the fund; general economic and market conditions; regional or global economic instability; and currency and interest rate fluctuations. Certain securities selected for the fund's portfolio may decline in value more than the overall stock market. In general, the securities of small companies are more volatile than those of mid-size companies or large companies.
- Equity Securities Risk--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. These factors will probably affect the equity securities of smaller companies more than the equity securities of larger, more-established companies. Also, because equity securities of smaller compa-
nies may not be traded as often as equity securities of larger, more- established companies, it may be difficult or impossible for the fund to sell these securities at a desirable price.
- Sector Fund Risk--The fund's investments are concentrated in a comparatively narrow segment of the economy, the utilities sector. This means that the fund's investment concentration in the utilities sector is higher than most mutual funds and the broad securities market. Consequently, the fund may tend to be more volatile than other mutual funds, and consequently the value of an investment in the fund may tend to rise and fall more rapidly.
- Utilities Industry Risk--Governmental regulation, difficulties in obtaining adequate financing and investment return, environmental issues, prices of fuel for generations of electricity, availability of natural gas, risks associated with power marketing and trading, and risks associated with nuclear power may adversely affect the market value of the fund's holdings. The recent trend towards deregulation in the utility industries presents special risks. Some companies may be faced with increased competition and may become less profitable.
- Foreign Securities Risk--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.
- Concentration Risk--Since a large percentage of the fund's assets may be invested in the securities of a limited number of companies, each investment has a greater effect on the fund's overall performance and any change in the value of those securities could significantly affect the value of your investment in the fund.
- Management Risk--There is no guarantee that the investment techniques and risks analyses used by the fund's portfolio managers will produce the desired results.
An investment in the fund is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
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 shown does not reflect charges assessed in connection with your variable product; if it did, the performance shown would be lower.
Series I shares are not offered by this prospectus. The Series I shares and Series II shares invest in the same portfolio of securities and will have substantially similar performance, except to the extent that the expenses borne by each share class differ. Series II shares have higher expenses (and therefore lower performance) resulting from its Rule 12b-1 plan, which provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund).
The following bar chart shows changes in the performance of the fund's shares from year to year.
ANNUAL
YEARS ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
1997*.................................................................. 23.10%
1998*.................................................................. 25.17%
1999*.................................................................. 18.84%
2000*.................................................................. 5.01%
2001*.................................................................. -32.58%
2002*.................................................................. -20.52%
2003................................................................... 17.18%
2004................................................................... 23.24%
2005................................................................... 16.55%
2006................................................................... 25.25%
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* The returns shown for these periods are the restated historical performance of the fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares.
** The return shown for this period is the blended return of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the fund's Series I shares adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004.
During the periods shown in the bar chart, the highest quarterly return was 17.11% (quarter ended December 31, 1998) and the lowest quarterly return was -21.65% (quarter ended September 30, 2001). For periods prior to April 30, 2004, performance shown above relates to a predecessor fund advised by INVESCO, an affiliate of A I M Advisors, Inc.
PERFORMANCE TABLE
The following performance table compares the fund's performance to those of an
unmanaged broad-based securities market index and a peer-group index. The fund
is not managed to track the performance of any particular index, including the
indices shown below, and consequently, the performance of the fund may deviate
significantly from the performance of the indices shown below. A fund's past
performance is not necessarily an indication of its future performance. The
performance table shown below does not reflect charges assessed in connection
with your variable product; if it did, the performance shown would be lower.
AVERAGE ANNUAL TOTAL RETURNS -------------------------------------------------------------------------------------- (for the periods ended SERIES I December 31, 2006) 1 YEAR 5 YEARS 10 YEARS INCEPTION DATE -------------------------------------------------------------------------------------- AIM V.I. Utilities Fund(1) 25.25% 10.87% 8.07% 12/30/94 S&P 500--Registered Trademark-- Index(2,3) 15.78 6.19 8.42 -- Lipper VUF Utility Funds Category Average(2,3,4) 27.74 11.05 9.55 -- Lipper Utility Funds Index(2,3,5) 26.89 11.18 9.48 -- -------------------------------------------------------------------------------------- |
(1) For periods prior to April 30, 2004, performance shown relates to a predecessor fund advised by INVESCO. The return shown for the one year period is the historical performance of the fund's Series II shares. The returns shown for other periods are the blended returns of the historical performance of the fund's Series II shares since their inception and the restated historical performance of the predecessor fund's Series I shares (for periods prior to inception of the Series II shares) adjusted to reflect the Rule 12b-1 fees applicable to the Series II shares. The inception date of the fund's Series II shares is April 30, 2004. Total return figures include reinvested dividends and capital gain distributions and the effect of the fund's expenses.
(2) The Standard & Poor's 500 Index is a market capitalization weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry. The index accounts for approximately 70% of the U.S. market. The performance of the S&P 500 is considered one of the best overall indicators of market performance. In addition, the Lipper Variable Underlying Funds (VUF) Utility Funds Category Average (which may or may not include the fund) is included for comparison to a peer-group. The fund has elected to use the Lipper VUF Utility Funds Category Average as its peer-group instead of the Lipper Utility Funds Index. Prior to the date of this prospectus, Lipper did not publish VUF indices. In 2006, Lipper began publishing these indices allowing the fund to now be compared to the Lipper VUF Utility Funds Category Average.
(3) The indices may not reflect payment of fees, expenses or taxes.
(4) The Lipper VUF Utility Funds Category Average represents the average of all the variable insurance underlying utility funds tracked by Lipper Inc.
(5) The Lipper Utility Funds Index is an equally weighted representation of the largest funds in the Lipper Utility Category. These funds invest at least 65% of their equity portfolios in utility shares.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses that are incurred, directly or indirectly, when a variable product owner buys, holds, or redeems interest in an insurance company separate account that invests in the Series II shares of the fund but does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
SHAREHOLDER FEES -------------------------------------------------------------------------------- (fees paid directly from your investment) SERIES II SHARES -------------------------------------------------------------------------------- Maximum Sales Charge (Load) N/A Maximum Deferred Sales Charge (Load) N/A -------------------------------------------------------------------------------- |
"N/A" in the above table means "not applicable."
ANNUAL FUND OPERATING EXPENSES (SERIES II SHARES)(1) -------------------------------------------------------------------------------- (expenses that are deducted from Series II share assets) SERIES II SHARES -------------------------------------------------------------------------------- Management Fees 0.60% Distribution and/or Service (12b-1) Fees 0.25 Other Expenses 0.36 Acquired Fund Fees and Expenses(2) 0.00 Total Annual Fund Operating Expenses 1.21 Fee Waiver and/or Expense Reimbursements(3) 0.03 Net Annual Fund Operating Expenses 1.18 -------------------------------------------------------------------------------- |
(1) Except as otherwise noted, figures shown in the table are for the year ended December 31, 2006 and are expressed as a percentage of the fund's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table.
(2) Acquired Fund Fees and Expenses are not fees or expenses incurred by the fund directly but are expenses of the investment companies in which the fund invests. You incur these fees and expenses indirectly through the valuation of the fund's investment in those investment companies. As a result, the Net Annual Fund Operating Expenses listed above may exceed the limit on Total Annual Fund Operating Expenses, if any. The impact of the acquired fund fees and expenses are included in the total returns of the fund.
(3) The fund's advisor has contractually agreed to waive advisory 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) of Series II shares to 1.18% of average daily net assets. In determining the advisor's obligation to waive advisory 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 number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganization, as approved by the fund's Board of Trustees; and (vi) expenses that the fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the fund may benefit 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. In addition, the fund may also benefit from a one time credit to be used to offset future custodian expenses. These credits are used to pay certain expenses incurred by the fund. This expense limitation agreement is in effect through at least April 30, 2008.
EXPENSE EXAMPLE
This example is intended to help you compare the costs of investing in the Series II shares of the fund with the cost of investing in other mutual funds.
This example does not represent the effect of any fees or other expenses assessed in connection with your variable product, and if it did, expenses would be higher.
The expense example assumes you:
(i) invest $10,000 in the fund's Series II shares for the time periods indicated;
(ii) earn a 5% return on your investment before operating expenses each year; and
(iii)incur the same amount in operating expenses each year (after giving effect to any applicable contractual fee waivers and/or expense reimbursements).
To the extent fees are waived and/or expenses are reimbursed voluntarily, 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 II SHARES 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------------- AIM V.I. Utilities Fund $120 $381 $662 $1,463 -------------------------------------------------------------------------------- |
- You invest $10,000 in the fund and hold it for the entire 10 year period;
- Your investment has a 5% return before expenses each year; and
- The fund's current annual expense ratio includes any applicable contractual fee waiver or expense reimbursement for the period committed.
There is no assurance that the annual expense ratio will be the expense ratio for the fund for any of the years shown. To the extent that A I M Advisors, Inc. and certain of its affiliates make any fee waivers and/or expense reimbursements pursuant to a voluntary arrangement, your actual expenses may be less. The chart does not take into account any fees or other expenses assessed in connection with your variable product; if it did, the expenses shown would be higher, while the ending balance shown would be lower. This is only a hypothetical presentation made to illustrate what expenses and returns would be under the above scenarios, your actual returns and expenses are likely to differ (higher or lower) from those shown below.
SERIES II YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.18% 1.21% 1.21% 1.21% 1.21%
Cumulative Return Before
Expenses 5.00% 10.25% 15.76% 21.55% 27.63%
Cumulative Return After
Expenses 3.82% 7.75% 11.84% 16.08% 20.48%
End of Year Balance $10,382.00 $10,775.48 $11,183.87 $11,607.74 $12,047.67
Estimated Annual Expenses $ 120.25 $ 128.00 $ 132.85 $ 137.89 $ 143.12
-----------------------------------------------------------------------------------------------
(1) Your annual expenses may be higher or lower than those shown.
SERIES II YEAR 6 YEAR 7 YEAR 8 YEAR 9 YEAR 10
-----------------------------------------------------------------------------------------------
Annual Expense Ratio(1) 1.21% 1.21% 1.21% 1.21% 1.21%
Cumulative Return Before
Expenses 34.01% 40.71% 47.75% 55.13% 62.89%
Cumulative Return After
Expenses 25.04% 29.78% 34.70% 39.81% 45.10%
End of Year Balance $12,504.28 $12,978.19 $13,470.06 $13,980.58 $14,510.44
Estimated Annual Expenses $ 148.54 $ 154.17 $ 160.01 $ 166.08 $ 172.37
-----------------------------------------------------------------------------------------------
(1) Your annual expenses may
|
The fund's portfolio holdings are disclosed on a regular basis in its semi-annual and annual reports to shareholders, and on Form N-Q, which is filed with the Securities and Exchange Commission within 60 days of the fund's first and third quarter-ends. Due to the fact that you cannot purchase shares of the fund directly, these documents have not been made available on our website. However, these documents are available on the SEC's website at http://www.sec.gov. In addition, the fund's portfolio holdings as of each calendar quarter-end are made available to insurance companies issuing variable products that invest in the fund.
A description of the fund's policies and procedures with respect to the disclosure of the fund's portfolio holdings is available in the fund's Statement of Additional Information.
THE ADVISOR
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment advisor and is responsible for its day-to-day management. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of the fund's operations and provides investment advisory services to the fund, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the fund.
The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 200 investment portfolios, including the fund, encompassing a broad range of investment objectives.
On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment advisor to certain AIM funds), AIM and A I M Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached final settlements with certain regulators, including the SEC, the New York Attorney General and the Colorado Attorney General, to resolve civil enforcement actions and/or investigations related to market timing and related activity in the AIM funds, including those formerly advised by IFG. As part of the settlements, a $325 million fair fund ($110 million of which is civil penalties) has been created to compensate shareholders harmed by market timing and related activity in funds formerly advised by IFG. Additionally, AIM and ADI created a $50 million fair fund ($30 million of which is civil penalties) to compensate shareholders harmed by market timing and related activity in funds advised by AIM, which was done pursuant to the terms of the settlements. These two fair funds may increase as a result of contributions from third parties who reach final settlements with the SEC or other regulators to resolve allegations of market timing and/or late trading that also may have harmed applicable AIM funds. These two fair funds will be distributed in accordance with a methodology to be determined by AIM's independent distribution consultant, in consultation with AIM and the independent trustees of the AIM funds and acceptable to the staff of the SEC.
Civil lawsuits, including a regulatory proceeding and purported class action and shareholder derivative suits, have been filed against certain of the AIM funds, IFG, AIM, ADI and/or related entities and individuals, depending on the lawsuit, alleging among other things: (i) that the defendants permitted improper market timing and related activity in the funds; (ii) that certain funds inadequately employed fair value pricing; and (iii) that the defendants improperly used the assets of the funds to pay brokers to aggressively promote the sale of the funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions.
Additional civil lawsuits related to the above or other matters may be filed by regulators or private litigants against the AIM funds, IFG, AIM, ADI and/or related entities and individuals in the future. You can find more detailed information concerning all of the above matters, including the parties to the civil lawsuits and summaries of the various allegations and remedies sought in such lawsuits, in the fund's Statement of Additional Information.
As a result of the matters discussed above, investors in the AIM 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.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 2006, the advisor received compensation of 0.57% of average daily net assets, after fee waivers and/or expense reimbursements.
A discussion regarding the basis for the Board of Trustees' (the Board) approval of the investment advisory agreement of the fund is available in the fund's annual report to shareholders for the twelve-month period ended December 31, 2006.
PORTFOLIO MANAGER(S)
John S. Segner, Senior Portfolio Manager, is primarily responsible for the day-to-day management of the fund's portfolio. He has been responsible for the fund since 2003 and has been associated with the advisor and/or its affiliates since 1997.
He is assisted by the Energy/Gold/Utilities Team, which is comprised of portfolio managers and research analysts. Team members provide research support and make securities recommendations with respect to the fund's portfolio, but do not have day-to-day management responsibilities with respect to the fund's portfolio. Members of the team may change from time to time. More information on these portfolio manager(s) and the team, including biographies of members of the team, may be found on the advisor's website http://www.aiminvestments.com. The website is not a part of this prospectus.
The fund's Statement of Additional Information provides additional information about the portfolio manager's investments in the fund, a description of his compensation structure, and information regarding other accounts he manages.
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. Insurance companies participating in the fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. The fund may postpone the right of redemption only under unusual circumstances, as allowed by the SEC, such as when the NYSE restricts or suspends trading.
Although the fund generally intends to pay redemption proceeds solely in cash, the fund reserves the right to determine, in its sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind).
Shares of the fund are offered in connection with mixed and shared funding,
i.e., to separate accounts of affiliated and unaffiliated insurance companies
funding variable products. The fund currently offers shares only to insurance
company separate accounts. In the future, the fund may offer them to pension and
retirement plans that qualify for special federal income tax treatment. The fund
and AIM have applied for regulatory relief to enable the fund's shares to be
sold to and held by one or more fund of funds (open-end management investment
companies or series thereof that offer their shares exclusively to insurance
companies, their separate accounts and/or qualified plans). The fund plans to
offer its shares to fund of funds following receipt of the requested regulatory
relief. Due to differences in tax treatment and other considerations, the
interests of fund shareholders, including variable product owners and plan
participants investing in the fund (whether directly or indirectly through fund
of funds), may conflict.
Mixed and shared funding may present certain conflicts of interest. For example, violation of the federal tax laws by one insurance company separate account investing directly or indirectly in a fund could cause variable products funded through another insurance company separate account to lose their tax-deferred status, unless remedial actions were taken. The Board 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.
EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES
The fund's investment programs are designed to serve long-term investors and are not designed to accommodate excessive short-term trading activity in violation of our policies described below. Excessive short-term trading activity in the fund's shares (i.e., purchases of fund shares followed shortly thereafter by redemptions of such shares, or vice versa) may hurt the long-term performance of the fund by requiring it to maintain an excessive amount of cash or to liquidate portfolio holdings at a disadvantageous time, thus interfering with the efficient management of the fund by causing it to incur increased brokerage and administrative costs. Where excessive short-term trading activity seeks to take advantage of arbitrage opportunities from stale prices for portfolio securities, the value of fund shares held by long-term investors may be diluted.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of fund shares. The fund may alter its policies and procedures at any time without giving prior notice to fund shareholders, if the advisor believes the change would be in the best interests of long-term investors.
Pursuant to the fund's policies and procedures, AIM and its affiliates (collectively the AIM Affiliates) currently use the following tools designed to discourage excessive short-term trading in the fund:
(1) trade activity monitoring; and
(2) the use of fair value pricing consistent with procedures approved by the Board.
Each of these tools is described in more detail below.
In addition, restrictions designed to discourage or curtail excessive short-term trading activity may be imposed by the insurance companies and/or their separate accounts that invest in the fund on behalf of variable product owners. Variable product owners should refer to the applicable contract and related prospectus for more details.
TRADE ACTIVITY MONITORING
To detect excessive short-term trading activities, the AIM Affiliates will monitor, on a daily basis, selected aggregate purchase, or redemption trade orders placed by insurance companies and/or their separate accounts. The AIM Affiliates will seek to work with insurance companies to discourage variable product owners from engaging in abusive trading practices. However, the ability of the AIM Affiliates to monitor trades that are placed by variable product owners is severely if not completely limited due to the fact that the insurance companies trade with the funds through omnibus accounts, and maintain the exclusive relationship with, and are responsible for maintaining the account records of, their variable product owners. There may also be legal and technological limitations on the ability of insurance companies to impose restrictions on the trading practices of their variable product owners. As a result, there can be no guarantee that the AIM Affiliates will be able to detect or deter market timing by variable product owners.
If, as a result of this monitoring, the AIM Affiliates believe that a variable product owner has engaged in excessive short-term trading (regardless of whether or not the insurance company's own trading restrictions are exceeded), the AIM Affiliates will seek to act in a manner that they believe is consistent with the best interests of long-term investors, which may include taking steps such as (i) asking the insurance company to take action to stop such activities, or (ii) refusing to process future purchases related to such activities in the insurance company's account with the funds. AIM Affiliates will use reasonable efforts to apply the fund's policies uniformly given the potential limitations described above.
FAIR VALUE PRICING
Securities owned by a fund are to be valued at current market value if market quotations are readily available. All other securities and assets of a fund for which market quotations are not readily available are to be valued at fair value determined in good faith using procedures approved by the Board of the fund. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
See "Pricing of Shares--Determination of Net Asset Value" for more information.
RISKS
There is the risk that the fund's policies and procedures will prove ineffective in whole or in part to detect or prevent excessive short-term trading. Although these policies and procedures, including the tools described above, are designed to discourage excessive short-term trading, they do not eliminate the possibility that excessive short-term trading activity in the funds will occur. Moreover, each of these tools involves judgments that are inherently subjective. The AIM Affiliates seek to make these judgments to the best of their abilities in a manner that they believe is consistent with the best interests of long-term investors. However, there can be no assurance that the AIM Affiliates will be able to gain access to any or all of the information necessary to detect or prevent excessive short-term trading by a variable product owner. While the AIM Affiliates and the funds may seek to take actions with the assistance of the insurance companies that invest in the fund, there is the risk that neither the AIM Affiliates nor the fund will be successful in their efforts to minimize or eliminate such activity.
PRICING OF SHARES
DETERMINATION OF NET ASSET VALUE
The price of the fund's shares is the fund's net asset value per share. The fund values portfolio securities for which market quotations are readily available at market value. The fund values all other securities and assets for which market quotations are not readily available at their fair value in good faith using procedures approved by the Board of the fund. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day.
Even when market quotations are available, they may be stale or they may be unreliable because the security is not traded frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading or because of the passage of time between the close of the market on which the security trades and the close of the NYSE and when the fund calculates its net asset value. Issuer specific events may cause the last market quotation to be unreliable. Such events may include a merger or insolvency, events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the advisor determines that the closing price of the security is unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing may reduce the ability of frequent traders to take advantage of arbitrage opportunities resulting from potentially "stale" prices of portfolio holdings. However, it cannot eliminate the possibility of frequent trading.
Fair value is that amount that the owner might reasonably expect to receive for the security upon its current sale. Fair value requires consideration of all appropriate factors, including indications of fair value available from pricing services. A fair value price is an estimated price and may vary from the prices used by other mutual funds to calculate their net asset values.
The advisor may use indications of fair value from pricing services approved by the Board. In other circumstances, the advisor valuation committee may fair value securities in good faith using procedures approved by the Board. As a means of evaluating its fair value process, the advisor routinely compares closing market prices, the next day's opening prices for the security in its primary market if available, and indications of fair value from other sources. Fair value pricing methods and pricing services can change from time to time as approved by the Board.
Specific types of securities are valued as follows:
Domestic Exchange Traded Equity Securities: Market quotations are generally available and reliable for domestic exchange traded equity securities. If market quotations are not available or are unreliable, the advisor will value the security at fair value in good faith using procedures approved by the Board.
Foreign Securities: If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE events occur that are significant and may make the closing price unreliable, the fund may fair value the security. If an issuer specific event has occurred that the advisor determines, in its judgment, is likely to have affected the closing price of a foreign security, it will price the security at fair value. The advisor also relies on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where the advisor believes, at the approved degree of certainty, that the price is not reflective of current market value, the advisor will use the indication of fair value from the pricing service to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time.
Fund securities primarily traded on foreign markets may trade on days that are not business days of the fund. Because the net asset value of fund shares is determined only on business days of the fund,
the value of the portfolio securities of a fund that invests in foreign securities may change on days when you will not be able to purchase or redeem shares of the fund.
Fixed Income Securities: Government, corporate, asset-backed and municipal bonds and convertible securities, including high yield or junk bonds, are valued on the basis of prices provided by independent pricing services. Prices provided by the pricing services may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, maturity and other market data. Prices received from pricing services are fair value prices. In addition, if the price provided by the pricing service is unreliable, the advisor valuation committee may fair value the security using procedures approved by the Board.
Short-term Securities: The fund's short-term investments are valued at amortized cost when the security has 60 days or less to maturity.
Futures and Options: Futures and options are valued on the basis of market quotations, if available.
Swap Agreements: Swap Agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry and company performance.
Open-end Funds: To the extent the fund invests in other open-end funds, other than open-end funds that are exchange traded, the investing fund will calculate its net asset value using the net asset value of the underlying fund in which it invests.
The fund discloses portfolio holdings at different times to insurance companies issuing variable products that invest in the fund, and in annual and semi-annual shareholder reports. Refer to such reports to determine the types of securities in which a fund has invested. You may also refer to the Statement of Additional Information to determine what types of securities in which the fund may invest. You may obtain copies of these reports or of the Statement of Additional Information from the insurance company that issued your variable product, or from the advisor as described on the back cover of this prospectus.
The fund determines the net asset value of its shares on each day the NYSE is open for business, as of the close of the customary trading session, or 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. Variable product owners should refer to the prospectus for their variable products for information regarding the tax consequences of owning such variable products 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 insurance companies issuing the variable products. The fund expects that its distributions, if any, will consist of both ordinary income and capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains, if any, annually to separate accounts of insurance companies issuing the variable products.
At the election of insurance companies issuing the variable products, 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" which is described in this prospectus.
DISTRIBUTION PLAN
The fund has adopted a distribution or "Rule 12b-1" plan for its Series II shares. The plan allows the fund to pay distribution fees to life insurance companies and others to promote the sale and distribution of Series II shares. The plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets of the fund). Because the fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
PAYMENTS TO INSURANCE COMPANIES
The insurance company that issued your variable product, or one of its affiliates may receive all the Rule 12b-1 distribution fees discussed above. In addition to those payments, ADI, the distributor of the fund, or one or more of its corporate affiliates (ADI Affiliates), may make additional cash payments to the insurance company or an affiliate in connection with promotion of the fund and certain other marketing support services. ADI Affiliates make these payments from their own resources.
ADI Affiliates make these payments as incentives to certain insurance companies to promote the sale and retention of shares of the fund. The benefits ADI Affiliates receive when they make these payments may include, among other things, adding the fund to the list of underlying investment options in the insurance company's variable products, and access (in some cases on a preferential basis over other competitors) to individual members of an insurance company's sales force or to an insurance company's management. These payments are sometimes referred to as "shelf space" payments because the payments compensate the insurance company for including the fund in its variable products (on its "sales shelf"). ADI Affiliates compensate insurance companies differently depending typi-
cally on the level and/or type of consideration provided by the insurance companies. The payments ADI Affiliates make may be calculated on sales of shares of the fund (Sales-Based Payments), in which case the total amount of such payments shall not exceed 0.25% of the offering price of all shares sold through variable products during the particular period. Such payments also may be calculated on the average daily net assets of the fund attributable to that particular insurance company (Asset-Based Payments), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of shares of the fund and Asset-Based Payments primarily create incentives to retain assets of the fund in insurance company separate accounts.
ADI Affiliates are motivated to make the payments described above in order to promote the sale of fund shares and the retention of those investments by clients of insurance companies. To the extent insurance companies sell more shares of the fund or retain shares of the fund in their variable product owners' accounts, ADI Affiliates may directly or indirectly benefit from the incremental management and other fees paid to ADI Affiliates by the fund with respect to those assets.
In addition to the payments listed above, the advisor may also reimburse insurance companies for certain administrative services provided to variable product owners. Under a Master Administrative Services Agreement, between the fund and the advisor, the advisor is entitled to receive from the fund reimbursement of its costs or such reasonable compensation as may be approved by the Board. Under this arrangement, the advisor provides, or assures that insurance companies issuing variable products will provide, certain variable product owner-related services. These services, include, but are not limited to, facilitation of variable product owners' purchase and redemption requests; distribution to existing variable product owners of copies of fund prospectuses, proxy materials, periodic fund reports, and other materials; maintenance of variable product owners' records; and fund services and communications. Currently, these administrative service payments made by the fund to the advisor are subject to an annual limit of 0.25% of the average net assets invested in the fund by each insurance company. Any amounts paid by the advisor to an insurance company in excess of 0.25% of the average net assets invested in the fund are paid by the advisor out of its own financial resources, and not out of the fund's assets. Insurance companies may earn profits on these payments for these services, since the amount of the payments may exceed the cost of providing the service.
You can find further details in the Statement of Additional Information about these payments and the services provided by insurance companies. In certain cases these payments could be significant to the insurance company. Your insurance company may charge you additional fees or commissions, on your variable product other than those disclosed in this prospectus. You can ask your insurance company about any payments it receives from the advisor, ADI, or the fund, as well as about fees and/or commissions it charges.
The financial highlights table is intended to help you understand the financial performance of the fund's Series II shares. Certain information reflects financial results for a single Series II 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 the fiscal years (or period) indicated.
This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the fund's financial statements, is included in the fund's annual report, which is available upon request.
SERIES II
-------------------------------------
APRIL 30, 2004
YEAR ENDED (DATE SALES
DECEMBER 31, COMMENCED) TO
------------------- DECEMBER 31,
2006 2005 2004
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Net asset value, beginning of period $17.76 $15.57 $12.63
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Income from investment operations:
Net investment income(a) 0.42 0.38 0.26
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Net gains on securities (both realized and unrealized) 4.06 2.20 2.68
===================================================================================================
Total from investment operations 4.48 2.58 2.94
===================================================================================================
Less distributions:
Dividends from net investment income (0.69) (0.39) --
---------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.43) -- --
===================================================================================================
Total distributions (1.12) (0.39) --
===================================================================================================
Net asset value, end of period $21.12 $17.76 $15.57
___________________________________________________________________________________________________
===================================================================================================
Total return(b) 25.25% 16.55% 23.28%
___________________________________________________________________________________________________
===================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $2,462 $ 801 $ 602
___________________________________________________________________________________________________
===================================================================================================
Ratio of expenses to average net assets:
With fee waivers and/or expense reimbursements 1.18%(c) 1.18% 1.28%(d)
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Without fee waivers and/or expense reimbursements 1.21%(c) 1.21% 1.28%(d)
===================================================================================================
Ratio of net investment income to average net assets 2.15%(c) 2.24% 2.82%(d)
___________________________________________________________________________________________________
===================================================================================================
Portfolio turnover rate(e) 38% 49% 52%
___________________________________________________________________________________________________
===================================================================================================
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(a) Calculated using average shares outstanding.
(b) Includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Total returns are not annualized for periods less than one year and do not reflect charges assessed in connection with a variable product, which if included would reduce total returns.
(c) Ratios are based on average daily net assets of $1,690,117.
(d) Annualized.
(e) Portfolio turnover is calculated at the fund level and is not annualized for periods less than one year.
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 the 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. The fund also files its complete schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each fiscal year on Form N-Q.
If you wish to obtain free copies of the fund's current SAI or annual or semiannual reports, please contact the insurance company that issued your variable product, or you may contact us at
BY MAIL: A I M Distributors, Inc.
11 Greenway Plaza, Suite 100
Houston, TX 77046-1173
BY TELEPHONE: (800) 410-4246
Because you cannot purchase shares of the fund
directly, these documents have not been made
available on our website.
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THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED ON FORM N-Q, HAVE ALSO BEEN MADE AVAILABLE TO INSURANCE COMPANIES ISSUING VARIABLE PRODUCTS THAT INVEST IN THE FUND.
You can also review and obtain copies of the fund's SAI, financial reports, the fund's Forms N-Q and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplicating fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room.
AIMinvestments.com I-VIUTI-PRO-2
[AIM INVESTMENTS LOGO APPEARS HERE]
--Registered Trademark--
|
STATEMENT OF
ADDITIONAL INFORMATION
AIM VARIABLE INSURANCE FUNDS
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TEXAS 77046-1173
(713) 626-1919
THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO EACH PORTFOLIO OF AIM
VARIABLE INSURANCE FUNDS LISTED BELOW. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUSES FOR THE FUNDS LISTED BELOW. EACH FUND'S FINANCIAL STATEMENTS ARE INCORPORATED INTO THIS STATEMENT OF ADDITIONAL INFORMATION BY REFERENCE TO SUCH FUND'S MOST RECENT ANNUAL REPORT TO SHAREHOLDERS. YOU MAY OBTAIN, WITHOUT CHARGE, A COPY OF ANY PROSPECTUS AND/OR ANNUAL REPORT FOR ANY FUND LISTED BELOW FROM AN AUTHORIZED DEALER OR BY WRITING TO:
A I M DISTRIBUTORS, INC.
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
OR BY CALLING (800) 410-4246
THIS STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 2007 RELATES TO THE FOLLOWING PROSPECTUSES FOR THE SERIES I AND SERIES II SHARES OF EACH OF THE FOLLOWING FUNDS:
FUND DATED
---- --------
AIM V.I. BASIC BALANCED FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. BASIC VALUE FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. CAPITAL APPRECIATION FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. CAPITAL DEVELOPMENT FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. CORE EQUITY FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. DIVERSIFIED INCOME FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. DYNAMICS FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. FINANCIAL SERVICES FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. GLOBAL HEALTH CARE FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. GLOBAL REAL ESTATE FUND - SERIES I 05/01/07
SERIES II 05/01/07
|
FUND DATED
---- --------
AIM V.I. GOVERNMENT SECURITIES FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. HIGH YIELD FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. INTERNATIONAL GROWTH FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. LARGE CAP GROWTH FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. LEISURE FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. MID CAP CORE EQUITY FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. MONEY MARKET FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. SMALL CAP EQUITY FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. TECHNOLOGY FUND - SERIES I 05/01/07
SERIES II 05/01/07
AIM V.I. UTILITIES FUND - SERIES I 05/01/07
SERIES II 05/01/07
|
AIM VARIABLE INSURANCE FUNDS
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
PAGE
----
GENERAL INFORMATION ABOUT THE TRUST ..................................... 1
Fund History ......................................................... 1
Shares of Beneficial Interest ........................................ 1
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS ................ 3
Classification ....................................................... 3
Investment Strategies and Risks ...................................... 3
Equity Investments ................................................ 12
Foreign Investments ............................................... 12
Debt Investments for Equity Funds ................................. 14
Debt Investments for Fixed Income Funds and Money Market Fund ..... 15
Other Investments ................................................. 22
Investment Techniques ............................................. 25
Derivatives ....................................................... 32
Additional Securities or Investment Techniques .................... 38
Diversification Requirements - AIM V.I. Money Market Fund ............ 38
Fund Policies for the V.I. Funds ..................................... 38
Temporary Defensive Positions (for V.I. Funds) .................... 41
Fund Policies for the VIF Funds ...................................... 41
Temporary Defensive Positions (for VIF Funds) ..................... 43
Portfolio Turnover ................................................... 43
Policies and Procedures for Disclosure of Fund Holdings .............. 43
General Disclosures ............................................... 43
Selective Disclosures ............................................. 44
MANAGEMENT OF THE TRUST ................................................. 46
Board of Trustees .................................................... 46
Management Information ............................................... 46
Trustee Ownership of Fund Shares .................................. 49
Compensation ......................................................... 49
Retirement Plan For Trustees ...................................... 49
Deferred Compensation Agreements .................................. 50
Code of Ethics ....................................................... 50
Proxy Voting Policies ................................................ 50
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ..................... 51
INVESTMENT ADVISORY AND OTHER SERVICES .................................. 51
Investment Advisor ................................................... 51
Investment Sub-Advisor ............................................... 55
Portfolio Manager(s) .............................................. 56
Securities Lending Arrangements ................................... 56
Services Agreements .................................................. 56
Other Service Providers .............................................. 57
BROKERAGE ALLOCATION AND OTHER PRACTICES ................................ 58
Brokerage Transactions ............................................... 58
Commissions .......................................................... 59
Broker Selection ..................................................... 59
Directed Brokerage (Research Services) ............................... 62
Regular Brokers ...................................................... 62
Allocation of Portfolio Transactions ................................. 62
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Allocation of Equity Initial Public Offering ("IPO") Transactions .... 62
PURCHASE AND REDEMPTION OF SHARES ....................................... 63
Calculation of Net Asset Value ....................................... 63
Redemptions In Kind .................................................. 66
Payments to Participating Insurance Companies and/or their
Affiliates ........................................................ 66
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS ................................ 67
Dividends and Distributions .......................................... 67
Tax Matters .......................................................... 68
DISTRIBUTION OF SECURITIES .............................................. 70
Distribution Plan .................................................... 70
Distributor .......................................................... 71
FINANCIAL STATEMENTS .................................................... 71
PENDING LITIGATION ...................................................... 72
APPENDICES:
RATINGS OF DEBT SECURITIES .............................................. A-1
PERSONS TO WHOM AIM PROVIDES NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING
BASIS ................................................................ B-1
TRUSTEES AND OFFICERS ................................................... C-1
TRUSTEE AND OFFICER COMPENSATION TABLE .................................. D-1
PROXY POLICIES AND PROCEDURES ........................................... E-1
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES ..................... F-1
MANAGEMENT FEES ......................................................... G-1
PORTFOLIO MANAGER(S) .................................................... H-1
ADMINISTRATIVE SERVICES FEES ............................................ I-1
BROKERAGE COMMISSIONS ................................................... J-1
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF
REGULAR BROKERS OR DEALERS ........................................... K-1
CERTAIN FINANCIAL INSTITUTIONS THAT RECEIVE ONE OR MORE TYPES OF
PAYMENTS ............................................................. L-1
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTIONS
PLAN ................................................................. M-1
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS ........... N-1
PENDING LITIGATION ...................................................... O-1
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GENERAL INFORMATION ABOUT THE TRUST
FUND HISTORY
AIM Variable Insurance Funds (the "Trust") is a Delaware statutory trust which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company. The Trust currently consists of twenty separate portfolios: AIM V.I. Basic Balanced Fund (formerly known as AIM V.I. Balanced Fund), AIM V.I. Basic Value Fund, , AIM V.I. Capital Appreciation Fund, AIM V.I. Capital Development Fund, AIM V.I. Core Equity Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Real Estate Fund (formerly known as AIM V.I. Real Estate Fund and INVESCO VIF - Real Estate Opportunity Fund),AIM V.I. Government Securities 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, , and AIM V.I. Small Cap Equity Fund (collectively, the " V.I. Funds"), and AIM V.I. Dynamics Fund (formerly known as INVESCO VIF - Dynamics Fund), AIM V.I. Financial Services Fund (formerly known as INVESCO VIF - Financial Services Fund), AIM V.I. Global Health Care Fund (formerly known as AIM V.I. Health Sciences Fund and INVESCO VIF - Health Sciences Fund), AIM V.I. Leisure Fund (formerly known as INVESCO VIF - Leisure Fund), , AIM V.I. Technology Fund (formerly known as INVESCO VIF - Technology Fund), and AIM V.I. Utilities Fund (formerly known as INVESCO VIF - Utilities Fund) (collectively, the " VIF Funds"). This Statement of Additional Information relates to the V.I. Funds and the VIF Funds (each a "Fund," and collectively, the "Funds"). Under the Amended and Restated Agreement and Declaration of Trust, dated September 14, 2005, as amended (the "Trust Agreement"), the Board of Trustees of the Trust (the "Board") is authorized to create new series of shares without the necessity of a vote of shareholders of the Trust.
The Trust was originally organized on January 22, 1993 as a Maryland corporation. On October 15, 1999, the following Funds acquired all the assets and assumed all the liabilities of the series portfolios of G.T. Global Variable Investment Trust and G.T. Global Variable Investment Series: AIM V.I. Global Growth and Income Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. International Equity Fund, AIM V.I. Diversified Income Fund, AIM V.I. Government Securities Fund and AIM V.I. Money Market Fund. The Trust reorganized as a Delaware business trust on May 1, 2000. All of the V.I. Funds, except AIM V.I. Basic Value Fund, AIM V.I. Global Real Estate Fund and AIM V.I. Large Cap Growth Fund, AIM V.I. Mid Cap Core Equity Fund, and AIM V.I. Small Cap Equity Fund, were included in the reorganization. All historical financial and other information contained in this Statement of Additional Information for periods prior to May 1, 2000 relating to these Funds (or a class thereof) is that of the predecessor funds (or the corresponding class thereof). AIM V.I. Basic Value Fund and AIM V.I. Mid Cap Core Equity Fund commenced operations as a series of the Trust on September 10, 2001. AIM V.I. Large Cap Growth Fund and AIM V.I. Small Cap Equity Fund commenced operations as series of the Trust on September 1, 2003. AIM V.I. Core Equity Fund was known as AIM V.I. Growth and Income Fund, AIM V.I. International Growth Fund was known as AIM V.I. International Equity Fund, AIM V.I. Mid Cap Core Equity Fund was known as AIM V.I. Mid Cap Equity Fund. Prior to April 30, 2004, AIM V.I. Global Real Estate Fund and the VIF Funds were portfolios of INVESCO Variable Investment Funds, Inc., a Maryland corporation. Pursuant to an agreement and plan of reorganization, AIM V.I. Global Real Estate Fund and the VIF Funds became portfolios of the Trust. All historical financial and other information contained in this Statement of Additional Information for the periods prior to April 30, 2004, relating to AIM V.I. Global Real Estate Fund and the VIF Funds (or a class thereof) is that of its predecessor fund (or its corresponding class thereof).
SHARES OF BENEFICIAL INTEREST
Shares of beneficial interest of the Trust are redeemable at their net asset value at the option of the shareholder or at the option of the Trust in certain circumstances.
The Trust allocates moneys and other property it receives from the issue or sale of shares of each of its series of shares, and all income, earnings and profits from such issuance and sales, subject only to the rights of creditors, to the appropriate Fund. These assets constitute the underlying assets of
each Fund, are segregated on the Trust's books of account, and are charged with the expenses of such Fund and its respective classes. The Trust allocates any general expenses of the Trust not readily identifiable as belonging to a particular Fund by or under the direction of the Board, primarily on the basis of relative net assets, or other relevant factors.
Each Fund offers Series I and Series II shares. Each share of each Fund represents an equal proportionate interest in that Fund with each other share and is entitled to such dividends and distributions out of the income belonging to such Fund as are declared by the Board. Each Fund offers two separate classes of shares: Series I shares and Series II shares. Each such class represents interests in the same portfolio of investments. Differing expenses will result in differing net asset values and dividends and distributions. Upon any liquidation of the Trust, shareholders of each class are entitled to share pro rata in the net assets belonging to the applicable Fund allocable to such class available for distribution after satisfaction of outstanding liabilities of the Fund allocable to such class.
The Trust is not required to hold annual or regular meetings of shareholders. Meetings of shareholders of a Fund or Series will be held from time to time to consider matters requiring a vote of such shareholders in accordance with the requirements of the 1940 Act, state law or the provisions of the Trust Agreement. It is not expected that shareholder meetings will be held annually.
The Trust understands that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with the instructions received from owners of variable annuity contracts and variable life insurance policies ("Contract Owners"), annuitants and beneficiaries. Fund shares held by a separate account as to which no instructions have been received will be voted for or against any proposition, or in abstention, in the same proportion as the shares of that separate account as to which instructions have been received. Fund shares held by a separate account that are not attributable to Contracts will also be voted for or against any proposition in the same proportion as the shares for which voting instructions are received by that separate account. If an insurance company determines, however, that it is permitted to vote any such shares of the Funds in its own right, it may elect to do so, subject to the then current interpretation of the 1940 Act and the rules thereunder.
Each share of a Fund has generally the same voting, dividend, liquidation and other rights, however, each class of shares of a Fund is subject to different class-specific expenses. Only shareholders of a specific class may vote on matters relating to that class' distribution plan.
Except as specifically noted above, shareholders of each Fund are entitled to one vote per share (with proportionate voting for fractional shares), irrespective of the relative net asset value of the shares of a Fund. However, on matters affecting an individual Fund or class of shares, a separate vote of shareholders of that Fund or class is required. Shareholders of a Fund or class are not entitled to vote on any matter which does not affect that Fund or class but that requires a separate vote of another Fund or class. An example of a matter that would be voted on separately by shareholders of each Fund is the approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an example of a matter that would be voted on separately by shareholders of each class of shares is approval of the distribution plans. When issued, shares of each Fund are fully paid and nonassessable, have no preemptive or subscription rights, and are freely transferable. There are no conversion rights. Shares do not have cumulative voting rights, which means that in situations in which shareholders elect trustees, holders of more than 50% of the shares voting for the election of trustees can elect all of the trustees of the Trust, and the holders of less than 50% of the shares voting for the election of trustees will not be able to elect any trustees.
Under Delaware law, shareholders of a Delaware statutory trust shall be entitled to the same limitations of liability extended to shareholders of private for-profit corporations. There is a remote possibility, however, that shareholders could, under certain circumstances, be held liable for the obligations of the Trust to the extent the courts of another state which does not recognize such limited liability were to apply the laws of such state to a controversy involving such obligations. The Trust Agreement disclaims shareholder liability for acts or obligations of the Trust and requires that notice of such disclaimer be given in each agreement, obligation or instrument entered into or executed by the
Trust or the trustees to all parties, and each party thereto must expressly waive all rights of action directly against shareholders of the Trust. The Trust Agreement provides for indemnification out of the property of a Fund for all losses and expenses of any shareholder of such Fund held liable on account of being or having been a shareholder. Thus, the risk of a shareholder incurring financial loss due to shareholder liability is limited to circumstances in which a Fund is unable to meet its obligations and the complaining party is not held to be bound by the disclaimer.
The trustees and officers of the Trust will not be liable for any act, omission or obligation of the Trust or any Trustee or officer; however, a trustee or officer is not protected against any liability to the Trust or to the shareholders to which a trustee or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of his or her office with the Trust ("Disabling Conduct"). The Trust's Bylaws generally provide for indemnification by the Trust of the trustees, the officers and employees or agents of the Trust, provided that such persons have not engaged in Disabling Conduct. Indemnification does not extend to judgments or amounts paid in settlement in any actions by or in the right of the Trust. The Trust's Bylaws provide for the advancement of payments to current and former trustees, officers and employees or agents of the Trust, or anyone serving at their request, in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding, expenses for which such person would be entitled to indemnification; provided that any advancement of payments would be reimbursed unless it is ultimately determined that such person is entitled to indemnification for such expenses.
SHARE CERTIFICATES. Shareholders of the Funds do not have the right to demand or require the Trust to issue share certificates and share certificates are not issued.
DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Trust is an open-end management investment company. Each of the Funds are "diversified" for purposes of the 1940 Act.
INVESTMENT STRATEGIES AND RISKS
The tables on the following pages identify various securities and investment techniques used by AIM in managing the Funds. The tables have been marked to indicate those securities and investment techniques that AIM and/or the sub-advisor, INVESCO Institutional (N.A.), Inc. ("INVESCO Institutional" or the Sub-Advisor"), may use to manage a Fund. A Fund may not use all of these techniques at any one time. AIM may also invest in types of securities and may use investment techniques in managing the Funds, other than those described below, subject to the limitations imposed by a Fund's investment objectives, policies and restrictions described in that Fund's prospectus and/or this Statement of Additional Information, as well as federal securities laws. Other than AIM V.I. Dynamics Fund, AIM V.I. Financial Services Fund, AIM V.I. Global Healthcare Fund, AIM V.I. Leisure Fund, AIM V.I. Technology Fund and AIM V.I. Utilities Fund, the Funds' investment objectives, policies, strategies and practices are non-fundamental unless otherwise indicated. A more detailed description of the securities and investment techniques, as well as the risks associated with those securities and investment techniques that the Funds utilize, follows the table. The descriptions of the securities and investment techniques in this section supplement the discussion of principal investment strategies contained in each Fund's Prospectus; where a particular type of security or investment technique is not discussed in a Fund's Prospectus, that security or investment technique is not a principal investment strategy.
V.I. FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FIXED INCOME FUNDS AND
EQUITY FUNDS MONEY MARKET FUND
---------------------------------------------------------------------------------------- ----------------------------------
FUND V.I. V.I. V.I.
-------------------- V.I. V.I. V.I. V.I. GLOBAL V.I. LARGE MID CAP V.I. V.I. V.I. V.I. V.I. V.I.
SECURITY BASIC CAP CAP CORE REAL INT'L CAP CORE SMALL BASIC DIV GOVT HIGH MONEY
INVESTMENT VALUE APPR DEV EQUITY ESTATE GROWTH GROWTH EQUITY CAP BAL INCOME SEC YIELD MARKET
TECHNIQUE FUND FUND FUND FUND FUND FUND FUND FUND EQUITY FUND FUND FUND FUND FUND
-------------------- ----- ---- ---- ------ ------ ------ ------ ------- ------ ----- ------ ---- ----- ------
EQUITY INVESTMENTS
Common Stock X X X X X X X X X X X
Preferred Stock X X X X X X X X X X X X
Convertible
Securities X X X X X X X X X X X X
Alternative
Entity Securities X X X X X X X X X X X X
FOREIGN INVESTMENTS
Foreign Securities X X X X X X X X X X X X X X
Foreign
Government
Obligations X X X X X X X
Foreign
Exchange
Transactions X X X X X X X X X X X X X
ADRs and EDRs X X X X X X X X X X X X X X
DEBT INVESTMENTS FOR EQUITY FUNDS
U.S. Government
Obligations X X X
Mortgage-Backed
and Asset-Backed
Securities X
Collateralized
Mortgage
Obligations X
Municipal
Securities X
Municipal Lease
Obligations X
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V.I. FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FIXED INCOME FUNDS AND
EQUITY FUNDS MONEY MARKET FUND
---------------------------------------------------------------------------------------- ----------------------------------
FUND V.I. V.I. V.I.
-------------------- V.I. V.I. V.I. V.I. GLOBAL V.I. LARGE MID CAP V.I. V.I. V.I. V.I. V.I. V.I.
SECURITY BASIC CAP CAP CORE REAL INT'L CAP CORE SMALL BASIC DIV GOVT HIGH MONEY
INVESTMENT VALUE APPR DEV EQUITY ESTATE GROWTH GROWTH EQUITY CAP BAL INCOME SEC YIELD MARKET
TECHNIQUE FUND FUND FUND FUND FUND FUND FUND FUND EQUITY FUND FUND FUND FUND FUND
-------------------- ----- ---- ---- ------ ------ ------ ------ ------- ------ ----- ------ ---- ----- ------
Investment
Grade Corporate
Debt X X X X X X X X X
Liquid Assets X X X X X X X X X
Junk Bonds X
DEBT INVESTMENTS FOR FIXED INCOME FUNDS AND MONEY MARKET FUND
U.S. Government X X X X X
Obligations
Rule 2a-7 X X X X X
Requirements
Foreign Bank
Obligations X X X X
Mortgage-Backed
and
Asset-Backed
Securities X X X X
Collateralized
Mortgage
Obligations X X
Bank Instruments X X X
Commercial
Instruments X X X X
Participation
Interests X
Municipal
Securities X X X
Municipal Lease
Obligations X X X X
Investment
Grade Corporate X X X X
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V.I. FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FIXED INCOME FUNDS AND
EQUITY FUNDS MONEY MARKET FUND
---------------------------------------------------------------------------------------- ----------------------------------
FUND V.I. V.I. V.I.
-------------------- V.I. V.I. V.I. V.I. GLOBAL V.I. LARGE MID CAP V.I. V.I. V.I. V.I. V.I. V.I.
SECURITY BASIC CAP CAP CORE REAL INT'L CAP CORE SMALL BASIC DIV GOVT HIGH MONEY
INVESTMENT VALUE APPR DEV EQUITY ESTATE GROWTH GROWTH EQUITY CAP BAL INCOME SEC YIELD MARKET
TECHNIQUE FUND FUND FUND FUND FUND FUND FUND FUND EQUITY FUND FUND FUND FUND FUND
-------------------- ----- ---- ---- ------ ------ ------ ------ ------- ------ ----- ------ ---- ----- ------
Debt Obligations
Junk Bonds X X
OTHER INVESTMENTS
REITs X X X X X X X X X X X X X X
Other
Investment
Companies X X X X X X X X X X X X X X
Exchange -
Traded Funds X X X X X X X X X X X X X X
Defaulted
Securities X X X
Municipal
Forward
Contracts
Variable or
Floating Rate
Instruments X X X X X X
Indexed
Securities
Zero-Coupon and
Pay-in-Kind
Securities X X X X
Synthetic
Municipal
Instruments
INVESTMENT TECHNIQUES
Delayed
Delivery
Transactions X X X X X X X X X X X X X X
When-Issued
Securities X X X X X X X X X X X X X X
Short Sales X X X X X X X X X X X X X
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V.I. FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FIXED INCOME FUNDS AND
EQUITY FUNDS MONEY MARKET FUND
---------------------------------------------------------------------------------------- ----------------------------------
FUND V.I. V.I. V.I.
-------------------- V.I. V.I. V.I. V.I. GLOBAL V.I. LARGE MID CAP V.I. V.I. V.I. V.I. V.I. V.I.
SECURITY BASIC CAP CAP CORE REAL INT'L CAP CORE SMALL BASIC DIV GOVT HIGH MONEY
INVESTMENT VALUE APPR DEV EQUITY ESTATE GROWTH GROWTH EQUITY CAP BAL INCOME SEC YIELD MARKET
TECHNIQUE FUND FUND FUND FUND FUND FUND FUND FUND EQUITY FUND FUND FUND FUND FUND
-------------------- ----- ---- ---- ------ ------ ------ ------ ------- ------ ----- ------ ---- ----- ------
Margin
Transactions
Swap Agreements X X X X X X X X X X X X
Credit Default Swaps X X X
Interfund Loans X X X X X X X X X X X X X X
Borrowing X X X X X X X X X X X X X X
Lending
Portfolio
Securities X X X X X X X X X X X X X X
Repurchase
Agreements X X X X X X X X X X X X X X
Reverse
Repurchase
Agreements X X X X X X X X X X X X X X
Dollar Rolls X X X
Illiquid
Securities X X X X X X X X X X X X X X
Rule 144A
Securities X X X X X X X X X X X X X X
Unseasoned
Securities X X X X X X X X X X X X X
Portfolio
Transactions
Standby
Commitments
DERIVATIVES
Equity-Linked
Derivatives
Bundled
Securities X X
Put Options X X X X X X X X X X X X X
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V.I. FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
FIXED INCOME FUNDS AND
EQUITY FUNDS MONEY MARKET FUND
---------------------------------------------------------------------------------------- ----------------------------------
FUND V.I. V.I. V.I.
-------------------- V.I. V.I. V.I. V.I. GLOBAL V.I. LARGE MID CAP V.I. V.I. V.I. V.I. V.I. V.I.
SECURITY BASIC CAP CAP CORE REAL INT'L CAP CORE SMALL BASIC DIV GOVT HIGH MONEY
INVESTMENT VALUE APPR DEV EQUITY ESTATE GROWTH GROWTH EQUITY CAP BAL INCOME SEC YIELD MARKET
TECHNIQUE FUND FUND FUND FUND FUND FUND FUND FUND EQUITY FUND FUND FUND FUND FUND
-------------------- ----- ---- ---- ------ ------ ------ ------ ------- ------ ----- ------ ---- ----- ------
Call Options X X X X X X X X X X X X X
Straddles X X X X X X X X X X X X X
Warrants X X X X X X X X X X X X
Futures
Contracts and
Options on
Futures
Contracts X X X X X X X X X X X X X X
Forward
Currency
Contracts X X X X X X X X X X X X
Cover X X X X X X X X X X X X X
Taxable
Municipal
Securities X X X X
Investments in
Entities with
Relationships
with Funds/
Advisors X X X X X X X X X X X X X X
Master Limited
Partnerships
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VIF FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
EQUITY FUNDS
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FUND
--------------------
V.I. V.I.
SECURITY V.I. FINANCIAL GLOBAL HEALTH V.I. V.I. V.I.
INVESTMENT DYNAMICS SERVICES CARE LEISURE TECHNOLOGY UTILITIES
TECHNIQUE FUND FUND FUND FUND FUND FUND
-------------------- -------- ---------- ------------- ------- ---------- ---------
EQUITY INVESTMENTS
Common Stock X X X X X X
Preferred Stock X X X X X X
Convertible
Securities X X X X X X
Alternative
Entity Securities X X X X X X
FOREIGN INVESTMENTS
Foreign Securities X X X X X X
Foreign Government
Obligations X X X X X X
Foreign Exchange
Transactions X X X X X X
DEBT INVESTMENTS FOR EQUITY FUNDS
U.S. Government
Obligations X X X X X X
Mortgage-Backed and
Asset-Backed
Securities X X X X X X
Collateralized
Mortgage
Obligations
Investment Grade
Corporate Debt X X X X X X
Liquid Assets X X X X X X
Junk Bonds
OTHER INVESTMENTS
REITs X X X X X X
Other Investment
Companies X X X X X X
Exchange-Traded
Funds X X X X X X
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VIF FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
EQUITY FUNDS
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FUND
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V.I. V.I.
SECURITY V.I. FINANCIAL GLOBAL HEALTH V.I. V.I. V.I.
INVESTMENT DYNAMICS SERVICES CARE LEISURE TECHNOLOGY UTILITIES
TECHNIQUE FUND FUND FUND FUND FUND FUND
-------------------- -------- ---------- ------------- ------- ---------- ---------
Defaulted Securities
Municipal Forward
Contracts
Variable or
Floating Rate
Instruments
Indexed Securities
Zero-Coupon and
Pay-in-Kind
Securities X X X X X X
Synthetic Municipal
Instruments
Delayed Delivery
Transactions X X X X X X
When-Issued
Securities X X X X X X
Short Sales X X X X X X
Martin Transactions
Swap Agreements X X X X X X
Credit Default Swaps
Interfund Loans X X X X X X
Borrowing X X X X X X
Lending Portfolio
Securities X X X X X X
Repurchase
Agreements X X X X X X
Reverse Repurchase
Agreements X X X X X X
Dollar Rolls
Illiquid Securities X X X X X X
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VIF FUNDS
SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES
EQUITY FUNDS
-----------------------------------------------------------------------------------------
FUND
--------------------
V.I. V.I.
SECURITY V.I. FINANCIAL GLOBAL HEALTH V.I. V.I. V.I.
INVESTMENT DYNAMICS SERVICES CARE LEISURE TECHNOLOGY UTILITIES
TECHNIQUE FUND FUND FUND FUND FUND FUND
-------------------- -------- ---------- ------------- ------- ---------- ---------
Rule 144A Securities X X X X X X
Unseasoned
Securities X X X X X X
DERIVATIVES
Equity-Linked
Derivatives
Call Options X X X X X X
Straddles X X X X X X
Warrants X X X X X X
Futures Contracts
and Options on
Futures Contracts X X X X X X
Forward Currency
Contracts X X X X X X
Cover X X X X X X
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Equity Investments
COMMON STOCK. Common stock is issued by companies principally to raise cash for business purposes and represents a residual interest in the issuing company. A Fund participates in the success or failure of any company in which it holds stock. 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.
PREFERRED STOCK. Preferred stock, unlike common stock, often offers a stated dividend rate payable from a corporation's earnings. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing the price of preferred stocks to decline. Preferred stock may have mandatory sinking fund provisions, as well as call/redemption provisions prior to maturity, a negative feature when interest rates decline. Dividends on some preferred stock may be "cumulative," requiring all or a portion of prior unpaid dividends to be paid before dividends are paid on the issuer's common stock. Preferred stock also generally has a preference over common stock on the distribution of a corporation's assets in the event of liquidation of the corporation, and may be "participating," which means that it may be entitled to a dividend exceeding the stated dividend in certain cases. In some cases an issuer may offer auction rate preferred stock, which means that the interest to be paid is set by auction and will often be reset at stated intervals. The rights of preferred stocks on the distribution of a corporation's assets in the event of a liquidation are generally subordinate to the rights associated with a corporation's debt securities.
CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into a prescribed amount of common stock or other equity securities at a specified price and time. The holder of convertible securities is entitled to receive interest paid or accrued on debt, or dividends paid or accrued on preferred stock, until the security matures or is converted.
The value of a convertible security depends on interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. Convertible securities may be illiquid, and may be required to convert at a time and at a price that is unfavorable to the Fund. AIM V.I. International Growth Fund may invest up to 20% of its total assets in securities exchangeable for or convertible into marketable equity securities of foreign issues.
ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited partnerships, limited liability companies, business trusts or other non-corporate entities may issue equity securities that are similar to common or preferred stock of corporations.
Foreign Investments
FOREIGN SECURITIES. Foreign securities are equity or debt securities issued by entities outside the United States. The term "foreign securities" includes securities in the form of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers. Depositary Receipts are typically issued by a bank or trust company and evidence ownership of underlying securities issued by foreign corporations. For a discussion of ADRs and EDRs, please refer to subsection "Foreign Exchange Transaction - ADRs and EDRs below.
Each Fund may invest in foreign securities as described in the Prospectus. Investments by a Fund in foreign securities, whether denominated in U.S. dollars or foreign currencies, may entail all of the risks set forth below; in addition to those accompanying an investment in U.S. issued securities. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
Currency Risk. The value of the Funds' foreign investments will be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and increases when the value of the U.S. dollar falls against such currency.
Political and Economic Risk. The economies of many of the countries in which the Funds may invest may not be as developed as the United States' economy and may be subject to significantly different forces. Political or social instability, and development, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Funds' investments.
Regulatory Risk. Foreign companies are not registered with the Securities and Exchange Commission ("SEC") and are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, corporate governance practices and requirements comparable to those applicable to domestic companies. Therefore, financial information about foreign companies may be incomplete, or may not be comparable to the information available on U.S. companies. Income from foreign securities owned by the Funds may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Funds' shareholders.
Market Risk. The securities markets in many of the countries in which the Funds invest often have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative costs (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States.
Risks of Developing Countries. Each Fund (excluding AIM V.I. Money Market Fund) may invest up to 5%, except that AIM V.I. Technology Fund may invest up to 10%, AIM V.I. High Yield Fund and AIM V.I. Diversified Income Fund may invest up to 15% and AIM V.I. International Growth Fund, and AIM V.I. Global Health Care Fund and AIM V.I. Global Real Estate Fund may invest up to 20% of their respective total assets in securities of companies located in developing countries. Developing countries are those countries which are not included in the MSCI World Index. The Funds consider various factors when determining whether a company is in a developing country, including whether (1) it is organized under the laws of a developing country; (2) it has a principal office in a developing country; (3) it derives 50% or more of its total revenues from business in a developing country; or (4) its securities are traded principally on a stock exchange, or in an over-the-counter market, in a developing country. Investments in developing countries present risks greater than, and in addition to, those presented by investments in foreign issuers in general. A number of developing countries restrict, to varying degrees, foreign investment in stocks. Repatriation of investment income, capital, and the proceeds of sales by foreign investors may require governmental registration and/or approval in some developing countries. A number of the currencies of developing countries have experienced significant declines against the U.S. dollar in recent years, and devaluation may occur subsequent to investments in these currencies by a Fund. Inflation and rapid fluctuations in inflation rates have had and may continue to have negative effects on the economies and securities markets of certain emerging market countries. Many of the developing securities markets are relatively small or less diverse, have low trading volumes, suffer periods of relative illiquidity, and are characterized by significant price volatility. There is a risk in developing countries that a future economic or political crisis could lead to price controls, forced mergers of companies, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies, any of which may have a detrimental effect on a Fund's investments.
FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign governments, or their subdivisions, agencies or instrumentalities, that issue them. These securities involve the risks discussed above with respect to foreign securities. Additionally, the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interest or repay principal when due.
Political or economic changes or the balance of trade may affect a country's willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign debt obligations, especially debt obligations issued by the governments of developing countries. Foreign government obligations of developing countries, and some structures of emerging market debt securities, both of which are generally below investment grade, are sometimes referred to as "Brady Bonds," though, there are other types of foreign government obligations meeting this definition that are not Brady Bonds.
FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include direct purchases of futures contracts with respect to foreign currency, and contractual agreements to purchase or sell a specified currency at a specified future date (up to one year) at a price set at the time of the contract. Such contractual commitments may be forward contracts entered into directly with another party or exchange traded futures contracts. Foreign exchange transactions also include transactions conducted on a cash or "spot" basis at the spot rate for purchasing or selling currency in the relevant foreign currency exchange market.
Each Fund (except AIM V.I. Money Market Fund) has authority to deal in foreign exchange between currencies of the different countries in which it will invest as a hedge against possible variations in the foreign exchange rates between those currencies. AIM V.I. Diversified Income Fund may also invest in foreign exchange transactions using futures or forward contracts for other than hedging purposes to enhance returns. A Fund may commit the same percentage of its assets to foreign exchange transactions as it can invest in foreign securities.
The Funds may utilize either specific transactions ("transaction hedging") or portfolio positions ("position hedging") to hedge foreign currency exposure through foreign exchange transactions. Transaction hedging is the purchase or sale of foreign currency with respect to specific receivables or payables of a Fund accruing in connection with the purchase or sale of its portfolio securities, the sale and redemption of shares of the Fund, or the payment of dividends and distributions by the Fund. Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions (or underlying portfolio security positions, such as in an ADR) denominated or quoted in a foreign currency. Additionally, foreign exchange transactions may involve some of the risks of investments in foreign securities.
ADRS AND EDRS - American Depositary Receipts, or ADRs, are receipts typically issued by U.S. banks. ADRs are receipts for the shares of foreign corporations that are held by the bank issuing the receipt. An ADR entitles its holder to all dividends and capital gains on the underlying foreign securities, less any fees paid to the bank. Purchasing ADRs gives a Fund the ability to purchase the functional equivalent of foreign securities without going to the foreign securities markets to do so. ADRs are bought and sold in U.S. dollars, not foreign currencies. An ADR that is "sponsored" means that the foreign corporation whose shares are represented by the ADR is actively involved in the issuance of the ADR, and generally provides material information about the corporation to the U.S. market. An "unsponsored" ADR program means that the foreign corporation whose shares are held by the bank is not obligated to disclose material information in the United States, and, therefore, the market value of the ADR may not reflect important facts known only to the foreign company. Since they mirror their underlying foreign securities, ADRs generally have the same risks as investing directly in the underlying foreign securities. European Depositary Receipts, or EDRs, are similar to ADRs, except they are typically issued by European banks or trust companies.
Debt Investments for Equity Funds
U.S. GOVERNMENT OBLIGATIONS. See "Debt Investments for Fixed Income Funds and Money Market Fund - U.S. Government Obligations."
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. See "Debt Investments for Fixed Income Funds and Money Market Fund - Mortgage Backed and Asset-Backed Securities."
COLLATERALIZED MORTGAGE OBLIGATIONS. See "Debt Investments for Fixed Income Funds and Money Market Fund - Collateralized Mortgage Obligations."
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S. dollar-denominated debt obligations issued or guaranteed by U.S. corporations or U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers and debt obligations of foreign issuers denominated in foreign currencies. Such debt obligations include, among others, bonds, notes, debentures and variable rate demand notes. In choosing corporate debt securities on behalf of a Fund, its portfolio manager(s) may consider (i) general economic and financial conditions; (ii) the specific issuer's (a) business and management, (b) cash flow, (c) earnings coverage of interest and dividends, (d) ability to operate under adverse economic conditions, (e) fair market value of assets, and (f) in the case of foreign issuers, unique political, economic or social conditions applicable to such issuer's country; and, (iii) other considerations deemed appropriate.
LIQUID ASSETS. Cash equivalents include money market instruments (such as certificates of deposit, time deposits, banker's acceptances from U.S. or foreign banks, and repurchase agreements), shares of affiliated money market funds or high-quality debt obligations (such as U.S. Government obligations, commercial paper, master notes and other short-term corporate instruments and municipal obligations).
JUNK BONDS. Junk bonds are lower-rated or non-rated debt securities. Junk bonds are considered speculative with respect to their capacity to pay interest and repay principal in accordance with the terms of the obligation. While generally providing greater income and opportunity for gain, non-investment grade debt securities are subject to greater risks than higher-rated securities.
Companies that issue junk bonds are often highly leveraged, and may not have more traditional methods of financing available to them. During an economic downturn or recession, highly leveraged issuers of high yield securities may experience financial stress, and may not have sufficient revenues to meet their interest payment obligations. Economic downturns tend to disrupt the market for junk bonds, lowering their values, and increasing their price volatility. The risk of issuer default is higher with respect to junk bonds because such issues are generally unsecured and are often subordinated to other creditors of the issuer.
The credit rating of a junk bond does not necessarily address its market value risk, and ratings may from time to time change to reflect developments regarding the issuer's financial condition. The lower the rating of a junk bond, the more speculative its characteristics.
To the extent that a Fund has the ability to invest in junk bonds, a Fund may have difficulty selling certain junk bonds because they may have a thin trading market. The lack of a liquid secondary market may have an adverse effect on the market price and each Fund's ability to dispose of particular issues and may also make it more difficult for each Fund to obtain accurate market quotations of valuing these assets. In the event a Fund experiences an unexpected level of net redemptions, the Fund could be forced to sell its junk bonds at an unfavorable price. Prices of junk bonds have been found to be less sensitive to fluctuations in interest rates, and more sensitive to adverse economic changes and individual corporate developments than those of higher-rated debt securities.
Descriptions of debt securities ratings are found in Appendix A.
Debt Investments for Fixed Income Funds and Money Market Fund
U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S. Treasury obligations representing future interest or principal payments on U.S. Treasury notes or bonds. Stripped securities are sold at a discount to their "face value," and may exhibit greater price volatility than interest-bearing securities since investors receive no payment until maturity. Obligations of certain agencies and instrumentalities of the U.S. Government, such as the
Government National Mortgage Association ("GNMA"), are supported by the full faith and credit of the U.S. Treasury; others, such as those of the Federal National Mortgage Association ("FNMA"), are supported by the right of the issuer to borrow from the Treasury; others, such as those of the former Student Loan Marketing Association ("SLMA"), are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations; still others, though issued by an instrumentality chartered by the U.S. Government, like the Federal Farm Credit Bureau ("FFCB"), are supported only by the credit of the instrumentality. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so, in which case if the issuer were to default, the Funds holding securities of such issuer might not be able to recover their investments from the U.S. Government.
RULE 2A-7 REQUIREMENTS. Money market instruments in which the Fund will invest will be "Eligible Securities" as defined in Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time. An Eligible Security is generally a rated security with a remaining maturity of 397 calendar days or less that has been rated by the Requisite NRSROs (as defined below) in one of the two highest short-term rating categories, or a security issued by an issuer that has received a rating by the Requisite NRSROs in one of the two highest short-term rating categories with respect to a class of debt obligations (or any debt obligation within that class). Eligible Securities may also include unrated securities determined by AIM (under the supervision of and pursuant to guidelines established by the Board) to be of comparable quality to such rated securities. If an unrated security is subject to a guarantee, to be an Eligible Security, the guarantee generally must have received a rating from an NRSRO in one of the two highest short-term rating categories or be issued by a guarantor that has received a rating from an NRSRO in one of the two highest short-term rating categories with respect to a class of debt obligations (or any debt obligation within that class). Since AIM V.I. Money Market Fund may invest in securities backed by banks and other financial institutions, changes in the credit quality of these institutions could cause losses to the Fund and affect their share price. The term "Requisite NRSRO" means (a) any two nationally recognized statistical rating organizations (NRSROs) that have issued a rating with respect to a security or class of debt obligations of an issuer, or (b) if only one NRSRO has issued a rating with respect to such security or issuer at the time a Fund acquires the security, that NRSRO.
AIM V.I. Money Market Fund will limit investments in money market obligations to those which are denominated in U.S. dollars and which at the date of purchase are "First Tier" securities as defined in Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time. Briefly, "First Tier" securities are securities that are rated in the highest rating category for short-term debt obligations by two NRSROs, or, if only rated by one NRSRO, are rated in the highest rating category by the NRSRO, or if unrated, are determined by AIM, the Fund's investment advisor (under the supervision of and pursuant to guidelines established by the Board) to be of comparable quality to a rated security that meets the foregoing quality standards, as well as securities issued by a registered investment company that is a money market fund and U.S. Government securities.
FOREIGN BANK OBLIGATIONS. To the extent that a Fund has the ability to invest in foreign Bank Obligations, the Fund may invest in Eurodollar obligations (i.e., U.S. dollar-denominated obligations issued by a foreign branch of a domestic bank), Yankee dollar obligations (i.e., U.S. dollar-denominated obligations issued by a domestic branch of a foreign bank) and obligations of foreign branches of foreign banks. AIM V.I. Money Market Fund will limit its aggregate investments in foreign bank obligations, including Eurodollar obligations and Yankee dollar obligations, to 50% of its total assets at the time of purchase, provided that there is no limitation upon the Fund's investments in (a) Eurodollar obligations, if the domestic parent of the foreign branch issuing the obligation is unconditionally liable in the event that the foreign branch for any reason fails to pay on the Eurodollar obligation; and (b) Yankee dollar obligations, if the U.S. branch of the foreign bank is subject to the same regulation as U.S. banks. Eurodollar, Yankee dollar and other foreign bank obligations include time deposits, which are non-negotiable deposits maintained in a bank for a specified period of time at a stated interest rate. For a discussion of the risks pertaining to investments in foreign securities, see "Risk Factors" in this Statement of Additional Information.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. Mortgage-backed securities are mortgage-related securities issued or guaranteed by the U.S. Government, its agencies and instrumentalities, or issued by nongovernment entities. Mortgage-related securities represent pools of mortgage loans assembled for sale to investors by various government agencies such as GNMA and government-related organizations such as FNMA and the Federal Home Loan Mortgage Corporation ("FHLMC"), as well as by nongovernment issuers such as commercial banks, savings and loan institutions, mortgage bankers and private mortgage insurance companies. Although certain mortgage-related securities are guaranteed by a third party or otherwise similarly secured, the market value of the security, which may fluctuate, is not so secured.
There are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities they issue. Mortgage-related securities issued by GNMA include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as to the timely payment of principal and interest. That guarantee is backed by the full faith and credit of the U.S. Treasury. GNMA is a corporation wholly owned by the U.S. Government within the Department of Housing and Urban Development. Mortgage-related securities issued by FNMA include FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") and are guaranteed as to payment of principal and interest by FNMA itself and backed by a line of credit with the U.S. Treasury. FNMA is a government-sponsored entity wholly owned by public stockholders. Mortgage-related securities issued by FHLMC include FHLMC Mortgage Participation Certificates (also known as "Freddie Macs") guaranteed as to payment of principal and interest by FHLMC itself and backed by a line of credit with the U.S. Treasury. FHLMC is a government-sponsored entity wholly owned by public stockholders.
Other asset-backed securities are structured like mortgage-backed securities, but instead of mortgage loans or interests in mortgage loans, the underlying assets may include such items as motor vehicle installment sales or installment loan contracts, leases of various types of real and personal property, and receivables from credit card agreements. Regular payments received in respect of such securities include both interest and principal. Asset-backed securities typically have no U.S. Government backing. Additionally, the ability of an issuer of asset-backed securities to enforce its security interest in the underlying assets may be limited.
If a Fund purchases a mortgage-backed or other asset-backed security at a premium, that portion may be lost if there is a decline in the market value of the security whether resulting from changes in interest rates or prepayments in the underlying collateral. As with other interest-bearing securities, the prices of such securities are inversely affected by changes in interest rates. However, though the value of a mortgage-backed or other asset-backed security may decline when interest rates rise, the converse is not necessarily true, since in periods of declining interest rates the mortgages and loans underlying the securities are prone to prepayment, thereby shortening the average life of the security and shortening the period of time over which income at the higher rate is received. When interest rates are rising, though, the rate of prepayment tends to decrease, thereby lengthening the period of time over which income at the lower rate is received. For these and other reasons, a mortgage-backed or other asset-backed security's average maturity may be shortened or lengthened as a result of interest rate fluctuations and, therefore, it is not possible to predict accurately the security's return.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). AIM V.I. Basic Balanced
Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Real Estate Fund and AIM
V.I. Government Securities Fund may invest in CMOs. The Funds can also invest in
mortgage-backed bonds and asset-backed securities. A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans, but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated maturity. Actual maturity and average life will depend upon the prepayment experience of the collateral. CMOs provide for a modified form of call protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal received from the pool of underlying mortgages, including prepayments, is first returned to investors holding the shortest maturity class. Investors holding the longer maturity classes receive principal only after the first class has been retired. An investor is partially guarded against a sooner than desired return of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase mortgages or mortgage pass-through certificates ("Collateral"). The Collateral is pledged to a third party trustee as security for the Bonds. Principal and interest payments from the Collateral are used to pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds all bear current interest. Interest on Series Z Bond is accrued and added to principal and a like amount is paid as principal on the Series A, B, or C Bond currently being paid off. When the Series A, B, and C Bonds are paid in full, interest and principal on the Series Z Bond begins to be paid currently. With some CMOs, the issuer serves as a conduit to allow loan originators (primarily builders or savings and loan associations) to borrow against their loan portfolios.
CMOs that are issued or guaranteed by the U.S. government or by any of its agencies or instrumentalities will be considered U.S. government securities by the Funds, while other CMOs, even if collateralized by U.S. government securities, will have the same status as other privately issued securities for purposes of applying a Fund's diversification tests.
FHLMC CMOs. FHLMC CMOs are debt obligations of FHLMC issued in multiple classes having different maturity dates which are secured by the pledge of a pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC Participation Certificates, payments of principal and interest on the CMOs are made semiannually, as opposed to monthly. The amount of principal payable on each semiannual payment date is determined in accordance with FHLMC's mandatory sinking fund schedule, which, in turn, is equal to approximately 100% of FHA prepayment experience applied to the mortgage collateral pool. All sinking fund payments in the CMOs are allocated to the retirement of the individual classes of bonds in the order of their stated maturities. Payment of principal on the mortgage loans in the collateral pool in excess of the amount of FHLMC's minimum sinking fund obligation for any payment date are paid to the holders of the CMOs as additional sinking fund payments. Because of the "pass-through" nature of all principal payments received on the collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate at which principal of the CMOs is actually repaid is likely to be such that each class of bonds will be retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage loans during any semiannual payment period is not sufficient to meet FHLMC's minimum sinking fund obligation on the next sinking fund payment date, FHLMC agrees to make up the deficiency from its general funds.
Risks of Mortgage-Related Securities. Investment in mortgage-backed securities poses several risks, including prepayment, market, and credit risk. Prepayment risk reflects the risk that borrowers may prepay their mortgages faster than expected, thereby affecting the investment's average life and perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely controlled by the borrower. Borrowers are most likely to exercise prepayment options at the time when it is least advantageous to investors, generally prepaying mortgages as interest rates fall, and slowing payments as interest rates rise. Besides the effect of prevailing interest rates, the rate of prepayment and refinancing of mortgages may also be affected by home value appreciation, ease of the refinancing process and local economic conditions.
Market risk reflects the risk that the price of the security may fluctuate over time. The price of mortgage-backed securities may be particularly sensitive to prevailing interest rates, the length of time the security is expected to be outstanding, and the liquidity of the issue. In a period of unstable interest rates, there may be decreased demand for certain types of mortgage-backed securities, and a Fund invested in such securities wishing to sell them may find it difficult to find a buyer, which may in turn decrease the price at which they may be sold.
Credit risk reflects the risk that a Fund may not receive all or part of its principal because the issuer or credit enhancer has defaulted on its obligations. Obligations issued by U.S. government-related entities are guaranteed as to the payment of principal and interest, but are not backed by the full faith and credit of the U.S. government. The performance of private label mortgage-backed securities, issued by private institutions, is based on the financial health of those institutions. With respect to GNMA certificates, although GNMA guarantees timely payment even if homeowners delay or default, tracking the "pass-through" payments may, at times, be difficult.
BANK INSTRUMENTS. Each Fund may invest in certificates of deposits, time deposits, and bankers' acceptances from U.S. or foreign banks. A bankers' acceptance is a bill of exchange or time draft drawn on and accepted by a commercial bank. A certificate of deposit is a negotiable interest-bearing instrument with a specific maturity. Certificates of deposit are issued by banks and savings and loan institutions in exchange for the deposit of funds, and normally can be traded in the secondary market prior to maturity. A time deposit is a non-negotiable receipt issued by a bank in exchange for the deposit of funds. Like a certificate of deposit, it earns a specified rate of interest over a definite period of time; however, it cannot be traded in the secondary market.
COMMERCIAL INSTRUMENTS. Each Fund may invest in commercial instruments, including commercial paper, master notes and other short-term corporate instruments, that are denominated in U.S. dollars. Commercial paper consists of short-term promissory notes issued by corporations. Commercial paper may be traded in the secondary market after its issuance. Master notes are demand notes that permit the investment of fluctuating amounts of money at varying rates of interest pursuant to arrangements with issuers who meet the quality criteria of the Fund. The interest rate on a master note may fluctuate based upon changes in specified interest rates or be reset periodically according to a prescribed formula or may be a set rate. Although there is no secondary market in master demand notes, if such notes have a demand feature, the payee may demand payment of the principal amount of the note upon relatively short notice. Variable rate master demand notes are unsecured demand notes that permit investment of fluctuating amounts of money at variable rates of interest pursuant to arrangements with issuers who meet the applicable quality criteria. The interest rate on a variable rate master demand note is periodically redetermined according to a prescribed formula. All variable rate master demand notes acquired by AIM V.I. Money Market Fund will be payable within a prescribed notice period not to exceed seven days.
PARTICIPATION INTERESTS. AIM V.I. Money Market Fund may purchase participations in corporate loans. Participation interests generally will be acquired from a commercial bank or other financial institution (a "Lender") or from other holders of a participation interest (a "Participant"). The purchase of a participation interest either from a Lender or a Participant will not result in any direct contractual relationship with the borrowing company (the "Borrower"). Instead, the Fund will be required to rely on the Lender or the Participant that sold the participation interest both for the enforcement of the Fund's rights against the Borrower and for the receipt and processing of payments due to the Fund under the loans. The Fund is thus subject to the credit risk of both the Borrower and a Participant. Participation interests are generally subject to restrictions on resale. The Fund considers participation interests to be illiquid and therefore subject to the Fund's percentage limitation for investments in illiquid securities.
MUNICIPAL SECURITIES. AIM V.I. Diversified Income Fund, AIM V.I. Global Real Estate Fund, AIM V.I. High Yield Fund, and AIM V.I. Money Market Fund may invest in "Municipal Securities," which include debt obligations of states, territories or possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities. Municipal Securities are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which Municipal Securities may be issued include the refunding of outstanding obligations, obtaining funds for general operating expenses and lending such funds to other public institutions and facilities. In addition, certain types of industrial development bonds are issued by or on behalf of public authorities to obtain funds to provide for the construction, equipment, repair or
improvement of privately operated housing facilities, airport, mass transit, industrial, port or parking facilities, air or water pollution control facilities and certain local facilities for water supply, gas, electricity or sewage or solid waste disposal. The principal and interest payments for industrial development bonds or pollution control bonds are often the sole responsibility of the industrial user and therefore may not be backed by the taxing power of the issuing municipality. The interest paid on such bonds may be exempt from federal income tax, although current federal tax laws place substantial limitations on the purposes and size of such issues. Such obligations are considered to be Municipal Securities provided that the interest paid thereon, in the opinion of bond counsel, qualifies as exempt from federal income tax. However, interest on Municipal Securities may give rise to a federal alternative minimum tax liability and may have other collateral federal income tax consequences. See "Dividends, Distributions and Tax Matters."
The two major classifications of Municipal Securities are bonds and notes. Bonds may be further classified as "general obligation" or "revenue" issues. General obligation bonds are secured by the issuer's pledge of its full faith, credit and taxing power for the payment of principal and interest. Revenue bonds are payable from the revenues derived from a particular facility or class of facilities, and in some cases, from the proceeds of a special excise or other specific revenue source, but not from the general taxing power. Tax exempt industrial development bonds are in most cases revenue bonds and do not generally carry the pledge of the credit of the issuing municipality. Notes are short term instruments which usually mature in less than two years. Most notes are general obligations of the issuing municipalities or agencies and are sold in anticipation of a bond sale, collection of taxes or receipt of other revenues. There are, of course, variations in the risks associated with Municipal Securities, both within a particular classification and between classifications. The Funds' assets may consist of any combination of general obligation bonds, revenue bonds, industrial revenue bonds and notes. The percentage of such Municipal Securities held by a Fund will vary from time to time.
Municipal Securities also include the following securities:
- Bond Anticipation Notes usually are general obligations of state and local governmental issuers which are sold to obtain interim financing for projects that will eventually be funded through the sale of long term debt obligations or bonds.
- Tax Anticipation Notes are issued by state and local governments to finance the current operations of such governments. Repayment is generally to be derived from specific future tax revenues. Tax anticipation notes are usually general obligations of the issuer.
- Revenue Anticipation Notes are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general, they also constitute general obligations of the issuer.
- Tax-Exempt Commercial Paper (Municipal Paper) is similar to taxable commercial paper, except that tax-exempt commercial paper is issued by states, municipalities and their agencies.
The Funds also may purchase participation interests or custodial receipts from financial institutions. These participation interests give the purchaser an undivided interest in one or more underlying Municipal Securities.
Subsequent to its purchase by a Fund, an issue of Municipal Securities may cease to be rated by Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Services ("S&P"), or another nationally recognized statistical rating organization ("NRSRO"), or the rating of such a security may be reduced below the minimum rating required for purchase by a Fund. Neither event would require a Fund to dispose of the security, but AIM will consider such events to be relevant in determining whether the Fund should continue to hold the security. To the extent that the ratings applied by Moody's, S&P or another NRSRO to Municipal Securities may change as a result of changes in these rating systems, a
Fund will attempt to use comparable ratings as standards for its investments in Municipal Securities in accordance with the investment policies described herein.
Quality Standards. The following quality standards apply at the time a security is purchased. Information concerning the ratings criteria of Moody's, S&P, and Fitch Investors Service, Inc. ("Fitch") appears herein under "Appendix A - Ratings of Debt Securities."
At least 80% of AIM Municipal Bond Fund's total assets will be invested in municipal securities rated within the four highest ratings for municipal obligations by Moody's (Aaa, Aa, A, or Baa), S&P (AAA, AA, A, or BBB), or have received a comparable rating from another NRSRO. The Fund may invest up to 20% of its total assets in municipal securities that are rated below Baa/BBB (or a comparable rating of any other NRSRO) or that are unrated. For purposes of the foregoing percentage limitations, municipal securities (i) which have been collateralized with U.S. Government obligations held in escrow until the municipal securities' scheduled redemption date or final maturity, but (ii) which have not been rated by a NRSRO subsequent to the date of escrow collateralization, will be treated by the Fund as the equivalent of Aaa/AAA rated securities.
If a Fund invests in securities backed by insurance companies and other financial institutions, changes in the financial condition of these institutions could cause losses to the Fund and affect its share price.
The Funds may invest in securities which are insured by financial insurance companies. Because a limited number of entities provide such insurance, a Fund may invest more than 25% of its assets in securities insured by the same insurance company.
Other Considerations. The ability of a Fund to achieve its investment objective depends upon the continuing ability of the issuers or guarantors of Municipal Securities held by the Fund to meet their obligations for the payment of interest and principal when due. The securities in which a Fund invests may not yield as high a level of current income as longer term or lower grade securities, which generally have less liquidity and greater fluctuation in value.
There is a risk that some or all of the interest received by a Fund from Municipal Securities might become taxable as a result of tax law changes or determinations of the Internal Revenue Service ("IRS").
The yields on Municipal Securities are dependent on a variety of factors, including general economic and monetary conditions, money market factors, conditions of the Municipal Securities market, size of a particular offering, and maturity and rating of the obligation. Generally, the yield realized by a Fund's shareholders will be the yield realized by the Fund on its investments, reduced by the general expenses of the Fund and the Trust. The market values of the Municipal Securities held by a Fund will be affected by changes in the yields available on similar securities. If yields increase following the purchase of a Municipal Security, the market value of such Municipal Security will generally decrease. Conversely, if yields decrease, the market value of a Municipal Security will generally increase.
MUNICIPAL LEASE OBLIGATIONS. Municipal lease obligations may take the form of a lease, an installment purchase or a conditional sales contract. Municipal lease obligations are issued by state and local governments and authorities to acquire land, equipment and facilities such as state and municipal vehicles, telecommunications and computer equipment, and other capital assets. Interest payments on qualifying municipal leases for exempt from federal income taxes. Consistent with its investment objective, a Fund may purchase these obligations directly, or they may purchase participation interests in such obligations. Municipal leases are generally subject to greater risks than general obligation or revenue bonds. State laws set forth requirements that states or municipalities must meet in order to issue municipal obligations, and such obligations may contain a covenant by the issuer to budget for, appropriate, and make payments due under the obligation. However, certain municipal lease obligations may contain "non-appropriation" clauses which provide that the issuer is not obligated to make payments on the obligation in future years unless funds have been appropriated for this purpose each year. Accordingly, such obligations are subject to "non-appropriation" risk. While municipal leases are secured
by the underlying capital asset, it may be difficult to dispose of such assets in the event of non-appropriation or other default. All direct investments by the Fund in municipal lease obligations shall be deemed illiquid and shall be valued according to the Fund's Procedures for Valuing Securities current at the time of such valuation.
INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. See "Debt Investments for
Equity Funds - Investment Grade Corporate Debt."
JUNK BONDS. See "Debt Investments for Equity Funds - Junk Bonds."
Other Investments
REAL ESTATE INVESTMENT TRUSTS ("REITS"). REITs are trusts that sell equity or debt securities to investors and use the proceeds to invest in real estate or interests therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the southeastern United States, or both.
To the extent consistent with its investment objective, each Fund (except AIM V.I. Global Real Estate Fund) may invest up to 15% of its total assets in equity and/or debt securities issued by REITs. AIM V.I. Global Real Estate Fund may invest all of its total assets in equity and/or debt securities issued by REITs.
To the extent that a Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. A Fund, therefore, may be subject to certain risks associated with the direct ownership of real estate including difficulties in valuing and trading real estate, declines in the value of real estate, risks related to general and local economic conditions, adverse changes in the climate for real estate, environmental liability risks, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates.
REITs can generally be classified as equity REITs, mortgage REITs and hybrid REITs. Equity REITs generally invest a majority of their assets in income-producing real estate properties in order to generate cash flow from rental income and a gradual asset appreciation. The income-producing real estate properties in which equity REITs invest typically include properties such as office, retail, industrial, hotel and apartment buildings, self storage, specialty and diversified and healthcare facilities. Equity REITs can realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive their income primarily from interest payments on the mortgages. Hybrid REITs combine the characteristics of both equity REITs and mortgage REITs. The Fund will invest primarily in equity REITs, but may invest up to 10% of its total assets in any combination of mortgage REITs and hybrid REITs.
REITs can be listed and traded on national securities exchanges or can be traded privately between individual owners. The Fund may invest in both publicly and privately traded REITs.
The Fund could conceivably own real estate directly as a result of a default on the securities it owns. The Fund, therefore, may be subject to certain risks associated with the direct ownership of real estate including difficulties in valuing and trading real estate, declines in the value of real estate, risks related to general and local economic conditions, adverse changes in the climate for real estate, environmental liability risks, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage REITs are dependent upon management skill, are not diversified, and are therefore subject to the risk of financing single or a limited number of projects.
Such trusts are also subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to maintain an exemption from the 1940 Act. Changes in interest rates may also affect the value of debt securities held by a Fund. By investing in REITs indirectly through a Fund, a shareholder will bear not only his/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs.
OTHER INVESTMENT COMPANIES. Each Fund may purchase shares of other investment companies. For each Fund, the 1940 Act imposes the following restrictions on investments in other investment companies: (i) a Fund may not purchase more than 3% of the total outstanding voting stock of another investment company; (ii) a Fund may not invest more than 5% of its total assets in securities issued by another investment company; and (iii) a Fund may not invest more than 10% of its total assets in securities issued by other investment companies. These restrictions do not apply to investments by the Funds in investment companies that are money market funds, including money market funds that have AIM or an affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds").
With respect to a Fund's purchase of shares of another investment company, including an Affiliated Money Market Fund, the Fund will indirectly bear its proportionate share of the advisory fees and other operating expenses of such investment company.
EXCHANGE-TRADED FUNDS. Each Fund may purchase shares of exchange-traded funds ("ETFs"). Most ETFs are registered under the 1940 Act as investment companies. Therefore, a Fund's purchase of shares of an ETF may be subject to the restrictions on investments in other investment companies discussed above under "Other Investment Companies."
ETFs hold portfolios of securities, commodities and/or currencies that are designed to replicate, as closely as possible before expenses, the price and/or yield of (i) a specified market or other index, (ii) a basket of securities, commodities or currencies, or (iii) a particular commodity or currency. The performance results of ETFs will not replicate exactly the performance of the pertinent index, basket, commodity or currency due to transaction and other expenses, including fees to service providers, borne by ETFs. ETF shares are sold and redeemed at net asset value only in large blocks called creation units and redemption units, respectively. ETF shares also may be purchased and sold in secondary market trading on national securities exchanges, which allows investors to purchase and sell ETF shares at their market price throughout the day.
Investments in ETFs involve the same risks associated with a direct investment in the commodity or currency, or in the types of securities, commodities and/or currencies included in the indices or baskets the ETFs are designed to replicate. In addition, shares of an ETF may trade at a market price that is higher or lower than their net asset value and an active trading market in such shares may not develop or continue. Moreover, trading of an ETF's shares may be halted if the listing exchange's officials deem such action to be appropriate, the shares are de-listed from the exchange, or the activation of market-wide "circuit breakers" (which are tied to large decreases in stock prices) halts stock trading generally. Finally there can be no assurance that the portfolio of securities, commodities and/or currencies purchased by an ETF to replicate a particular index or basket will replicate (i) such index or basket, or (ii) a commodity or currency will replicate the prices of such commodity or currency.
DEFAULTED SECURITIES. AIM V.I. Global Real Estate Fund, AIM V.I. High Yield Fund and AIM V.I. Diversified Income Fund may invest in defaulted securities. In order to enforce its rights in defaulted securities, the Fund may be required to participate in various legal proceedings or take possession of and manage assets securing the issuer's obligations on the defaulted securities. This could increase a Fund's operating expenses and adversely affect its net asset value. Any investments by a Fund in defaulted securities will also be considered illiquid securities subject to the limitations described herein, unless AIM determines that such defaulted securities are liquid under guidelines adopted by the Board.
VARIABLE OR FLOATING RATE INSTRUMENTS. The Funds may invest in Municipal Securities which have variable or floating interest rates which are readjusted on set dates (such as the last day of the month or calendar quarter) in the case of variable rates or whenever a specified interest rate change
occurs in the case of a floating rate instrument. Variable or floating interest rates generally reduce changes in the market price of Municipal Securities from their original purchase price because, upon readjustment, such rates approximate market rates. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less for variable or floating rate Municipal Securities than for fixed rate obligations. Many Municipal Securities with variable or floating interest rates purchased by a Fund are subject to payment of principal and accrued interest (usually within seven days) on the Fund's demand. The terms of such demand instruments require payment of principal and accrued interest by the issuer, a guarantor, and/or a liquidity provider. All variable or floating rate instruments will meet the applicable quality standards of a Fund. AIM will monitor the pricing, quality and liquidity of the variable or floating rate Municipal Securities held by the Funds.
INDEXED SECURITIES. AIM V.I. Diversified Income Fund and AIM V.I. High Yield Fund may invest in indexed securities the value of which is linked to interest rates, commodities, indices or other financial indicators. Most indexed securities are short to intermediate term fixed income securities whose values at maturity (principal value) or interest rates rise or fall according to changes in the value of one or more specified underlying instruments. Indexed securities may be positively or negatively indexed (i.e., their principal value or interest rates may increase or decrease if the underlying instrument appreciates), and may have return characteristics similar to direct investments in the underlying instrument or to one or more options on the underlying instrument. Indexed securities may be more volatile than the underlying instrument itself and could involve the loss of all or a portion of the principal amount of the indexed security.
ZERO-COUPON AND PAY-IN-KIND SECURITIES. To the extent consistent with its investment objective, each Fund may invest in zero-coupon or pay-in-kind securities. These securities are debt securities that do not make regular cash interest payments. Zero-coupon securities are sold at a deep discount to their face value. Pay-in-kind securities pay interest through the issuance of additional securities. Because zero-coupon and pay-in-kind securities do not pay current cash income, the price of these securities can be volatile when interest rates fluctuate. While these securities do not pay current cash income, federal tax law requires the holders of zero-coupon and pay-in-kind securities to include in income each year the portion of the original issue discount (or deemed discount) and other non-cash income on such securities accrued during that year. In order to qualify as a "regulated investment company" under the Internal Revenue Code of 1986, as amended (the "Code") and to avoid certain excise taxes, the Fund may be required to distribute a portion of such discount and income, and may be required to dispose of other portfolio securities, which could occur during periods of adverse market prices, in order to generate sufficient cash to meet these distribution requirements.
Investment Techniques
DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also referred to as forward commitments, involve commitments by a Fund to dealers or issuers to acquire or sell securities at a specified future date beyond the customary settlement for such securities. These commitments may fix the payment price and interest rate to be received or paid on the investment. A Fund may purchase securities on a delayed delivery basis to the extent it can anticipate having available cash on settlement date. Delayed delivery transactions will not be used as a speculative or leverage technique.
Investment in securities on a delayed delivery basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must engage in portfolio transactions in order to honor a delayed delivery commitment. Until the settlement date, a Fund will segregate liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery transactions. Such segregated liquid assets will be marked-to-market daily, and the amount segregated will be increased if necessary to maintain adequate coverage of the delayed delivery commitments. No additional delayed delivery agreements or when-issued commitments (as described below) will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
The delayed delivery securities, which will not begin to accrue interest or dividends until the settlement date, will be recorded as an asset of a Fund and will be subject to the risk of market fluctuation. The purchase price of the delayed delivery securities is a liability of a Fund until settlement. Absent extraordinary circumstances, a Fund will not sell or otherwise transfer the delayed delivery basis securities prior to settlement.
AIM V.I. Government Securities Fund may enter into buy/sell back transactions (a form of delayed delivery agreement). In a buy/sell back transaction, the Fund enters a trade to sell securities at one price and simultaneously enters a trade to buy the same securities at another price for settlement at a future date.
WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis means that the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued. The payment obligation and, if applicable, the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. A Fund will only make commitments to purchase such securities with the intention of actually acquiring such securities, but the Fund may sell these securities before the settlement date if it is deemed advisable.
Securities purchased on a when-issued basis and the securities held in a Fund's portfolio are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and, if applicable, changes in the level of interest rates. Therefore, if a Fund is to remain substantially fully invested at the same time that it has purchased securities on a when-issued basis, there will be a possibility that the market value of the Fund's assets will fluctuate to a greater degree. Furthermore, when the time comes for the Fund to meet its obligations under when-issued commitments, the Fund will do so by using then available cash flow, by sale of the segregated liquid assets, by sale of other securities or, although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a market value greater or less than the Fund's payment obligation).
Investment in securities on a when-issued basis may increase a Fund's exposure to market fluctuation and may increase the possibility that the Fund will incur short-term gains subject to federal taxation or short-term losses if the Fund must engage in portfolio transactions in order to honor a when-issued commitment. A Fund will employ techniques designed to reduce such risks. If a Fund purchases a when-issued security, the Fund will segregate liquid assets in an amount equal to the when-issued commitment. If the market value of such segregated assets declines, additional liquid assets will be segregated on a daily basis so that the market value of the segregated assets will equal the amount of the Fund's when-issued commitments. No additional delayed delivery agreements (as described above) or when-issued commitments will be made by a Fund if, as a result, more than 25% of the Fund's total assets would become so committed.
SHORT SALES. Each Fund intends from time to time to sell securities short. A short sale is effected when it is believed that the price of a particular security will decline, and involves the sale of a security which a Fund does not own in the hope of purchasing the same security at a later date at a lower price. To make delivery to the buyer, a Fund must borrow the security from a broker-dealer through which the short sale is executed, and the broker-dealer delivers such securities, on behalf of such Fund, to the buyer. The broker-dealer is entitled to retain the proceeds from the short sale until a Fund delivers to such broker-dealer the securities sold short. In addition, a Fund is required to pay to the broker-dealer the amount of any dividends paid on shares sold short and may have to pay a premium to borrow the securities.
To secure its obligation to deliver to such broker-dealer the securities sold short, a Fund may be required to deposit cash or liquid securities with the broker in addition to the proceeds from the short sale to meet necessary margin requirements. In addition, a Fund will place in a segregated account with such Fund's custodian an amount of cash or liquid securities equal to the difference, if any, between the current market value of the securities sold short and any cash or liquid securities deposited as collateral with the broker-dealer in connection with the short sale. As a result of these requirements, a Fund will not gain any leverage merely by selling short, except to the extent that it earns interest on the retained proceeds of sale. The amounts deposited with the broker-dealer or segregated as described above do not have the effect of limiting the amount of money that the Fund may lose on a short sale.
A Fund is said to have a short position in the securities sold short until it delivers to the broker-dealer the securities sold short, at which time such Fund receives the proceeds of the sale. A Fund will normally close out a short position by purchasing on the open market and delivering to the broker-dealer an equal amount of the securities sold short.
A Fund will realize a gain if the price of a security declines between the date of the short sale and the date on which such Fund purchases a security to replace the borrowed security. On the other hand, a Fund will incur a loss if the price of the security increases between those dates. The amount of any gain will be decreased and the amount of any loss increased by any premium or interest that a Fund may be required to pay in connection with a short sale. It should be noted that possible losses from short sales differ from those that could arise from a cash investment in a security in that losses from a short sale may be limitless, while the losses from a cash investment in a security cannot exceed the total amount of a Fund's investment in the security. For example, if a Fund purchases a $10 security, potential loss is limited to $10; however, if a Fund sells a $10 security short, it may have to purchase the
security for return to the broker-dealer when the market value of that security is $50, thereby incurring a loss of $40.
A Fund may also make short sales "against the box," meaning that at all times when a short position is open a Fund owns an equal amount of such securities or securities convertible into or exchangeable for, without payment of any further consideration, securities of the same issue as, and in an amount equal to, the securities sold short. To secure its obligation to deliver the securities sold short "against the box", a Fund will segregate with its custodian an equal amount of the securities sold short or securities convertible into or exchangeable for an equal amount of such securities. Open short positions (established by AIM V.I. Diversified Income Fund) using futures or forward currency contracts are not deemed to constitute selling securities short. Short sales "against the box" result in a "constructive sale" and require a Fund to recognize any taxable gain unless an exception to the constructive sale rule applies.
AIM V.I. Global Real Estate Fund is permitted and intends from time to time to effect short sales that are not "against the box." In a short sale that is not "against the box", AIM V.I. Global Real Estate Fund does not own the security borrowed. To secure its obligation to deliver to such broker-dealer the securities sold short, AIM V.I. Global Real Estate Fund must segregate an amount of cash or liquid securities equal to the difference between the current market value of the securities sold short and any cash or liquid securities deposited as collateral with the broker in connection with the short sale (including the proceeds of the short sale). As a result of these requirements, AIM V.I. Global Real Estate Fund will not gain any leverage merely by selling short, except to the extent that it earns interest on the immobilized cash or liquid securities.
The amounts deposited with the broker or segregated, as described above, do not have the effect of limiting the amount of money that the Funds may lose on a short sale. In a short sale that is not "against the box", AIM V.I. Global Real Estate Fund will normally close out a short position by purchasing on the open market and delivering to the broker-dealer an equal amount of the securities sold short.
In a short sale that is not "against the box", AIM V.I. Global Real Estate Fund will realize a gain if the price of a security declines between the date of the short sale and the date on which the Fund replaces the borrowed security. On the other hand, the Fund will incur a loss if the price of the security increases between those dates. The amount of any gain will be decreased and the amount of any loss increased by any premium or interest that the Fund may be required to pay in connection with a short sale. It should be noted that possible losses from short sales that are not "against the box" differ from those that could arise from a cash investment in a security in that losses from short sales that are not "against the box" may be limitless, while the losses from a cash investment in a security cannot exceed the total amount of the Fund's investment in the security. For example, if the Fund purchases a $10 security, potential loss is limited to $10; however, if the Fund sells a $10 security short, it may have to purchase the security for return to the broker-dealer when the market value of that security is $50, thereby incurring a loss of $40.
In addition to enabling the Funds to hedge against market risk, short sales and short sales "against the box" may afford a Fund an opportunity to earn additional current income to the extent a Fund is able to enter into arrangements with broker-dealers through which the short sales are executed to receive income with respect to the proceeds of the short sales during the period a Fund's short positions remain open. There is no assurance that a Fund will be able to enter into such arrangements.
MARGIN TRANSACTIONS. None of the Funds will purchase any security on margin, except that each Fund may obtain such short-term credits as may be necessary for the clearance of purchases and sales of portfolio securities. The payment by a Fund of initial or variation margin in connection with futures or related options transactions and short sales will not be considered the purchase of a security on margin.
SWAPS AGREEMENTS. To the extent that a Fund has the ability to enter into Swap Agreements, a Fund has the ability to enter into interest rate, index and currency exchange rate swap agreements for purposes of attempting to obtain a particular desired return at a lower cost to the Fund than if it had
invested directly in an instrument that yielded that desired return. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard "swap" transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or "swapped" between the parties are calculated with respect to a "notional amount," i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a "basket" of securities representing a particular index. Commonly used swap agreements include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or "cap"; (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or "floor"; and (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
The "notional amount" of the swap agreement is only a fictitious basis on which to calculate the obligations that the parties to a swap agreement have agreed to exchange. Swaps are generally governed by a single master agreement for each counterparty, and the agreements allow for netting of counterparties' obligations on specific transactions. A Fund's current obligations under a swap agreement will be accrued daily (on a net basis), and a Fund will maintain liquid assets in an amount equal to amounts owed to a swap counterparty less the value of any collateral posted.
In addition, a Fund will not enter into a transaction with any single counterparty if the net amount owed or to be received under existing transactions under the swap agreements with that counterparty would exceed 5% of the Fund's net assets determined on the date the transaction is entered into. For a discussion of the tax considerations relating to swap agreements, see "Dividends, Distributions and Tax Matters - Swap Agreements."
Although this will not guarantee that the counterparty does not default, the Fund will not enter into an interest rate swap or cap transaction with any counterparty that AIM and/or the Sub-Advisor believes does not have the financial resources to honor its obligation under the interest rate swap or cap transaction. Further, AIM will continually monitor the financial stability of a counterparty to an interest rate swap or cap transaction in an effort to proactively protect the Fund's investments. Where the obligations of the counterparty are guaranteed, AIM monitors the financial stability of the guarantor instead of the counterparty.
CREDIT DEFAULT SWAPS. AIM V.I. Basic Balanced Fund, AIM V.I. Diversified Income Fund, and AIM V.I. High Yield Fund may enter into Credit Default Swaps ("CDS"). A CDS is an agreement between two parties pursuant to which one party agrees to make one or more payments to the other, while the other party would assume the risk of a referenced debt obligation in the event of default. CDS may be direct ("unfunded swaps") or indirect in the form of a structured note ("funded swaps"). Unfunded and funded credit default swaps may be on a single security or packaged as a basket of CDS. The Fund may buy a CDS ("buy credit protection") in which it pays a fixed payment over the life of the swap in exchange for a counterparty taking on the risk of default of a referenced debt obligation ("Reference Entity"). Alternatively, the Fund may sell a CDS ("sell protection") in which it will receive a fixed payment in exchange for taking on the credit risk of the Reference Entity. An investment in a CDS may cause the portfolio performance to be more or less volatile.
CDS agreements are typically individually negotiated and structured. CDS agreements may be entered into for investment or hedging purposes. The Fund may enter into CDS to create direct or synthetic long or short exposure to domestic or foreign corporate debt securities or sovereign debt securities.
As a buyer of a CDS, the Fund would pay a fixed spread over the life of the agreement to the seller of the CDS. If an event of default occurs, the fixed payment stream would cease, the Fund would deliver defaulted bonds to the seller and the seller would pay the full notional value, or the "par value," of the reference obligation to the Fund. The Fund may already own the reference bonds or may purchase a
deliverable bond in the market. Alternatively, the two counterparties may agree to cash settlement. If no event of default occurs, the Fund pays the fixed stream of cash flows to the seller, and no other exchange occurs.
As a seller of a CDS, the Fund would receive a fixed payment stream. If an event of default occurs, the fixed payment stream stops, the Fund would pay the buyer par, and, in return, the Fund would receive deliverable bonds. Alternatively, if cash settlement is elected, the Fund would pay the buyer par less the market value of the referenced bonds. If no event of default occurs, the Fund receives the cash flow payment over the life of the agreement. Risks of CDS include the risk that a counterparty may default on amounts owed to the Fund, basis risk (risk that the price of a derivative used to hedge or reflect an underlying bond behaves differently than the price of that bond), liquidity risk and market risk.
Credit Derivatives may create covered or uncovered exposure to the Funds. The Fund generally will employ a strategy of setting aside liquid assets to cover any potential obligation. This strategy would be employed to avoid multiplying a Fund's economic exposure and would limit risks of leveraging. For example, the Fund may sell protection on a Reference Entity bearing the risk of delivering par to the counterparty. The Fund would set aside liquid assets, marked to the market daily, to cover this potential obligation.
CDS agreements are generally governed by a single master agreement for each counterparty, and the agreements allow for netting of counterparties' obligations on specific transactions. The Fund's obligation or rights will be the net amount owed to or by the counterparty. A Fund's current obligations under a swap agreement will be accrued daily (on a net basis), and the Fund will maintain liquid assets in an amount equal to amounts owed to a swap counterparty less the value of any collateral posted. The Fund will not enter into a swap agreement with any single counterparty if the net amount owed or to be received under existing contracts with that counterparty would exceed 5% of the Fund's net assets determined on the date the CDS is entered into.
CDS Options. The Fund may additionally enter into CDS option transactions which grant the holder the right, but not the obligation, to enter into a credit default swap at a specified future date and under specified terms in exchange for a purchase price ("premium"). The writer of the option bears the risk of any unfavorable move in the value of the CDS relative to the market value on the exercise date, while the purchaser may allow the option to expire unexercised.
INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net assets to other funds advised by AIM (the "AIM Funds") and each Fund may borrow from other AIM Funds to the extent permitted under such Fund's investment restrictions. During temporary or emergency periods, the percentage of a Fund's net assets that may be loaned to other AIM Funds may be increased as permitted by the SEC. If any interfund borrowings are outstanding, a Fund cannot make any additional investments. If a Fund has borrowed from other AIM Funds and has aggregate borrowings from all sources that exceed 10% of such Fund's total assets, such Fund will secure all of its loans from other AIM Funds. The ability of a Fund to lend its securities to other AIM Funds is subject to certain other terms and conditions.
BORROWING. Each Fund may borrow money to a limited extent for temporary or emergency purposes. If there are unusually heavy redemptions because of changes in interest rates or for any other reason, a Fund may have to sell a portion of its investment portfolio at a time when it may be disadvantageous to do so. Selling fund securities under these circumstances may result in a lower net asset value per share or decreased dividend income, or both. The Trust believes that, in the event of abnormally heavy redemption requests, a Fund's borrowing ability would help to mitigate any such effects and could make the forced sale of their portfolio securities less likely.
LENDING PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities (principally to broker-dealers) where such loans are callable at any time and are continuously secured by segregated collateral equal to no less than the market value, determined daily, of the loaned securities. Such collateral will be
cash, letters of credit, or debt securities issued or guaranteed by the U.S. Government or any of its agencies. Each Fund may lend portfolio securities to the extent of one-third of its total assets.
A Fund will not have the right to vote securities while they are being lent, but it can call a loan in anticipation of an important vote. The Fund would receive income in lieu of dividends on loaned securities and would, at the same time, earn interest on the loan collateral or on the investment of any cash collateral. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the loaned securities increases and the collateral is not increased accordingly, or in the event of a default by the borrower. The Fund could also experience delays and costs in gaining access to the collateral.
Any cash received as collateral for loaned securities will be invested, in accordance with a Fund's investment guidelines, in short-term money market instruments or Affiliated Money Market Funds. For purposes of determining whether a Fund is complying with its investment policies, strategies and restrictions, the Fund will consider the loaned securities as assets of the Fund, but will not consider any collateral received as a Fund asset.
REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a Fund acquires ownership of a security from a broker-dealer or bank that agrees to repurchase the security at a mutually agreed upon time and price (which is higher than the purchase price), thereby determining the yield during a Fund's holding period. A Fund may, however, enter into a "continuing contract" or "open" repurchase agreement under which the seller is under a continuing obligation to repurchase the underlying obligation from the Fund on demand and the effective interest rate is negotiated on a daily basis. Each of the Funds may engage in repurchase agreement transactions involving the types of securities in which it is permitted to invest.
If the seller of a repurchase agreement fails to repurchase the security in accordance with the terms of the agreement, the Fund might incur expenses in enforcing its rights, and could experience losses, including a decline in the value of the underlying security and loss of income. The securities underlying a repurchase agreement will be marked-to-market every business day so that the value of such securities is at least equal to the investment value of the repurchase agreement, including any accrued interest thereon.
The Funds may invest their cash balances in joint accounts with other AIM Funds for the purpose of investing in repurchase agreements with maturities not to exceed 60 days, and in certain other money market instruments with remaining maturities not to exceed 90 days. Repurchase agreements are considered loans by a Fund under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are
agreements that involve the sale of securities held by a Fund to financial
institutions such as banks and broker-dealers, with an agreement that the Fund
will repurchase the securities at an agreed upon price and date. A Fund may
employ reverse repurchase agreements (i) for temporary emergency purposes, such
as to meet unanticipated net redemptions so as to avoid liquidating other
portfolio securities during unfavorable market conditions; (ii) to cover
short-term cash requirements resulting from the timing of trade settlements; or
(iii) to take advantage of market situations where the interest income to be
earned from the investment of the proceeds of the transaction is greater than
the interest expense of the transaction. At the time it enters into a reverse
repurchase agreement, a Fund will segregate liquid assets having a dollar value
equal to the repurchase price, and will subsequently continually monitor the
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements involve the risk that the market value of securities to be
purchased by the Fund may decline below the price at which it is obligated to
repurchase the securities, or that the other party may default on its
obligation, so that the Fund is delayed or prevented from completing the
transaction. Reverse repurchase agreements are considered borrowings by a Fund
under the 1940 Act.
DOLLAR ROLLS. A dollar roll involves the sale by a Fund of a mortgage security to a financial institution such as a broker-dealer or a bank, with an agreement to repurchase a substantially similar
(i.e., same type, coupon and maturity) security at an agreed upon price and date. The mortgage securities that are repurchased will bear the same interest rate as those sold, but will generally be collateralized by different pools of mortgages with different prepayment histories. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. At the time the Fund enters into a dollar roll, it will segregate liquid assets having a dollar value equal to the repurchase price, and will monitor the account to ensure that such equivalent value is maintained. The Fund typically enters into dollar roll transactions on mortgage securities to enhance the Fund's return either on an income or total return basis or to manage prepayment risk. Dollar rolls are considered borrowings by a Fund under the 1940 Act.
ILLIQUID SECURITIES. Illiquid securities are securities that cannot be disposed of within seven days in the normal course of business at the price at which they are valued. Illiquid securities may include securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in certain circumstances, be resold pursuant to Rule 144A under the 1933 Act, and thus may or may not constitute illiquid securities.
Each Fund, except AIM V.I. Money Market Fund, may invest up to 15% of its net assets in securities that are illiquid. AIM V.I. Money Market Fund may invest up to 10% of its net assets in securities that are illiquid. Limitations on the resale of restricted securities may have an adverse effect on their marketability, which may prevent a Fund from disposing of them promptly at reasonable prices. A Fund may have to bear the expense of registering such securities for resale, and the risk of substantial delays in effecting such registrations.
RULE 144A SECURITIES. Rule 144A securities are securities which, while privately placed, are eligible for purchase and resale pursuant to Rule 144A under the 1933 Act. This Rule permits certain qualified institutional buyers, such as the Funds, to trade in privately placed securities even though such securities are not registered under the 1933 Act. AIM, under the supervision of the Board, will consider whether securities purchased under Rule 144A are illiquid and thus subject to the Funds' restriction on investment in illiquid securities. Determination of whether a Rule 144A security is liquid or not is a question of fact. In making this determination AIM will consider the trading markets for the specific security taking into account the unregistered nature of a Rule 144A security. In addition, AIM could consider the (i) frequency of trades and quotes; (ii) number of dealers and potential purchasers; (iii) dealer undertakings to make a market; and (iv) nature of the security and of market place trades (for example, the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). AIM will also monitor the liquidity of Rule 144A securities and, if as a result of changed conditions, AIM determines that a Rule 144A security is no longer liquid, AIM will review a Fund's holdings of illiquid securities to determine what, if any, action is required to assure that such Fund complies with its restriction on investment in illiquid securities. Investing in Rule 144A securities could increase the amount of each Fund's investments in illiquid securities if qualified institutional buyers are unwilling to purchase such securities.
UNSEASONED ISSUERS. Investments in the equity securities of companies having less than three years' continuous operations (including operations of any predecessor) involve more risk than investments in the securities of more established companies because unseasoned issuers have only a brief operating history and may have more limited markets and financial resources. As a result, securities of unseasoned issuers tend to be more volatile than securities of more established companies.
Derivatives
To the extent a Fund has the ability to invest in Derivatives, the Fund may invest in forward currency contracts, futures contracts, options on securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge against the overall level of investment and currency risk normally associated with the Fund's investments. AIM V.I. Diversified Income Fund may also invest in futures and forward currency contracts for non-hedging purposes with the goal of enhancing returns. The Fund may also invest in equity-linked derivative products designed to replicate the composition and performance of particular indices. AIM V.I. Diversified Income Fund and AIM V.I. High Yield Fund may also invest in fixed-rate certificates ("TRAINS") that represent fractional undivided interests in the assets of a Targeted Return Index Securities Trust. These instruments are often referred to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the performance of another asset (such as a security, currency or an index of securities).
BUNDLED SECURITIES. In lieu of investing directly in securities appropriate for AIM V.I. Diversified Income Fund and AIM V.I. High Yield Fund, the Funds may from time to time invest in trust certificates (such as TRAINS) or similar instruments representing a fractional undivided interest in an underlying pool of such appropriate securities. The Funds will be permitted at any time to exchange such certificates for the underlying securities evidenced by such certificates. To that extent, such certificates are generally subject to the same risks as the underlying securities. The Funds will examine the characteristics of the underlying securities for compliance with most investment criteria but will determine liquidity with reference to the certificates themselves. To the extent that such certificates involve interest rate swaps or other derivative devices, a Fund may invest in such certificates if the Fund is permitted to engage in interest rate swaps or other such derivative devices.
PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy the underlying security, futures contract or foreign currency at the stated exercise price at any time prior to the expiration of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, futures contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the call option, the writer of a call option is obligated to sell the underlying security, futures contract or foreign currency. A put option gives the purchaser the right to sell the underlying security, contract or foreign currency at the stated exercise price at any time prior to the expiration date of the option (or on a specified date if the option is a European style option), regardless of the market price or exchange rate of the security, futures contract or foreign currency, as the case may be at the time of exercise. If the purchaser exercises the put option, the writer of a put option is obligated to buy the underlying security, contract or foreign currency. The premium paid to the writer is consideration for undertaking the obligations under the option contract. Until an option expires or is offset, the option is said to be "open." When an option expires or is offset, the option is said to be "closed."
A Fund (except for AIM V.I. Diversified Income Fund) will not write
(sell) options if, immediately after such sale, the aggregate value of
securities or obligations underlying the outstanding options exceeds 20% of the
Fund's total assets.
Pursuant to federal securities rules and regulations, a Fund's use of options may require that Fund to set aside assets to reduce the risks associated with using those options. This process is described in more detail below in the section "Cover."
Writing Options. Each Fund may write put and call options in an attempt to realize, through the receipt of premiums, a greater current return than would be realized on the underlying security, futures contract, or foreign currency alone. A Fund may only write a call option on a security if it owns an equal amount of such security or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to the securities subject to the call option. In return for the premium received for writing a call option, the Fund foregoes the opportunity for profit from a price increase in the underlying security, futures contract, or foreign currency above the exercise price so long as the option remains open, but retains the risk of loss should the price of the underling security, futures contract, or foreign currency decline.
A Fund may write a put option without owning the underlying security if it covers the option as described below in the section "Cover." A Fund may only write a put option on a security as part of an investment strategy. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the underlying security, futures contract, or foreign currency will decline below the exercise price, in which case the put would be exercised and the Fund would suffer a loss.
If a call option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If the call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset to the extent of the premium received. A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the lowest price it is willing to receive for the underlying security, contract or currency. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call as the case may be) identical to that previously sold.
Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, futures contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit a Fund to write another call option on the underlying security, futures contract or currency with either a different exercise price or expiration date, or both.
Purchasing Options. Each Fund may purchase a call option for the purpose of acquiring the underlying security, futures contract or currency for its portfolio. The Fund is not required to own the underlying security in order to purchase a call option, and may only cover this transaction with cash, liquid assets and/or short-term debt securities. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, futures contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected decline in the market price of the underlying security, futures contract or currency. If the market price does not exceed the exercise price, the Fund could purchase the security on the open market and could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. Each of the Funds may also purchase call options on underlying securities, futures contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise strike and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads."
A Fund may, in some cases, only purchase a put option on an underlying security, futures contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, futures contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, futures contract or currency is delivered upon the exercise of the put option. Conversely, if the underlying security, futures contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, futures contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write call options on underlying securities, futures contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar."
Over-The-Counter Options. Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer which would result in the loss of any premium paid by a Fund as well as the loss of any expected benefit from the transaction. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Because purchased OTC options in certain cases may be difficult to dispose of in a timely manner, the Fund may be required to treat some or all of these options (i.e., the market value) as illiquid securities. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration.
Index Options. Index options (or options on securities indices) are similar in many respects to options on securities, except that an index option gives the holder the right to receive, upon exercise, cash instead of securities, if the closing level of the securities index upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index.
Pursuant to federal securities rules and regulations, if a Fund writes index options it may be required to set aside assets to reduce the risks associated with writing those options. This process is described in more detail below in the section "Cover."
STRADDLES. Each Fund may write straddles (combinations of put and call options on the same underlying security) to adjust the risk and return characteristics of the Fund's overall position. A possible combined position would involve writing a covered call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written covered call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out.
WARRANTS. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of the warrant,
the current market value of the underlying security, the life of the warrant and various other investment factors.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or delivery of a cash settlement price, in the case of an index future) for a specified price at a designated date, time and place (collectively, "Futures Contracts"). A stock index Futures Contract provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon in the Futures Contract; no physical delivery of stocks comprising the index is made. Brokerage fees are incurred when a Futures Contract is bought or sold, and margin deposits must be maintained at all times when a Futures Contract is outstanding.
A Fund, other than AIM V.I. Diversified Income Fund, will enter into Futures Contracts for hedging purposes only; that is, Futures Contracts will be sold to protect against a decline in the price of securities or currencies that the Fund owns, or Futures Contracts will be purchased to protect the Fund against an increase in the price of securities or currencies it has committed to purchase or expects to purchase. A Fund's hedging may include sales of Futures Contracts as an offset against the effect of expected increases in interest rates, and decreases in currency exchange rates and stock prices, and purchases of Futures Contracts as an offset against the effect of expected declines in interest rates, and increases in currency exchange rates or stock prices. AIM V.I. Diversified Income Fund may enter into futures contracts for both hedging and non-hedging purposes.
The Funds currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
The Funds will only enter into Futures Contracts that are traded (either domestically or internationally) on futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under the Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges and trading thereon are not regulated by the CFTC and are not subject to the same regulatory controls. For a further discussion of the risks associated with investments in foreign securities, see "Foreign Investments" in this Statement of Additional Information.
The Trust, on behalf of each Fund, has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under that Act with respect to the Funds.
Limitations on Futures Contracts and Options on Futures Contract and on Certain Options on Currencies. Pursuant to federal securities rules and regulations, a Fund's use of Futures Contracts and options on Futures Contracts may require that Fund to set aside assets to reduce the risks associated with using Futures Contracts and options on Futures Contracts. This process is described in more detail below in the section "Cover."
Closing out an open Futures Contract is effected by entering into an offsetting Futures Contract for the same aggregate amount of the identical financial instrument or currency and the same delivery date. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular Futures Contract at a particular time. If a Fund is not able to enter into an offsetting transaction, it will continue to be required to maintain the margin deposits on the Futures Contract.
"Margin" with respect to Futures Contracts is the amount of funds that must be deposited by a Fund in order to initiate Futures Contracts trading and maintain its open positions in Futures Contracts. A margin deposit made when the Futures Contract is entered ("initial margin") is intended to ensure the Fund's performance under the Futures Contract. The margin required for a particular Futures Contract is
set by the exchange on which the Futures Contract is traded and may be significantly modified from time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," from and to the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures Contract more or less valuable, a process known as marking-to-market.
If a Fund were unable to liquidate a Futures Contract or an option on a Futures Contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Futures Contract or option or to maintain cash or securities in a segregated account.
OPTIONS ON FUTURES CONTRACTS. Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures Contract position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's Futures Contract margin account. The funds currently may not invest in any security (including Futures Contracts or options thereon) that is secured by physical commodities.
FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date, which may be any fixed number of days (term) from the date of the forward currency contract agreed upon by the parties, and price as agreed upon by the parties at the time the contract is entered. A Fund either may accept or make delivery of the currency at the maturity of the forward currency contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. Forward currency contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions.
Each Fund may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates ("hedged"). AIM V.I. Diversified Income Fund may also engage in forward currency transactions for non-hedging purposes. A Fund may enter into forward currency contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward currency contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward currency contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward currency contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward currency contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward currency contract sales limit the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase.
Pursuant to federal securities rules and regulations, a Fund's use of forward currency contracts may require that Fund to set aside assets to reduce the risks associated with using forward currency contracts. This process is described in more detail below in the section "Cover."
COVER. Transactions using forward currency contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless, in addition to complying with all the restrictions noted in the disclosure above, it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient at all times to cover its potential obligations not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward contract or option is deemed to be illiquid, the assets used to "cover" the Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, a Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the corresponding forward contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations.
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging and non-hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM and/or the Sub-Advisor are experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed.
(2) In a hedging transaction, there might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments.
(4) Non-hedging transactions present greater profit potential but also involve increased risk relative to hedging transactions. For example, a Fund may purchase a given foreign currency through a future contract if, in the judgment of AIM, the value of such currency is expected to rise relative to another currency. Conversely, a Fund may sell the currency through a forward contract if AIM believes that its value will decline relative to another currency.
(5) There is no assurance that a liquid secondary market will exist for any particular option, futures contract or option thereon or forward contract at any particular time.
(6) As described above, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair a Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time.
(7) There is no assurance that a Fund will use hedging transactions. For example, if a Fund determines that the cost of hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transaction.
Additional Securities or Investment Techniques
TAXABLE MUNICIPAL SECURITIES. Taxable municipal securities are debt securities issued by or on behalf of states and their political subdivisions, the District of Columbia, and possessions of the United States, the interest on which is not exempt from federal income tax.
INVESTMENTS IN ENTITIES WITH RELATIONSHIPS WITH THE FUNDS/ADVISORS. The Funds may invest in securities issued, sponsored or guaranteed by the following types of entities or their affiliates: (i) entities that sell shares of the AIM Funds; (ii) entities that rate or rank the AIM Funds; (iii) exchanges on which the AIM Funds buy or sell securities; and (iv) entities that provide services to the AIM Funds (e.g., custodian banks). The Funds will decide whether to invest in or sell securities issued by these entities based on the merits of the specific investment opportunity.
DIVERSIFICATION REQUIREMENTS - AIM V.I. MONEY MARKET FUND
As a money market fund, AIM V.I. Money Market Fund is subject to the diversification requirements of Rule 2a-7 under the 1940 Act. This Rule sets forth two different diversification requirements: one applicable to the issuer of securities (provided that such securities are not subject to a demand feature or a guarantee), and one applicable to securities with demand features or guarantees.
The issuer diversification requirement provides that the Fund may not invest in the securities of any issuer if, as a result, more than 5% of its total assets would be invested in securities issued by such issuer. If the securities are subject to a demand feature or guarantee, however, they are not subject to this requirement. Moreover, for purposes of this requirement, the issuer of a security is not always the nominal issuer. Instead, in certain circumstances, the underlying obligor of a security is deemed to be the issuer of the security. Such circumstances arise for example when another political subdivision agrees to be ultimately responsible for payments of principal of an interest on a security or when the assets and revenues of a non-governmental user of the facility financed with the securities secures repayment of such securities.
The diversification requirement applicable to securities subject to a demand feature or guarantee provides that, with respect to 75% of its total assets, the Fund may not invest more than 10% of its total assets in securities issued by or subject to demand features or guarantees from the same entity. A demand feature permits the Fund to sell a security at approximately its amortized cost value plus accrued interest at specified intervals upon no more than 30 days' notice. A guarantee includes a letter of credit, bond insurance and an unconditional demand feature (provided the demand feature is not provided by the issuer of the security).
FUND POLICIES FOR THE V.I. FUNDS
FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following fundamental investment restrictions, except AIM V.I. Global Real Estate Fund is not subject to restriction (4). Fundamental restrictions may be changed only by a vote of the lesser of (i) 67% or more of the Fund's shares present
at a meeting if the holders of more than 50% of the outstanding shares are present in person or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares. Consistent with applicable law and unless otherwise provided, all percentage limitations apply at the time of purchase.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The Fund will not purchase the securities of any issuer if, as a result, the Fund would fail to be a diversified company within the meaning of the 1940 Act, and the rules and regulations promulgated thereunder, as such statute, rules and regulations are amended from time to time or are interpreted from time to time by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or except to the extent that the Fund may be permitted to do so by exemptive order or similar relief (collectively, with the 1940 Act Laws and Interpretations, the "1940 Act Laws, Interpretations and Exemptions"). In complying with this restriction, however, the Fund may purchase securities of other investment companies to the extent permitted by the 1940 Act Laws, Interpretations and Exemptions;
(2) The Fund may not borrow money or issue senior securities, except as permitted by the 1940 Act Laws, Interpretations and Exemptions;
(3) The Fund may not underwrite the securities of other issuers. This restriction does not prevent the Fund from engaging in transactions involving the acquisition, disposition or resale of its portfolio securities, regardless of whether the Fund may be considered to be an underwriter under the Securities Act of 1933;
(4) The Fund will not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt obligations issued by governments or political subdivisions of governments, or (iii) for AIM V.I. Money Market Fund, bank instruments. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security;
AIM V.I. Global Real Estate Fund will concentrate (as such term may be defined or interpreted by the 1940 Act Laws, Interpretations and Exemptions) its investments in the securities of domestic and foreign real estate and real estate-related companies.
(5) The Fund may not purchase real estate or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from investing in issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein, or in investing in securities that are secured by real estate or interests therein;
(6) The Fund may not purchase physical commodities or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities;
(7) The Fund may not make personal loans or loans of its assets to persons who control or are under common control with the Fund, except to the extent permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests; and
(8) The Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and limitations as that Fund.
The investment restrictions set forth above provide the Funds with the ability to operate under new interpretations of the 1940 Act or pursuant to exemptive relief from the SEC without receiving prior shareholder approval of the change. Even though each of the Funds have this flexibility, the Board has adopted non-fundamental restrictions for the Funds relating to certain of these restrictions which AIM and the sub-advisor of AIM V.I. Global Real Estate Fund must follow in managing the Funds. Any changes to these non-fundamental restrictions, which are set forth below, require the approval of the Board.
NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment restrictions apply to all of the Funds, except AIM V.I. Global Real Estate Fund is not subject to restriction (3). They may be changed for any Fund without approval of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets (and for AIM V.I. Money Market Fund, with respect to 100% of its total assets), purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities and securities issued by other investment companies), if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, except as permitted by Rule 2a-7 under the 1940 Act, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may purchase securities of other investment companies as permitted by the 1940 Act Laws, Interpretations and Exemptions.
(2) In complying with the fundamental restriction regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow from banks, broker/dealers or an AIM Fund. The Fund may not borrow for leveraging, but may borrow for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. The Fund may not purchase additional securities when any borrowing from banks exceeds 5% of the Fund's total assets or when any borrowings from an AIM Fund are outstanding.
(3) In complying with the fundamental restriction regarding industry concentration, the Fund may invest up to 25% of its total assets in the securities of issuers whose principal business activities are in the same industry.
(4) In complying with the fundamental restriction with regard to making loans, the Fund may lend up to 33 1/3% of its total assets and may lend money to an AIM Fund, on such terms and conditions as the SEC may require in an exemptive order.
(5) Notwithstanding the fundamental restriction with regard to investing all assets in an open-end fund, the Fund may not invest all of its assets in the securities of a single open-end management investment company with the same fundamental investment objectives, policies and restrictions as the Fund.
(6) Notwithstanding the fundamental restriction with regard to engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities, the Fund currently may not invest in any security (including futures contracts or options thereon) that is secured by physical commodities.
For purposes of AIM V.I. Global Real Estate Fund's fundamental restriction regarding industry concentration, real estate and real estate-related companies shall consist of companies (i) that at least 50% of its assets, gross income or net profits are attributable to ownership, construction, management, or sale of residential, commercial or industrial real estate, including listed equity REITs and other real estate operating companies that own property, or that make short-term construction and development mortgage loans or which invest in long-term mortgages or mortgage pools, or (ii) companies whose products and services are related to the real estate industry, such as manufacturers and distributors of building supplies and financial institutions which issue or service mortgages.
Temporary Defensive Positions (for V.I. Funds)
In anticipation of or in response to adverse market or other conditions, or atypical circumstances such as unusually large cash inflows or redemptions, each Fund may temporarily hold all or a portion of their assets in cash, cash equivalents or high-quality debt instruments. Each of the Funds may also invest up to 25% of its total assets in Affiliated Money Market Funds for these purposes.
FUND POLICIES FOR THE VIF FUNDS
INVESTMENT RESTRICTIONS. The investment restrictions set forth below have been adopted by each respective Fund and, unless identified as non-fundamental policies, may not be changed without the affirmative vote of a majority of the outstanding voting securities of that Fund. As provided in the 1940 Act, a "vote of a majority of the outstanding voting securities of the Fund" means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares present at a meeting, if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. Except with respect to borrowing, changes in values of a particular Fund's assets will not cause a violation of the following investment restrictions so log as percentage restrictions are observed by such Fund at the time it purchases any security.
(1) The Fund may not purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities or municipal securities) if, as a result, more than 25% of the Fund's total assets would be invested in the securities of companies whose principal business activities are in the same industry, except that (i) AIM V.I. Financial Services Fund may invest more than 25% of the value of its total assets in one or more industries relating to financial services; (ii) AIM V.I. Global Health Care Fund may invest more than 25% of the value of its total assets in one or more industries relating to health care; (iii) AIM V.I. Leisure Fund may invest more than 25% of the value of its total assets in one or more industries relating to leisure; (iv) AIM V.I. Technology Fund may invest more than 25% of the value of its total assets in the one or more industries relating to technology; and (v) AIM V.I. Utilities Fund may invest more than 25% of the value of its total assets in one or more industries relating to the utilities industry;
(2) The Fund may not with respect to 75% of the Fund's total assets, purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. government or any of its agencies or instrumentalities, or securities of other investment companies) if, as a result, (i) more than 5% of the Fund's total assets would be invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer;
(3) The Fund may not underwrite securities of other issuers, except insofar as it may be deemed to be an underwriter under the 1933 Act in connection with the disposition of the Fund's portfolio securities;
(4) The Fund may not borrow money, except that the Fund may borrow money in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings);
(5) The Fund may not issue securities, except as permitted under the 1940 Act;
(6) The Fund may not lend any security or make any loan if, as a result, more than 33 1/3% of its total assets would be lent to other parties, but this limitation does not apply to the purchase of debt securities or to repurchase agreements;
(7) The Fund may not purchase or sell physical commodities; however, this policy shall not prevent the Fund from purchasing and selling foreign currency, futures contracts, options, forward contracts, swaps, caps, floors, collars, and other financial instruments; or
(8) The Fund may not purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from investing in securities or other instruments backed by real estate or securities of companies engaged in the real estate business).
(9) The Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company managed by the Advisor or an affiliate or a successor thereof, with substantially the same fundamental investment objective, policies and limitations as the Fund.
In addition, each Fund has the following non-fundamental policies, which may be changed without shareholder approval:
A. The Fund may not sell securities short (unless it owns or has the
right to obtain securities equivalent in kind and amount to the
securities sold short) or purchase securities on margin, except that
(i) this policy does not prevent the Fund from entering into short
positions in foreign currency, futures contracts, options, forward
contracts, swaps, caps, floors, collars, and other financial
instruments, (ii) the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and (iii) the Fund may
make margin payments in connection with futures contracts, options,
forward contracts, swaps, cap, floors, collars, and other financial
instruments.
B. The Fund may borrow money only from a bank or from an open-end management investment company managed by the Advisor or an affiliate or a successor thereof for temporary or emergency purposes (not for leveraging or investing) or by engaging in reverse repurchase agreements with any party (reverse repurchase agreements will be treated as borrowings for purposes of fundamental limitation (4)).
C. The Fund does not currently intend to purchase any security if, as a result, more than 15% if its net assets would be invested in securities that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued.
D. The Fund may invest in securities issued by other investment companies to the extent that such investments are consistent with the Fund's investment objective and policies and permissible under the 1940 Act.
E. With respect to fundamental limitation (1), domestic and foreign banking will be considered to be different industries.
In addition, with respect to a Fund that may invest in municipal obligations, the following non-fundamental policy applies, which may be changed without shareholder approval:
Each state (including the District of Columbia and Puerto Rico), territory and possession of the United States, each political subdivision agency, instrumentality and authority thereof, and each multi-state agency of which a state is a member is a separate "issuer." When the assets and revenues of an agency, authority, instrumentality or other political subdivision are separate from the government creating the subdivision and the security is backed only by assets and revenues of the subdivision, such subdivision would be deemed to be the sole issuer. Similarly, in the case of an Industrial Development Bond or Private Activity bond, if that bond is backed only by the assets and revenues of the non-governmental user, then that non-governmental user would be deemed to be the sole issuer. However, if the creating government or another entity guarantees a security, then to the extent that the value of all securities issued or guaranteed by that government or entity and owned by a Fund exceeds 10% of the Fund's total assets, the guarantee would be considered a separate security and would be treated as issued by that
government or entity, With respect to a Fund that is not a money market fund, securities issued or guaranteed by a bank or subject to financial guaranty insurance are not subject to the limitations set forth in the preceding sentence.
Temporary Defensive Positions (for VIF Funds)
When securities markets or economic conditions are unfavorable to unsettled, the Advisor and/or Sub-Advisor, where applicable, might try to protect the assets of the Fund by investing in securities that are highly liquid, such as high-quality money market instruments like short-term U.S. government obligations, commercial paper, or repurchase agreements, even though that is not the normal investment strategy of the Fund. We have the right to invest up to 100% of the Fund's assets in these securities, although we are unlikely to do so.
PORTFOLIO TURNOVER
For the fiscal years ended December 31, 2006 and 2005, the portfolio turnover rates for each Fund are presented in the table below. Unless otherwise indicated, variations in turnover rate may be due to a fluctuating volume of shareholder purchase and redemption orders, market conditions and/or changes in AIM's investment outlook.
FUND NAME 2006 2005
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AIM V.I. Basic Balanced Fund 44% 44%
AIM V.I. Basic Value Fund 15% 16%
AIM V.I. Capital Appreciation Fund 120% 97%
AIM V.I. Capital Development Fund 119% 125%
AIM V.I. Core Equity Fund 45% 52%
AIM V.I. Diversified Income Fund 78% 92%
AIM V.I. Dynamics Fund 142% 110%
AIM V.I. Financial Services Fund 14% 22%
AIM V.I. Global Health Care Fund 79% 82%
AIM V.I. Global Real Estate Fund(1) 84% 51%
AIM V.I. Government Securities Fund 89% 174%
AIM V.I. High Yield Fund 135% 69%
AIM V.I. International Growth Fund 34% 36%
AIM V.I. Large Cap Growth Fund 76% 99%
AIM V.I. Leisure Fund 14% 32%
AIM V.I. Mid Cap Core Equity Fund 83% 70%
AIM V.I. Money Market Fund -- --
AIM V.I. Small Cap Equity Fund 52% 70%
AIM V.I. Technology Fund 116% 114%
AIM V.I. Utilities Fund 38% 49%
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POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS
The Board has adopted policies and procedures with respect to the disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy"). Non-public holdings information may not be disclosed except in compliance with the Holdings Disclosure Policy.
General Disclosures
The Holdings Disclosure Policy permits AIM to publicly release certain portfolio holdings information of the Funds from time to time. The Funds sell their shares to life insurance companies and their separate accounts to fund interests in variable annuity and variable life insurance policies issued by such companies, but not directly to the public. Accordingly, the Policy authorizes AIM to disclose,
pursuant to the following table, the Funds' portfolio holdings information on a non-selective basis to all insurance companies whose variable annuity and variable life insurance separate accounts invest in the Funds and with which the Funds have entered into participation agreements ("Insurance Companies") and AIM has entered into a nondisclosure agreement:
DISCLOSURE DATE AVAILABLE/LAG
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Month-end top ten holdings Available 10 days after month-end (Holdings
as of June 30 available July 10)
Calendar quarter-end complete holdings Available 25 days after calendar quarter-end
(Holdings as of June 30 available July 25)
Fiscal quarter-end complete holdings Available 55 days after fiscal quarter-end
(Holdings as of June 30 available August 24)
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Selective Disclosures
SELECTIVE DISCLOSURE - TO INSURANCE COMPANIES. The Policy permits AIM to disclose Fund Portfolio Holdings Information to Insurance Companies, upon request/on a selective basis, up to five days prior to the scheduled release dates of such information to allow the Insurance Companies to post the information on their websites at approximately the same time that AIM posts the same information. The Policy incorporates the Board's determination that selectively disclosing portfolio holdings information to facilitate an Insurance Company's dissemination of the information on its website is a legitimate business purpose of the Funds. Insurance Companies that wish to receive such portfolio holdings information in advance must sign a non-disclosure agreement requiring them to maintain the confidentiality of the information until the later of five business days or the scheduled release dates and to refrain from using that information to execute transactions in securities. AIM does not post the portfolio holdings of the Funds to its website. Not all insurance companies that receive Fund portfolio holdings information provide such information on their websites. To obtain information about Fund portfolio holdings, please contact the life insurance company that issued your variable annuity or variable life insurance policy.
SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE AGREEMENT. Employees of AIM and its affiliates may disclose non-public full portfolio holdings on a selective basis only if the Internal Compliance Controls Committee (the "ICCC") of A I M Management Group Inc. ("AIM Management") approves the parties to whom disclosure of non-public full portfolio holdings will be made. The ICCC must determine that the proposed selective disclosure will be made for legitimate business purposes of the applicable Fund and address any perceived conflicts of interest between shareholders of such Fund and AIM or its affiliates as part of granting its approval.
The Board exercises continuing oversight of the disclosure of Fund portfolio holdings by (1) overseeing the implementation and enforcement of the Holdings Disclosure Policy and the AIM Funds Code of Ethics by the Chief Compliance Officer (or his designee) of AIM and the AIM Funds and (2) considering reports and recommendations by the Chief Compliance Officer concerning any material compliance matters (as defined in Rule 38a-1 under the 1940 Act and Rule 206(4)-7 under the Investment Advisers Act of 1940, as amended) that may arise in connection with the Holdings Disclosure Policy. Pursuant to the Holdings Disclosure Policy, the Board reviews the types of situations in which AIM provides selective disclosure and approves situations involving perceived conflicts of interest between shareholders of the applicable Fund and AIM or its affiliates brought to the Board's attention by AIM.
AIM discloses non-public full portfolio holdings information to the following persons in connection with the day-to-day operations and management of the AIM Funds:
- Attorneys and accountants;
- Securities lending agents;
- Lenders to the AIM Funds;
- Rating and rankings agencies;
- Persons assisting in the voting of proxies;
- AIM Funds' custodians;
- The AIM Funds' transfer agent(s) (in the event of a redemption in kind);
- Pricing services, market makers, or other persons who provide systems or software support in connection with AIM Funds' operations (to determine the price of securities held by an AIM Fund);
- Financial printers;
- Brokers identified by the AIM Funds' portfolio management team who provide execution and research services to the team; and
- Analysts hired to perform research and analysis to the AIM Funds' portfolio management team.
In many cases, AIM will disclose current portfolio holdings on a daily basis to these persons. In these situations, AIM has entered into non-disclosure agreements which provide that the recipient of the portfolio holdings will maintain the confidentiality of such portfolio holdings and will not trade on such information ("Non-Disclosure Agreements"). Please refer to Appendix B for a list of examples of persons to whom AIM provides non-public portfolio holdings on an ongoing basis.
AIM will also disclose non-public portfolio holdings information if such disclosure is required by applicable laws, rules or regulations, or by regulatory authorities having jurisdiction over AIM and its affiliates or the Funds.
The Holdings Disclosure Policy provides that AIM will not request, receive or accept any compensation (including compensation in the form of the maintenance of assets in any Fund or other mutual fund or account managed by AIM or one of its affiliates) for the selective disclosure of portfolio holdings information.
DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT NON-DISCLOSURE AGREEMENT. AIM and its affiliates that provide services to the Funds, and the Funds' subadvisors, if applicable, and each of their employees may receive or have access to portfolio holdings as part of the day-to-day operations of the Funds.
From time to time, employees of AIM and its affiliates may express their views orally or in writing on one or more of the Funds' portfolio securities or may state that a Fund has recently purchased or sold, or continues to own, one or more securities. The securities subject to these views and statements may be ones that were purchased or sold since a Fund's most recent quarter-end and therefore may not be reflected on the list of the Fund's most recent quarter-end portfolio holdings. Such views and statements may be made to various persons, including members of the press, brokers and other financial intermediaries that sell shares of the Funds. The nature and content of the views and statements provided to each of these persons may differ.
From time to time, employees of AIM and its affiliates also may provide oral or written information ("portfolio commentary") about a Fund, including, but not limited to, how the Fund's investments are divided among various sectors, industries, countries, investment styles and capitalization sizes, and among stocks, bonds, currencies and cash, security types, bond maturities, bond coupons and bond credit quality ratings. This portfolio commentary may also include information on how these various weightings and factors contributed to Fund performance. AIM may also provide oral or written information ("statistical information") about various financial characteristics of a Fund or its underlying portfolio securities including, but not limited to, alpha, beta, R-squared, coefficient of determination, duration, maturity, information ratio, sharpe ratio, earnings growth, payout ratio, price/book value, projected earnings growth, return on equity, standard deviation, tracking error, weighted average quality, market capitalization, percent debt to equity, price to cash flow, dividend yield or growth, default rate, portfolio turnover, and risk and style characteristics. This portfolio commentary and statistical information about a Fund may be based on the Fund's portfolio as of the most recent quarter-end or the end of some other interim period, such as month-end. The portfolio commentary and statistical information may be provided
to various persons, including those described in the preceding paragraph. The nature and content of the information provided to each of these persons may differ.
DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of AIM and its affiliates may disclose one or more of the portfolio securities of a Fund when purchasing and selling securities through broker-dealers, requesting bids on securities, obtaining price quotations on securities, or in connection with litigation involving the Funds' portfolio securities. AIM does not enter into formal Non-Disclosure Agreements in connection with these situations; however, the Funds would not continue to conduct business with a person who AIM believed was misusing the disclosed information.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trustees have the authority to take all actions necessary in connection with the business affairs of the Trust. The Trustees, among other things, approve the investment objectives, policies and procedures for the Funds. The Trust enters into agreements with various entities to manage the day-to-day operations of the Funds, including the Funds' investment advisers, administrator, transfer agent, distributor and custodians. The Trustees are responsible for selecting these service providers, and approving the terms of their contracts with the Funds. On an ongoing basis, the Trustees exercise general oversight of these service providers.
Certain trustees and officers of the Trust are affiliated with AIM and AIM Management, the parent corporation of AIM. All of the Trust's executive officers hold similar offices with some or all of the other AIM Funds.
MANAGEMENT INFORMATION
The trustees and officers of the Trust, their principal occupations during the last five years and certain other information concerning them are set forth in Appendix C.
The standing committees of the Board are the Audit Committee, the Compliance Committee, the Governance Committee, the Investments Committee, the Valuation Committee and the Special Market Timing Litigation Committee (the "Committees").
The members of the Audit Committee are James T. Bunch, Lewis F.
Pennock, Dr. Larry Soll, Dr. Prema Mathai-Davis, Raymond Stickel, Jr. (Chair)
and Ruth H. Quigley (Vice Chair). The Audit Committee's primary purposes are to:
(i) assist the Board in oversight of the independent registered public
accountant's qualifications, independence and performance; (ii) appoint
independent registered public accountants for the Funds; (iii) pre-approve all
permissible audit and non-audit services that are provided to Funds by their
independent registered public accountants to the extent required by Section
10A(h) and (i) of the Exchange Act, (iv) pre-approve, in accordance with Rule
2-01(c)(7)(ii) of Regulation S-X, certain non-audit services provided by the
Funds' independent registered public accountants to the Funds' investment
adviser and certain other affiliated entities; (v) to oversee the financial
reporting process for the Funds; (vi) prepare an audit committee report for
inclusion in any proxy statement issued by a Fund to the extent required by
Regulation 14A under the Exchange Act; (vii) assist the Board's oversight of the
performance of the Funds' internal audit function to the extent an internal
audit function exists; (viii) assist the Board's oversight of the integrity of
the Funds' financial statements; and (ix) assist the Board's oversight of the
Funds' compliance with legal and regulatory requirements. During the fiscal year
ended December 31, 2006, the Audit Committee held seven meetings.
The members of the Compliance Committee are Frank S. Bayley, Bruce L. Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Stickel. The Compliance Committee is responsible for: (i) recommending to the Board and the independent trustees the appointment, compensation and removal of the Funds' Chief Compliance Officer; (ii) recommending to the independent trustees the appointment,
compensation and removal of the Funds' Senior Officer appointed pursuant to the terms of the Assurances of Discontinuance entered into by the New York Attorney General, AIM and INVESCO Funds Group, Inc. ("IFG"); (iii) recommending to the independent trustees the appointment and removal of AIM's independent Compliance Consultant (the "Compliance Consultant") and reviewing the report prepared by the Compliance Consultant upon its compliance review of AIM (the "Report") and any objections made by AIM with respect to the Report; (iv) reviewing any report prepared by a third party who is not an interested person of AIM, upon the conclusion by such third party of a compliance review of AIM; (v) reviewing all reports on compliance matters from the Funds' Chief Compliance Officer, (vi) reviewing all recommendations made by the Senior Officer regarding AIM's compliance procedures, (vii) reviewing all reports from the Senior Officer of any violations of state and federal securities laws, the Colorado Consumer Protection Act, or breaches of AIM's fiduciary duties to Fund shareholders and of AIM's Code of Ethics; (viii) overseeing all of the compliance policies and procedures of the Funds and their service providers adopted pursuant to Rule 38a-1 of the 1940 Act; (ix) from time to time, reviewing certain matters related to redemption fee waivers and recommending to the Board whether or not to approve such matters; (x) receiving and reviewing quarterly reports on the activities of AIM's Internal Compliance Controls Committee; (xi) reviewing all reports made by AIM's Chief Compliance Officer; (xii) reviewing and recommending to the independent trustees whether to approve procedures to investigate matters brought to the attention of AIM's ombudsman; (xiii) risk management oversight with respect to the Funds and, in connection therewith, receiving and overseeing risk management reports from AMVESCAP PLC ("AMVESCAP") that are applicable to the Funds or their service providers; and (xiv) overseeing potential conflicts of interest that are reported to the Compliance Committee by AIM, the Chief Compliance Officer, the Senior Officer and/or the Compliance Consultant. During the fiscal year ended December 31, 2006, the Compliance Committee held seven meetings.
The members of the Governance Committee are Messrs. Bob R. Baker,
Bayley, Crockett, Dowden (Chair) and Jack M. Fields (Vice Chair). The Governance
Committee is responsible for: (i) nominating persons who will qualify as
independent trustees for (a) election as trustees in connection with meetings of
shareholders of the Funds that are called to vote on the election of trustees,
(b) appointment by the Board as trustees in connection with filling vacancies
that arise in between meetings of shareholders; (ii) reviewing the size of the
Board, and recommending to the Board whether the size of the Board shall be
increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring
the composition of the Board and each committee of the Board, and monitoring the
qualifications of all trustees; (v) recommending persons to serve as members of
each committee of the Board (other than the Compliance Committee), as well as
persons who shall serve as the chair and vice chair of each such committee; (vi)
reviewing and recommending the amount of compensation payable to the independent
trustees; (vii) overseeing the selection of independent legal counsel to the
independent trustees; (viii) reviewing and approving the compensation paid to
independent legal counsel and to the independent trustees; (ix) reviewing and
approving the compensation paid to counsel and other advisers, if any, to the
Committees of the Board; and (x) reviewing as they deem appropriate
administrative and/or logistical matters pertaining to the operations of the
Board.
The Governance Committee will consider nominees recommended by a
shareholder to serve as 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 trustees will be elected; and
(ii) that the Governance Committee or the Board, as applicable, shall make the
final determination of persons to be nominated. During the fiscal year ended
December 31, 2006, the Governance Committee held nine meetings.
Notice procedures set forth in the Trust's bylaws require that any shareholder of a Fund desiring to nominate a trustee for election at a shareholder meeting must submit to the Trust's Secretary the nomination in writing not later than the close of business on the later of the 90th day prior to such shareholder meeting or the tenth day following the day on which public announcement is made of the shareholder meeting and not earlier than the close of business on the 120th day prior to the shareholder meeting.
The members of the Investments Committee are Messrs. Baker (Vice Chair), Bayley (Chair), Bunch, Crockett, Dowden, Fields, Martin L. Flanagan, Carl Frischling, Robert H. Graham, Pennock, Soll, Stickel, Philip A. Taylor and Dr. Mathai-Davis (Vice Chair) and Miss Quigley (Vice Chair). The Investments Committee's primary purposes are to: (i) assist the Board in its oversight of the investment management services provided by AIM as well as any sub-advisers; and (ii) review and approve all proposed advisory, sub-advisory and distribution arrangements for the Funds, as well to review and approve the continuance of all such existing arrangements.
The Investments Committee has established three Sub-Committees. The
Sub-Committees are responsible for: (i) reviewing the performance, fees and
expenses of the Funds that have been assigned to a particular Sub-Committee (for
each Sub-Committee, the "Designated Funds"), unless the Investments Committee
takes such action directly; (ii) reviewing with the applicable portfolio
managers from time to time the investment objective(s), policies, strategies and
limitations of the Designated Funds; (iii) evaluating the investment advisory,
sub-advisory and distribution arrangements in effect or proposed for the
Designated Funds, unless the Investments Committee takes such action directly;
(iv) being familiar with the registration statements and periodic shareholder
reports applicable to their Designated Funds; and (v) such other
investment-related matters as the Investments Committee may delegate to the
Sub-Committee from time to time. During the fiscal year ended December 31, 2006,
the Investments Committee held seven meetings.
The members of the Valuation Committee are Messrs. Bunch, Pennock (Vice Chair), Soll, Taylor and Miss Quigley (Vice Chair). The Valuation Committee is responsible for: (i) developing a sufficient knowledge of the valuation process and of AIM's Procedures for Valuing Securities (Pricing Procedures) (the "Pricing Procedures") in order to carry out their responsibilities; (ii) periodically reviewing information provided by AIM or other advisors regarding industry developments in connection with valuation and pricing, and making recommendations to the Board with respect to the Pricing Procedures based upon such review; (iii) reviewing the reports described in the Pricing Procedures and other information from AIM regarding fair value determinations made pursuant to the Pricing Procedures by AIM's internal valuation committee, and reporting to and making recommendations to the Board in connection with such reports; (iv) receiving the reports of AIM' internal valuation committee requesting approval of any changes to pricing vendors or pricing methodologies as required by the Pricing Procedures, receiving the annual report of AIM evaluating the pricing vendors, and approving changes to pricing vendors and pricing methodologies as provided in the Pricing Procedures and recommending the pricing vendors for approval by the Board annually; (v) upon request of AIM, assisting AIM's internal valuation committee and/or the Board in resolving particular fair valuation issues; (vi) receiving any reports of concerns by AIM's internal valuation committee regarding actual or potential conflicts of interest by investment personnel or others that could color their input or recommendations regarding pricing issues, and receiving information from AIM disclosing differences between valuation and pricing procedures used for the Funds and private funds, if any, advised by AIM for which AIM Fund Administration has exclusive accounting responsibility, and the reasons for such differences; and (vii) in each of the foregoing areas, making regular reports to the Board. During the fiscal year ended December 31, 2006, the Valuation Committee held seven meetings.
The members of the Special Market Timing Litigation Committee are
Messrs. Bayley, Bunch (Chair), Crockett and Dowden (Vice Chair). The Special
Market Timing Litigation Committee is responsible: (i) for receiving reports
from time to time from management, counsel for management, counsel for the AIM
Funds and special counsel for the independent trustees, as applicable, related
to (a) the civil lawsuits, including purported class action and shareholder
derivative suits, that have been filed against the AIM Funds concerning alleged
excessive short term trading in shares of the AIM Funds ("market timing") and
(b) the civil enforcement actions and investigations related to market timing
activity in the AIM Funds that were settled with certain regulators, including
without limitation the SEC, the New York Attorney General and the Colorado
Attorney General, and for recommending to the independent trustees what actions,
if any, should be taken by the AIM Funds in light of all such reports; (ii) for
overseeing the investigation(s) on behalf of the independent trustees by special
counsel for the independent trustees and the independent trustees' financial
expert of market timing activity in the AIM Funds, and for recommending to the
independent trustees what actions, if any, should be taken by the
AIM Funds in light of the results of such investigation(s); (iii) for (a) reviewing the methodology developed by AIM's Independent Distribution Consultant (the "Distribution Consultation") for the monies ordered to be paid under the settlement order with the SEC, and making recommendations to the independent trustees as to the acceptability of such methodology and (b) recommending to the independent trustees whether to consent to any firm with which the Distribution Consultant is affiliated entering into any employment, consultant, attorney-client, auditing or other professional relationship with AIM, or any of its present or former affiliates, directors, officers, employees or agents acting in their capacity as such for the period of the Distribution Consultant's engagement and for a period of two years after the engagement; and (iv) for taking reasonable steps to ensure that any AIM Fund which the Special Market Timing Litigation Committee determines was harmed by improper market timing activity receives what the Special Market Timing Litigation Committee deems to be full restitution. During the fiscal year ended December 31, 2006, the Special Market Timing Litigation Committee held one meeting.
Trustee Ownership of Fund Shares
The dollar range of equity securities beneficially owned by each trustee (i) in the Funds and (ii) on an aggregate basis, in all registered investment companies overseen by the trustees in the AIM Funds Complex is set forth in Appendix C.
COMPENSATION
Each trustee who is not affiliated with AIM is compensated for his or her services according to a fee schedule which recognizes the fact that such trustee also serves as a director or trustee of other AIM Funds. Each such trustee receives a fee, allocated among the AIM Funds for which he or she serves as a director or trustee, which consists of an annual retainer component and a meeting fee component. The Chair of the Board and Chairs and Vice Chairs of certain committees receive additional compensation for their services.
Information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31, 2006 is found in Appendix D. Appendix D also provides information regarding compensation paid to Russell Burk, the Funds' Senior Vice President and Senior Officer, during the year ended December 31, 2006.
Retirement Plan For Trustees
The trustees have adopted a retirement plan for the trustees of the Trust who are not affiliated with AIM.
The trustees have also adopted a retirement policy that permits each non-AIM-affiliated trustee to serve until December 31 of the year in which the trustee turns 72. A majority of the trustees may extend from time to time the retirement date of a trustee.
Annual retirement benefits are available to each non-AIM-affiliated trustee of the Trust and/or the other AIM Funds (each, a "Covered Fund") who has at least five years of credited service as a trustee (including service to a predecessor fund) for a Covered Fund. Effective January 1, 2006, for retirement after December 31, 2005, the retirement benefits will equal 75% of the trustee's annual retainer paid to or accrued by any Covered Fund with respect to such trustee 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 trustee. The amount of the annual retirement benefit does not include additional compensation paid for Board meeting fees or compensation paid to the Chair of the Board and the Chairs and Vice Chairs of certain Board committees, whether such amounts are paid directly to the Trustee or deferred. The annual retirement benefit is payable in quarterly installments for a number of years equal to the lesser of (i) sixteen years or (ii) the number of such trustee's credited years of service. If a trustee dies prior to receiving the full amount of retirement benefits, the remaining payments will be made to the deceased trustee's designated beneficiary for the same length of time that the trustee would have received the payments based on his or her service. A trustee must have attained
the age of 65 (60 in the event of death or disability) to receive any retirement benefit. A trustee may make an irrevocable election to commence payment of retirement benefits is upon retirement from the Board before age 72; in such a case, the annual retirement benefit is subject to a reduction for early payment.
Deferred Compensation Agreements
Messrs. Crockett, Edward K. Dunn, Jr. (a former trustee), Fields, Frischling, Louis S. Sklar (a former trustee) and Drs. Mathai-Davis and Soll (for purposes of this paragraph only, the "Deferring Trustees") have each executed a Deferred Compensation Agreement (collectively, the "Compensation Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees have the option to elect to defer receipt of up to 100% of their compensation payable by the Trust, and such amounts are placed into a deferral account and deemed to be invested in one or more AIM Funds selected by the Deferring Trustees. Distributions from the Deferring Trustees' deferral accounts will be paid in cash, generally in equal quarterly installments over a period of up to ten (10) years (depending on the Compensation Agreement) beginning on the date selected under the Compensation Agreement. If a Deferring Trustee 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 Compensation Agreements are not funded and , with respect to the payments of amounts held in the deferral accounts, the Deferring Trustees have the status of unsecured creditors of the Trust and of each other AIM Fund from which they are deferring compensation.
CODE OF ETHICS
AIM, the Trust, A I M Distributors, Inc. ("AIM Distributors") and INVESCO Institutional have each adopted a Code of Ethics which applies to all AIM Fund trustees and officers, employees of AIM and its subsidiaries and INVESCO Institutional, and governs, among other things, personal trading activities of such persons. The Codes of Ethics are intended to prohibit conflicts of interest with the Trust that may arise from personal trading, including personal trading in most of the funds within The AIM Family of Funds--Registered Trademark-- ("affiliated funds"). Personal trading, including personal trading involving securities that may be purchased or held by a Fund and in affiliated funds, is permitted by persons covered under the relevant Codes subject to certain restrictions; however those persons are generally required to pre-clear all security transactions with the Compliance Officer or her designee and to report all transactions on a regular basis.
PROXY VOTING POLICIES
The Board has delegated responsibility for decisions regarding proxy voting for securities held by each Fund (except AIM V.I. Global Real Estate Fund to the Fund's investment advisor. The Board has delegated responsibility for decisions regarding proxy voting for securities held by AIM V.I. Global Real Estate Fund to the Sub-Advisor. AIM and the Sub-Advisor will vote such proxies in accordance with its proxy policies and procedures, which have been reviewed by the Board, and which are found in Appendix E.
Any material changes to the proxy policies and procedures will be submitted to the Board for approval. The Board will be supplied with a summary quarterly report of each Fund's proxy voting record.
Information regarding how the Funds voted proxies related to its portfolio securities during the 12 months ended June 30, 2006 is available, without charge, at our Website, http://www.aiminvestments.com. This information is also available at the SEC Website, http://www.sec.gov.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Information about the ownership of each class of each Fund's shares by certain beneficial or record owners of such Fund and by trustees and officers as a group is found in Appendix F. A shareholder who owns beneficially 25% or more of the outstanding shares of a Fund is presumed to "control" that Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
AIM, the Funds' investment advisor, was organized in 1976, and along with its subsidiaries, manages or advises over 200 investment portfolios encompassing a broad range of investment objectives. AIM is a direct, wholly owned subsidiary of AIM Management, a holding company that has been engaged in the financial services business since 1976. AIM Management is an indirect, wholly owned subsidiary of AMVESCAP. AMVESCAP and its subsidiaries are an independent global investment management group. Certain of the directors and officers of AIM are also executive officers of the Trust and their affiliations are shown under "Management Information" herein.
As investment advisor, AIM supervises all aspects of the Funds' operations and provides investment advisory services to the Funds. AIM obtains and evaluates economic, statistical and financial information to formulate and implement investment programs for the Funds. The Investment Advisory Agreement provides that, in fulfilling its responsibilities, AIM may engage the services of other investment managers with respect to one or more of the Funds. The investment advisory services of AIM and the investment sub-advisory services of the Sub-Advisor are not exclusive and AIM and the Sub-Advisor are free to render investment advisory services to others, including other investment companies.
AIM is also responsible for furnishing to the Funds, at AIM's expense, the services of persons believed to be competent to perform all supervisory and administrative services required by the Funds, in the judgment of the trustees, to conduct their respective businesses effectively, as well as the offices, equipment and other facilities necessary for their operations. Such functions include the maintenance of each Fund's accounts and records, and the preparation of all requisite corporate documents such as tax returns and reports to the SEC and shareholders.
The Advisory Agreement provides that the Fund will pay or cause to be
paid all expenses of the Fund not assumed by AIM, including, without limitation:
brokerage commissions, taxes, legal, 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
each Fund 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.
AIM, at its own expense, furnishes to the Trust office space and facilities. AIM furnishes to the Trust all personnel for managing the affairs of the Trust and each of its series of shares.
Pursuant to the Advisory Agreement with the Trust, AIM receives a monthly fee from each Fund calculated at the annual rates indicated in the second column below, based on the average daily net assets of each Fund during the year. Each Fund allocates advisory fees to a class based on the relative net assets of each class.
Effective January 1, 2005, the advisor has contractually agreed to waive advisory fees to the extent necessary so that the advisory fees payable by each Fund do not exceed the maximum advisory
fee rate set forth in the third column below. The maximum advisory fee rates are effective through the Committed Until Date set forth in the fourth column.
MAXIMUM ADVISORY
FEE RATES
ANNUAL RATE/NET ASSETS PER ADVISORY MAXIMUM ADVISORY FEE RATE AFTER COMMITTED UNTIL
FUND NAME AGREEMENT JANUARY 1, 2005 DATE
--------- ------------------------------------- ------------------------------- ----------------
AIM V.I. Basic Balanced Fund 0.75% of the first $150 million 0.62% of the first $150 million 12/31/2009
0.50% of the excess over $150 million 0.50% of the next $4.85 billion
0.475% of the next $5 billion
0.45% of the excess over $10 billion
AIM V.I. Basic Value Fund 0.725% of the first $500 million 0.695% of the first $250 million 12/31/2009
0.70% of the next $500 million 0.67% of the next $250 million
0.675% of the next $500 million 0.645% of the next $500 million
0.65% of the excess over $1.5 billion 0.62% of the next $1.5 billion
0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of the excess over $10 billion
AIM V.I. Capital Appreciation 0.65% of the first $250 million 0.695% of the first $250 million 12/31/2009
Fund 0.60% of the excess over $250 million 0.625% of the next $750 million
0.62% of the next $1.5 billion
0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of the excess over $10 billion
AIM V.I. Capital Development 0.75% of the first $350 million 0.745% of the first $250 million 04/30/2008
Fund 0.625% of the excess over $350 million 0.73% of the next $250 million
0.715% of the next $500 million
0.70% of the next $1.5 billion
0.685% of the next $2.5 billion
0.67% of the next $2.5 billion
0.655% of the next $2.5 billion
0.64% of the excess over $10 billion
AIM V.I. Core Equity Fund 0.65% of the first $250 million 0.695% of the first $250 million 12/31/2009
0.60% of the excess over $250 million 0.67% of the next $250 million
0.645% of the next $500 million
0.62% of the next $1.5 billion
0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of the excess over $10 billion
AIM V.I. Diversified Income 0.60% of the first $250 million N/A N/A
Fund 0.55% of the excess over $250 million
AIM V.I. Dynamics Fund 0.75% of average daily net assets 0.745% of the first $250 million 04/30/2008
0.73% of the next $250 million
0.715% of the next $500 million
0.70% of the next $1.5 billion
0.685% of the next $2.5 billion
0.67% of the next $2.5 billion
0.655% of the next $2.5 billion
0.64% of the excess over $10 billion
|
MAXIMUM ADVISORY
FEE RATES
ANNUAL RATE/NET ASSETS PER ADVISORY MAXIMUM ADVISORY FEE RATE AFTER COMMITTED UNTIL
FUND NAME AGREEMENT JANUARY 1, 2005 DATE
--------- ----------------------------------- ------------------------------- ----------------
AIM V.I. Financial Services 0.75% of average daily net assets 0.75% of the first $250 million 04/30/2008
Fund 0.74% of the next $250 million
0.73% of the next $500 million
0.72% of the next $1.5 billion
0.71% of the next $2.5 billion
0.70% of the next $2.5 billion
0.69% of the next $2.5 billion
0.68% of the excess over$10 billion
AIM V.I. Global Health Care 0.75% of average daily net assets 0.75% of the first $250 million 04/30/2008
Fund 0.74% of the next $250 million
0.73% of the next $500 million
0.72% of the next $1.5 billion
0.71% of the next $2.5 billion
0.70% of the next $2.5 billion
0.69% of the next $2.5 billion
0.68% of the excess over $10 billion
AIM V.I. Global Real Estate 0.90% of average daily net assets 0.75% of the first $250 million 04/30/2008
Fund 0.74% of the next $250 million
0.73% of the next $500 million
0.72% of the next $1.5 billion
0.71% of the next $2.5 billion
0.70% of the next $2.5 billion
0.69% of the next $2.5 billion
0.68% of the excess over $10 billion
AIM V.I. Government Securities 0.50% of the first $250 million N/A N/A
Fund 0.45% of the excess over $250 million
AIM V.I. High Yield Fund 0.625% of the first $200 million N/A N/A
0.55% of the next $300 million
0.50% of the next $500 million
0.45% of the excess over $1 billion
04/30/2008
AIM V.I. International Growth 0.75% of the first $250 million The current advisory fee schedule
Fund 0.70% of the excess over $250 million is lower than the uniform fee
schedule at all asset levels.
AIM V.I. Large Cap Growth Fund 0.75% of the first $350 million 0.695% of the first $250 million 12/31/2009
0.625% of the excess over $350 million 0.67% of the next $250 million
0.645% of the next $500 million
0.62% of the next $1.5 billion
0.595% of the next $2.5 billion
0.57% of the next $2.5 billion
0.545% of the next $2.5 billion
0.52% of the excess over $10 billion
AIM V.I. Leisure Fund 0.75% of average daily net assets 0.75% of the first $250 million 04/30/2008
0.74% of the next $250 million
0.73% of the next $500 million
0.72% of the next $1.5 billion
0.71% of the next $2.5 billion
0.70% of the next $2.5 billion
0.69% of the next $2.5 billion
0.68% of the excess over $10 billion
|
MAXIMUM ADVISORY
FEE RATES
ANNUAL RATE/NET ASSETS PER ADVISORY MAXIMUM ADVISORY FEE RATE AFTER COMMITTED UNTIL
FUND NAME AGREEMENT JANUARY 1, 2005 DATE
--------- ----------------------------------- ------------------------------- ----------------
AIM V.I. Mid Cap Core Equity 0.725% of the first $500 million The current advisory fee schedule 04/30/2008
Fund 0.70% of the next $500 million is lower than the uniform fee
0.675% of the next $500 million schedule at all asset levels.
0.65% of the excess over $1.5 billion
AIM V.I. Money Market Fund 0.40% of the first $250 million N/A N/A
0.35% of the excess over $250 million
AIM V.I. Small Cap Equity Fund 0.85% of average daily net assets 0.745% of the first $250 million 04/30/2008
0.73% of the next $250 million
0.715% of the next $500 million
0.70% of the next $1.5 billion
0.685% of the next $2.5 billion
0.67% of the next $2.5 billion
0.655% of the next $2.5 billion
0.64% of the excess over $10 billion
AIM V.I. Technology Fund 0.75% of average daily net assets 0.75% of the first $250 million 04/30/2008
0.74% of the next $250 million
0.73% of the next $500 million
0.72% of the next $1.5 billion
0.71% of the next $2.5 billion
0.70% of the next $2.5 billion
0.69% of the next $2.5 billion
0.68% of the excess over $10 billion
AIM V.I. Utilities Fund 0.60% of average daily net assets The current advisory fee schedule is 04/30/2008
lower than the uniform fee schedule
at all asset levels.
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AIM may from time to time waive or reduce its fee. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund.
AIM has voluntarily agreed to waive a portion of advisory fees payable to each Fund. The amount of the waiver will equal 25% of the advisory fee AIM receives from the Affiliated Money Market Funds as a result of each Fund's investment of uninvested cash in an Affiliated Money Market Fund. Termination of this agreement requires approval by the Board. See "Description of the Funds and Their Investments and Risks - Investment Strategies and Risks - Other Investments - Other Investment Companies."
AIM has contractually agreed to waive advisory fees and/or reimburse expenses through April 30, 2008, to the extent necessary to limit Total Annual Fund Operating Expenses (excluding: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganizations as approved by each Fund's Board of Trustees; and (vi) expenses that each Fund has incurred but did not actually pay because of an expense offset arrangement) for the following Funds' shares as follows:
EXPENSE
FUND LIMITATION
---- ----------
AIM V.I. Basic Balanced Fund - Series I 0.91%
Series II 1.16%
AIM V.I. Basic Value Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Capital Appreciation Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Capital Development Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Core Equity Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Diversified Income Fund - Series I 0.75%
Series II 1.00%
AIM V.I. Dynamics Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Financial Services Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Global Health Care Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Global Real Estate Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Government Securities Fund - Series I 0.73%
Series II 0.98%
AIM V.I. High Yield Fund - Series I 0.95%
Series II 1.20%
AIM V.I. International Growth Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Large Cap Growth Fund - Series I 1.01%
Series II 1.26%
AIM V.I. Leisure Fund - Series I 1.01%
Series II 1.26%
AIM V.I. Mid Cap Core Equity Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Money Market Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Small Cap Equity Fund - Series I 1.15%
Series II 1.40%
AIM V.I. Technology Fund - Series I 1.30%
Series II 1.45%
AIM V.I. Utilities Fund - Series I 0.93%
Series II 1.18%
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Such contractual fee waivers or reductions are set forth in the Fee Table included in each Fund's Prospectus and may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund.
INVESTMENT SUB-ADVISOR
AIM has entered into a Sub-Advisory contract with INVESCO Institutional to provide investment sub-advisory services to AIM V.I. Global Real Estate Fund.
INVESCO Institutional is registered as an investment advisor under the Investment Advisers Act of 1940, as amended (the "Advisers Act"). INVESCO Institutional is responsible for AIM V.I. Global Real Estate Fund's day to day management, including the Fund's investment decisions and the execution of securities transactions, with respect to the Fund.
AIM and INVESCO Institutional are indirectly wholly-owned subsidiaries of AMVESCAP. For the services to be rendered by INVESCO Institutional under its Sub-Advisory Contract with respect to AIM
V.I. Global Real Estate Fund, AIM will pay a sub-advisory fee 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.
Prior to April 30, 2004, INVESCO served as investment advisor to the VIF Funds. During the periods indicated in Appendix G, the VIF Funds paid AIM (INVESCO prior to April 30, 2004) advisory fees in the dollar amounts shown. If applicable, the advisory fees were offset by credits in the amounts shown below, so that the Funds' fees were not in excess of the expense limitations shown, which have been voluntarily agreed to by the Trust and AIM (INVESCO prior to April 30, 2004).
The management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund for the last three fiscal years ended December 31 are found in Appendix G.
Prior to April 30, 2004, INVESCO served as investment advisor to the predecessor to the AIM V.I. Global Real Estate Fund. During periods outlined in Appendix G, AIM V.I. Global Real Estate Fund paid INVESCO advisory fees in the dollar amounts shown. If applicable, the advisory fees were offset by credits in the amounts shown in Appendix G, so that the AIM V.I. Global Real Estate Fund's fees were not in excess of the expense limitations shown, which have been voluntarily agreed to by the Trust and INVESCO.
Portfolio Manager(s)
Appendix H contains the following information regarding the portfolio managers identified in each Fund's prospectus:
- The dollar range of the manager's investments in each Fund.
- A description of the manager's compensation structure.
- Information regarding other accounts managed by the manager and potential conflicts of interest that might arise from the management of multiple accounts.
Securities Lending Arrangements
If a Fund engages in securities lending, AIM will provide the Fund investment advisory services and related administrative services. The Advisory Agreement describes the administrative services to be rendered by AIM if a Fund engages in securities lending activities, as well as the compensation AIM may receive for such administrative services. Services to be provided include: (a) overseeing participation in the securities lending program to ensure compliance with all applicable regulatory and investment guidelines; (b) assisting the securities lending agent or principal (the agent) in determining which specific securities are available for loan; (c) monitoring the agent to ensure that securities loans are effected in accordance with AIM's instructions and with procedures adopted by the Board; (d) preparing appropriate periodic reports for, and seeking appropriate approvals from, the Board with respect to securities lending activities; (e) responding to agent inquiries; and (f) performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with securities lending is included in the advisory fee schedule. As compensation for the related administrative services AIM will provide, a lending Fund will pay AIM a fee equal to 25% of the net monthly interest or fee income retained or paid to the Fund from such activities. AIM currently intends to waive such fee, and has agreed to seek Board approval prior to its receipt of all or a portion of such fee.
SERVICES AGREEMENTS
ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a Master Administrative Services Agreement ("Administrative Services Agreement") pursuant to which AIM may perform or arrange for the provision of certain accounting and other administrative services to each Fund
which are not required to be performed by AIM under the Advisory Agreement. The Administrative Services Agreement provides that it will remain in effect and continue from year to year only if such continuance is specifically approved at least annually by the Board, including the independent trustees, by votes cast in person at a meeting called for such purpose. Under the Administrative Services Agreement, AIM is entitled to receive from the Funds reimbursement of its costs or such reasonable compensation as may be approved by the Board. Currently, AIM is reimbursed for the services of the Trust's principal financial officer and her staff, and any expenses related to fund accounting services. In addition, AIM contracts with Participating Insurance Companies to provide certain services related to operations of the Trust. These services may include, among other things: the printing of prospectuses, financial reports and proxy statements and the delivery of the same to existing Contract owners; the maintenance of master accounts; the facilitation of purchases and redemptions requested by Contract owners; and the servicing of Contract owner accounts.
Each Participating Insurance Company negotiates the fees to be paid for the provision of these services. The cost of providing the services and the overall package of services provided may vary from one Participating Insurance Company to another. AIM does not make an independent assessment of the cost of providing such services.
Effective May 1, 1998, the Funds agreed to reimburse AIM for its costs in paying the Participating Insurance Companies that provide these services, currently subject to an annual limit of 0.25% of the average net assets invested in each Fund by each Participating Insurance Company. Any amounts paid by AIM to a Participating Insurance Company in excess of 0.25% of the average net assets invested in each Fund are paid by AIM out of its own financial resources.
AIM is entitled to reimbursement by a VIF Fund for any fees waived pursuant to expense limitation commitments between AIM and the VIF Funds if such reimbursement does not cause the Fund to exceed the current expense limitations and the reimbursement is made within three years after AIM incurred the expense.
INVESCO served as the VIF Funds' administrative services agent until April 30, 2004. Administrative services fees paid to AIM by each Fund for the last three fiscal years ended December 31 are found in Appendix I.
OTHER SERVICE PROVIDERS
TRANSFER AGENT. AIM Investment Services, Inc. ("AIS"), 11 Greenway Plaza, Suite 100, Houston, Texas 77046, a wholly owned subsidiary of AIM, is the Trust's transfer agent.
The Transfer Agency and Service Agreement (the "TA Agreement") between the Trust and AIS provides that AIS will perform certain shareholder services for the Funds. The TA Agreement provides that AIS will receive a per trade fee plus out-of-pocket expenses to process orders for purchases, and redemptions of shares; prepare and transmit payments for dividends and distributions declared by the Funds; and maintain shareholder accounts.
SUB-TRANSFER AGENT. AIM Funds Management, Inc. ("AFMI"), 5140 Yonge Street, Suite 900, Toronto, Ontario M2N6X7, a wholly owned, indirect subsidiary of AMVESCAP PLC, provides services to the Trust as a sub-transfer agent, pursuant to an agreement between AFMI and AIS. The Trust does not pay a fee to AFMI for these services. Rather AFMI is compensated by AIS, as a sub-contractor.
CUSTODIANS. State Street Bank and Trust Company (the "Custodian"), 225 Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and cash of the Funds (except AIM V.I. Money Market Fund). The Bank of New York, 2 Hanson Place, Brooklyn, New York 11217-1431, is custodian of all securities and cash of AIM V.I. Money Market Fund. JPMorgan Chase Bank, N.A., 712 Main, Houston, Texas 77002, serves as sub-custodian for purchases of shares of the Funds.
The Custodians are authorized to establish separate accounts in foreign countries and to cause foreign securities owned by the Funds to be held outside the United States in branches of U.S. banks and, to the extent permitted by applicable regulations, in certain foreign banks and securities depositories. AIM is responsible for selecting eligible foreign securities depositories and for assessing the risks associated with investing in foreign countries, including the risk of using eligible foreign securities depositories in a country. The Custodian is responsible for monitoring eligible foreign securities depositories.
Under their contract with the Trust, the Custodian maintains the portfolio securities of the Funds, administers the purchases and sales of portfolio securities, collects interest and dividends and other distributions made on the securities held in the portfolios of the Funds and performs other ministerial duties. These services do not include any supervisory function over management or provide any protection against any possible depreciation of assets.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. The Funds' independent registered public accounting firm is responsible for auditing the financial statements of the Funds. The Audit Committee of the Board has appointed PricewaterhouseCoopers LLP, 1201 Louisiana, Suite 2900, Houston, Texas 77002, as the independent registered public accounting firm to audit the financial statements of the Funds. Such appointment was ratified and approved by the Board.
COUNSEL TO THE TRUST. Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia, Pennsylvania 19103-7599, has advised the Trust on certain federal securities law matters.
BROKERAGE ALLOCATION AND OTHER PRACTICES
The Sub-Advisor has adopted compliance procedures that cover, among other items, brokerage allocation and other trading practices. Unless specifically noted, the Sub-Advisor's procedures do not materially differ from AIM's procedures as set forth below.
BROKERAGE TRANSACTIONS
AIM or the Sub-Advisor makes decisions to buy and sell securities for each Fund, selects broker-dealers (each, a "Broker"), effects the Funds' investment portfolio transactions, allocates brokerage fees in such transactions and, where applicable, negotiates commissions and spreads on transactions. AIM's primary consideration in effecting a security transaction is to obtain best execution, which AIM defines as prompt and efficient execution of the transaction at the best obtainable price with payment of commissions, mark-ups or mark-downs which are reasonable in relation to the value of the brokerage services provided by the Broker. While AIM seeks reasonably competitive commission rates, the Funds may not pay the lowest commission or spread available. See "Broker Selection" below.
Some of the securities in which the Funds invest are traded in over-the-counter markets. Portfolio transactions placed in such markets may be effected on a principal basis at net prices without commissions, but which include compensation to the Broker in the form of a mark up or mark down, or on an agency basis, which involves the payment of negotiated brokerage commissions to the Broker, including electronic communication networks. Purchases of underwritten issues include a commission or concession paid by the issuer (not the Funds) to the underwriter. Purchases of money market instruments may be made directly from issuers without the payment of commissions.
Traditionally, commission rates have not been negotiated on stock markets outside the United States. Although in recent years many overseas stock markets have adopted a system of negotiated rates, a number of markets maintain an established schedule of minimum commission rates.
Brokerage commissions paid by each of the Funds during the last three fiscal years ended December 31 are found in Appendix J.
COMMISSIONS
During the last three fiscal years ended December 31, none of the Funds paid brokerage commissions to Brokers affiliated with the Funds, AIM, AIM Distributors, or any affiliates of such entities.
The Funds may engage in certain principal and agency transactions with banks and their affiliates that own 5% or more of the outstanding voting securities of an AIM Fund, provided the conditions of an exemptive order received by the AIM Funds from the SEC are met. In addition, a Fund may purchase or sell a security from or to certain other AIM Funds or other accounts (and may invest in the Affiliated Money Market Funds) provided the Funds follow procedures adopted by the Boards of the various AIM Funds, including the Trust. These inter-fund transactions do not generate brokerage commissions but may result in custodial fees or taxes or other related expenses.
BROKER SELECTION
AIM's primary consideration in selecting Brokers to execute portfolio transactions for a Fund is to obtain best execution. In selecting a Broker to execute a portfolio transaction in equity securities for a Fund, AIM considers the full range and quality of a Broker's services, including the value of research and/or brokerage services provided, execution capability, commission rate, willingness to commit capital, anonymity and responsiveness. AIM's primary consideration when selecting a Broker to execute a portfolio transaction in fixed income securities for a Fund is the Broker's ability to deliver or sell the relevant fixed income securities; however, AIM will also consider the various factors listed above. In each case, the determinative factor is not the lowest commission or spread available but whether the transaction represents the best qualitative execution for the Fund. AIM will not select Brokers based upon their promotion or sale of Fund shares.
In choosing Brokers to execute portfolio transactions for the Funds, AIM may select Brokers that provide brokerage and/or research services ("Soft Dollar Products") to the Funds and/or the other accounts over which AIM and its affiliates have investment discretion. Section 28(e) of the Securities Exchange Act of 1934, as amended, provides that AIM, under certain circumstances, lawfully may cause an account to pay a higher commission than the lowest available. Under Section 28(e)(1), AIM must make a good faith determination that the commissions paid are "reasonable in relation to the value of the brokerage and research services provided ... viewed in terms of either that particular transaction or [AIM's] overall responsibilities with respect to the accounts as to which [it] exercises investment discretion." The services provided by the Broker also must lawfully and appropriately assist AIM in the performance of its investment decision-making responsibilities. Accordingly, a Fund may pay a Broker higher commissions than those available from another Broker in recognition of such Broker's provision of Soft Dollar Products to AIM.
AIM faces a potential conflict of interest when it uses client trades to obtain Soft Dollar Products. This conflict exists because AIM is able to use the Soft Dollar Products to manage client accounts without paying cash for the Soft Dollar Products, which reduces AIM's expenses to the extent that AIM would have purchased such products had they not been provided by Brokers. Section 28(e) permits AIM to use Soft Dollar Products for the benefit of any account it manages. Certain AIM-managed accounts may generate soft dollars used to purchase Soft Dollar Products that ultimately benefit other AIM-managed accounts, effectively cross subsidizing the other AIM-managed accounts that benefit directly from the product. AIM may not use all of the Soft Dollar Products provided by Brokers through which a Fund effects securities transactions in connection with managing such Fund.
AIM and certain of its affiliates presently engage in the following instances of cross-subsidization:
1. Fixed income funds normally do not generate soft dollar commissions to pay for Soft Dollar Products. Therefore, soft dollar commissions used to pay for Soft Dollar Products which are used to manage the fixed income AIM Funds are generated entirely by equity AIM Funds and other equity client accounts managed by AIM or A I M Capital Management, Inc. ("AIM Capital"), a subsidiary of AIM. In other words, the fixed income AIM Funds are cross-
subsidized by the equity AIM Funds, in that the fixed income AIM Funds receive the benefit of Soft Dollar Products services for which they do not pay.
2. The investment models used to manage many of the AIM Funds are also used to manage other accounts of AIM and/or AIM Capital. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the AIM Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by both of these advisory affiliates.
This type of cross-subsidization occurs in both directions. For example, soft dollar commissions generated by transactions of the AIM Funds and/or other accounts managed by AIM are used for Soft Dollar Products which may benefit those AIM Funds and/or accounts as well as accounts managed by AIM Capital. Additionally, soft dollar commissions generated by transactions of accounts managed by AIM Capital are used for Soft Dollar Products which may benefit those accounts as well as accounts managed by AIM. In certain circumstances, AIM Capital accounts may indicate that their transactions should not be used to generate soft dollar commissions but may still receive the benefits of Soft Dollar Products received by AIM or AIM Capital.
3. Some of the common investment models used to manage various Funds and other accounts of AIM and/or AIM Capital are also used to manage accounts of AIM Private Asset Management, Inc. ("APAM"), another AIM subsidiary. The Soft Dollar Products obtained through the use of soft dollar commissions generated by the transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used to maintain the investment models relied upon by AIM, AIM Capital and APAM. This cross-subsidization occurs in only one direction. Most of APAM's accounts do not generate soft dollar commissions which can be used to purchase Soft Dollar Products. The soft dollar commissions generated by transactions of the Funds and/or other accounts managed by AIM and/or AIM Capital are used for Soft Dollar Products which may benefit the accounts managed by AIM, AIM Capital and APAM; however, APAM does not provide any soft dollar research benefit to the Funds and/or other accounts managed by AIM or AIM Capital.
AIM and AIM Capital attempt to reduce or eliminate the potential conflicts of interest concerning the use of Soft Dollar Products by directing client trades for Soft Dollar Products only if AIM and AIM Capital conclude that the Broker supplying the product is capable of providing best execution.
Certain Soft Dollar Products may be available directly from a vendor on a hard dollar basis; other Soft Dollar Products are available only through Brokers in exchange for soft dollars. AIM uses soft dollars to purchase two types of Soft Dollar Products:
- proprietary research created by the Broker executing the trade, and
- other products created by third parties that are supplied to AIM through the Broker executing the trade.
Proprietary research consists primarily of traditional research reports, recommendations and similar materials produced by the in house research staffs of broker-dealer firms. This research includes evaluations and recommendations of specific companies or industry groups, as well as analyses of general economic and market conditions and trends, market data, contacts and other related information and assistance. AIM periodically rates the quality of proprietary research produced by various Brokers. Based on the evaluation of the quality of information that AIM receives from each Broker, AIM develops an estimate of each Broker's share of AIM clients' commission dollars. AIM attempts to direct trades to the firms to meet these estimates.
AIM also uses soft dollars to acquire products from third parties that are supplied to AIM through Brokers executing the trades or other Brokers who "step in" to a transaction and receive a portion of the brokerage commission for the trade. AIM may from time to time instruct the executing Broker to allocate
or "step out" a portion of a transaction to another Broker. The Broker to which AIM has "stepped out" would then settle and complete the designated portion of the transaction, and the executing Broker would settle and complete the remaining portion of the transaction that has not been "stepped out." Each Broker may receive a commission or brokerage fee with respect to that portion of the transaction that it settles and completes.
Soft Dollar Products received from Brokers supplement AIM's own research (and the research of certain of its affiliates), and may include the following types of products and services:
- Database Services - comprehensive databases containing current and/or historical information on companies and industries and indices. Examples include historical securities prices, earnings estimates and financial data. These services may include software tools that allow the user to search the database or to prepare value-added analyses related to the investment process (such as forecasts and models used in the portfolio management process).
- Quotation/Trading/News Systems - products that provide real time market data information, such as pricing of individual securities and information on current trading, as well as a variety of news services.
- Economic Data/Forecasting Tools - various macro economic forecasting tools, such as economic data or currency and political forecasts for various countries or regions.
- Quantitative/Technical Analysis - software tools that assist in quantitative and technical analysis of investment data.
- Fundamental/Industry Analysis - industry specific fundamental investment research.
- Fixed Income Security Analysis - data and analytical tools that pertain specifically to fixed income securities. These tools assist in creating financial models, such as cash flow projections and interest rate sensitivity analyses, which are relevant to fixed income securities.
- Other Specialized Tools - other specialized products, such as consulting analyses, access to industry experts, and distinct investment expertise such as forensic accounting or custom built investment-analysis software.
If AIM determines that any service or product has a mixed use (i.e., it also serves functions that do not assist the investment decision-making or trading process), AIM will allocate the costs of such service or product accordingly in its reasonable discretion. AIM will allocate brokerage commissions to Brokers only for the portion of the service or product that AIM determines assists it in the investment decision-making or trading process and will pay for the remaining value of the product or service in cash.
Outside research assistance is useful to AIM since the Brokers used by AIM tend to provide more in-depth analysis of a broader universe of securities and other matters than AIM's staff follows. In addition, such services provide AIM with a diverse perspective on financial markets. Some Brokers may indicate that the provision of research services is dependent upon the generation of certain specified levels of commissions and underwriting concessions by AIM's clients, including the Funds. However, the Funds are not under any obligation to deal with any Broker in the execution of transactions in portfolio securities. In some cases, Soft Dollar Products are available only from the Broker providing them. In other cases, Soft Dollar Products may be obtainable from alternative sources in return for cash payments. AIM believes that because Broker research supplements rather than replaces AIM's research, the receipt of such research tends to improve the quality of AIM's investment advice. The advisory fee paid by the Funds is not reduced because AIM receives such services. To the extent the Funds' portfolio
transactions are used to obtain Soft Dollar Products, the brokerage commissions obtained by the Funds might exceed those that might otherwise have been paid.
AIM may determine target levels of brokerage business with various Brokers on behalf of its clients (including the Funds) over a certain time period. The target levels will be based upon the following factors, among others: (1) the execution services provided by the Broker; and (2) the research services provided by the Broker. Portfolio transactions may be effected through Brokers that recommend the Funds to their clients, or that act as agent in the purchase of a Fund's shares for their clients, provided that AIM believes such Brokers provide best execution and such transactions are executed in compliance with AIM's policy against using directed brokerage to compensate Brokers for promoting or selling AIM Fund shares. AIM will not enter into a binding commitment with Brokers to place trades with such Brokers involving brokerage commissions in precise amounts.
DIRECTED BROKERAGE (RESEARCH SERVICES)
Directed brokerage (research services) paid by each of the Funds during the last fiscal year ended December 31, 2006 are found in Appendix K.
REGULAR BROKERS
Information concerning the Funds' acquisition of securities of their regular Brokers during the last fiscal year ended December 31, 2006 is found in Appendix K.
ALLOCATION OF PORTFOLIO TRANSACTIONS
AIM and its affiliates manage numerous AIM Funds and other accounts. Some of these accounts may have investment objectives similar to the Funds. Occasionally, identical securities will be appropriate for investment by one of the Funds and by another Fund or one or more other accounts. However, the position of each account in the same security and the length of time that each account may hold its investment in the same security may vary. The timing and amount of purchase by each account will also be determined by its cash position. If the purchase or sale of securities is consistent with the investment policies of the Fund(s) and one or more other accounts, and is considered at or about the same time, AIM will allocate transactions in such securities among the Fund(s) and these accounts on a pro rata basis based on order size or in such other manner believed by AIM to be fair and equitable. AIM may combine such transactions, in accordance with applicable laws and regulations, to obtain the most favorable execution. Simultaneous transactions could, however, adversely affect a Fund's ability to obtain or dispose of the full amount of a security which it seeks to purchase or sell.
ALLOCATION OF EQUITY INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS
Certain of the AIM Funds or other accounts managed by AIM may become interested in participating in equity IPOs. Purchases of equity IPOs by one AIM Fund or other account may also be considered for purchase by one or more other AIM Funds or accounts. AIM shall combine indications of interest for equity IPOs for all AIM Funds and accounts participating in purchase transactions for that IPO. When the full amount of all IPO orders for such AIM Funds and accounts cannot be filled completely, AIM shall allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund and account that seeks to participate in a particular equity IPO by reviewing a number of factors, including market capitalization/liquidity suitability and sector/style suitability of the investment with the AIM Fund's or account's investment objective, policies, strategies and current holdings. AIM will allocate equity securities issued in IPOs to eligible AIM Funds and accounts on a pro rata basis based on order size.
INVESCO Institutional allocates equity IPOs on a pro rata basis based on account size or in such other manner believed by INVESCO Institutional to be fair and equitable.
PURCHASE AND REDEMPTION OF SHARES
The Trust offers the shares of the Funds, on a continuous basis, to both registered and unregistered separate accounts of affiliated and unaffiliated Participating Insurance Companies to fund variable annuity contracts (the "Contracts") and variable life insurance policies ("Policies"). Each separate account contains divisions, each of which corresponds to a Fund in the Trust. Net purchase payments under the Contracts are placed in one or more of the divisions of the relevant separate account and the assets of each division are invested in the shares of the Fund which corresponds to that division. Each separate account purchases and redeems shares of these Funds for its divisions at net asset value without sales or redemption charges. Currently several insurance company separate accounts invest in the Funds.
The Trust, in the future, may offer the shares of its Funds to certain pension and retirement plans ("Plans") qualified under the Internal Revenue Code. The relationships of Plans and Plan participants to the Fund would be subject, in part, to the provisions of the individual plans and applicable law. Accordingly, such relationships could be different from those described in this Prospectus for separate accounts and owners of Contracts and Policies, in such areas, for example, as tax matters and voting privileges.
The Board monitors for possible conflicts among separate accounts (and will do so for plans) buying shares of the Funds. Conflicts could develop for a variety of reasons. For example, violation of the federal tax laws by one separate account investing in a fund could cause the contracts or policies funded through another separate account to lose their tax-deferred status, unless remedial actions were taken. For example, differences in treatment under tax and other laws or the failure by a separate account to comply with such laws could cause a conflict. To eliminate a conflict, the Board may require a separate account or Plan to withdraw its participation in a Fund. A Fund's net asset value could decrease if it had to sell investment securities to pay redemptions proceeds to a separate account (or plan) withdrawing because of a conflict.
CALCULATION OF NET ASSET VALUE
For AIM V.I. Money Market Fund: The net asset value per share of the Fund is determined daily as of 12:00 noon and the close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern time) on a particular day, the net asset value of the Fund is determined as of the close of the NYSE on such day. Net asset value per share is determined by dividing the value of the Fund's securities, cash and other assets (including interest accrued but not collected) attributable to a particular class, less all of its liabilities (including accrued expenses and dividends payable) attributable to that class, by the number of shares outstanding of that class and rounding the resulting per share net asset value to the nearest one cent. Determination of the net asset value per share is made in accordance with generally accepted accounting principles.
The Fund uses the amortized cost method to determine its net asset value. Under the amortized cost method, each investment is valued at its cost and thereafter any discount or premium is amortized on a constant basis to maturity. While this method provides certainty of valuation, it may result in periods in which the amortized cost value of the Fund's investments is higher or lower than the price that would be received if the investments were sold. During periods of declining interest rates, use by the Fund of the amortized cost method of valuing its portfolio may result in a lower value than the market value of the portfolio, which could be an advantage to new investors relative to existing shareholders. The converse would apply in a period of rising interest rates.
The Fund may use the amortized cost method to determine its net asset value so long as the Fund does not (a) purchase any instrument with a remaining maturity greater than 397 days (for these purposes, repurchase agreements shall not be deemed to involve the purchase by the Fund of the securities pledged as collateral in connection with such agreements) or (b) maintain a dollar-weighted
average portfolio maturity in excess of 90 days, and otherwise complies with the terms of rules adopted by the SEC.
The Board has established procedures designed to stabilize the Fund's net asset value per share at $1.00, to the extent reasonably possible. Such procedures include review of portfolio holdings by the trustees at such intervals as they may deem appropriate. The reviews are used to determine whether net asset value, calculated by using available market quotations, deviates from $1.00 per share and, if so, whether such deviation may result in material dilution or is otherwise unfair to investors or existing shareholders. In the event the trustees determine that a material deviation exists, they intend to take such corrective action as they deem necessary and appropriate. Such actions may include selling portfolio securities prior to maturity in order to realize capital gains or losses or to shorten average portfolio maturity, withholding dividends, redeeming shares in kind, or establishing a net asset value per share by using available market quotations, in which case the net asset value could possibly be more or less than $1.00 per share. AIM V.I. Money Market Fund intends to comply with any amendments made to Rule 2a-7 which may require corresponding changes in the Fund's procedures which are designed to stabilize the Fund's price per share at $1.00.
Under the amortized cost method, each investment is valued at its cost and thereafter any discount or premium is amortized on a constant basis to maturity. While this method provides certainty of valuation, it may result in periods in which the amortized cost value of the Fund's investments is higher or lower than the price that would be received if the investments were sold.
For All Other Funds: Each Fund determines its net asset value per share once daily as of the close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE closes early (i.e., before 4:00 p.m. Eastern time) on a particular day, each Fund determines its net asset value per share as of the close of the NYSE on such day. For purposes of determining net asset value per share, futures and option contracts generally will be valued 15 minutes after the close of the customary trading session of the NYSE. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. The Funds determine net asset value per share by dividing the value of a Fund's securities, cash and other assets (including interest accrued but not collected) attributable to a particular class, less all its liabilities (including accrued expenses and dividends payable) attributable to that class, by the total number of shares outstanding of that class. Determination of a Fund's net asset value per share is made in accordance with generally accepted accounting principles. The net asset value for shareholder transactions may be different than the net asset value reported in the Fund's financial statements due to adjustments required by generally accepted accounting principles made to the net assets of the Fund at period end.
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
A security listed or traded on an exchange (excluding convertible bonds) held by a Fund is valued at its last sales price or official closing price on the exchange where the security is principally traded or, lacking any sales on a particular day, the security may be valued at the closing bid price on that day. Each equity security traded in the over-the-counter market is valued on the basis of prices furnished by independent pricing vendors or market makers. Debt securities (including convertible bonds) and unlisted equities are fair valued using an evaluated quote on the basis of prices provided by an independent pricing vendor. Evaluated quotes provided by the pricing vendor may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, dividend rate, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and ask prices. Short-term obligations having 60 days or less to maturity and commercial paper are priced at amortized cost, which approximates value.
Generally, trading in corporate bonds, U.S. Government securities and money market instruments is substantially completed each day at various times prior to the close of the customary trading session of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined at such times. Occasionally, events affecting the values of such securities may occur between the times at which such values are determined and the close of the customary trading session of the NYSE. If AIM believes a development/event has actually caused a closing price to no longer reflect current market value, the closing price may be adjusted to reflect the fair value of the affected security as of the close of the NYSE as determined in good faith using procedures approved by the Board.
Foreign securities are converted into U.S. dollar amounts using exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process from a pricing vendor to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current market value as of the close of the NYSE. For foreign securities where AIM believes, at the approved degree of certainty, that the price is not reflective of current market value, AIM will use the indication of fair value from the pricing vendor to determine the fair value of the security. The pricing vendor, pricing methodology or degree of certainty may change from time to time. Multiple factors may be considered by the pricing vendor in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs, domestic and foreign index futures, and exchange-traded funds.
Fund securities primarily traded in foreign markets may be traded in such markets on days that are not business days of the Fund. Because the net asset value per share of each Fund is determined only on business days of the Fund, the value of the portfolio securities of a Fund that invests in foreign securities may be significantly affected on days when an investor cannot exchange or redeem shares of the Fund.
Swap agreements are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service are based on a model that may include end of day net present values, spreads, ratings, industry, and company performance.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and ask prices.
Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value.
For financial reporting purposes and shareholder transactions on the last day of the fiscal quarter, transactions are normally accounted for on a trade date basis. For purposes of executing shareholder transactions in the normal course of business (other than shareholder transactions at a fiscal period-end), each non-money market fund's portfolio securities transactions are recorded no later than the first business day following the trade date. Transactions in money market fund portfolio securities are normally accounted for on a trade date basis.
REDEMPTIONS IN KIND
Although the Funds, except AIM V.I. Money Market Fund, generally intend to pay redemption proceeds solely in cash, the Funds reserve the right to determine, in their sole discretion, whether to satisfy redemption requests by making payment in securities or other property (known as a redemption in kind). For instance, a Fund may make a redemption in kind if a cash redemption would disrupt its operations or performance. Securities that will be delivered as payment in redemptions in kind will be valued using the same methodologies that the Fund typically utilizes in valuing such securities. Shareholders receiving such securities are likely to incur transaction and brokerage costs on their subsequent sales of such securities, and the securities may increase or decrease in value until the shareholder sells them. The Trust, on behalf of the Funds, has made an election under Rule 18f-1 under the 1940 Act (a "Rule 18f-1 Election"), and therefore, the Trust, on behalf of the Fund, is obligated to redeem for cash all shares presented to such Fund for redemption by any one shareholder in an amount up to the lesser of $250,000 or 1% of that Fund's net assets in any 90-day period. The Rule 18f-1 Election is irrevocable while Rule 18f-1 under the 1940 Act is in effect unless the SEC by order permits withdrawal of such Rule 18f-1 Election.
PAYMENTS TO PARTICIPATING INSURANCE COMPANIES AND/OR THEIR AFFILIATES
AIM or AIM Distributors may, from time to time, at their expense out of their own financial resources, make cash payments to Participating Insurance Companies and/or their affiliates, as an incentive to promote the Funds and/or to retain Participating Insurance Companies' assets in the Funds. Such cash payments may be calculated on the average daily net assets of the applicable Fund(s) attributable to that particular Participating Insurance Company ("Asset-Based Payments"), in which case the total amount of such cash payments shall not exceed 0.25% per annum of those assets during a defined period. AIM or AIM Distributors may also make other cash payments to Participating Insurance Companies and/or their affiliates in addition to or in lieu of Asset-Based Payments, in the form of: payment for travel expenses, including lodging, incurred in connection with trips taken by qualifying registered representatives of those dealer firms and their families to places within or outside the United States; meeting fees; entertainment; transaction processing and transmission charges; advertising or other promotional expenses; or other expenses as determined in AIM's or AIM Distributors' discretion. In certain cases these other payments could be significant to the Participating Insurance Companies and/or their affiliates. Generally, commitments to make such payments are terminable upon notice to the Participating Insurance Company and/or their affiliates. However, AIM and AIM Distributors have entered into unique agreements with RiverSource Life Insurance Company and its affiliates ("RiverSource"), where the payment obligation of AIM or AIM Distributors can only be terminated on the occurrence of certain specified events. For example, in the event that RiverSource obtains an SEC order to substitute out such RiverSource assets in the Funds or such RiverSource assets in the Funds falls below a pre-determined level, payments by AIM or AIM Distributors to RiverSource can then be terminated. Any payments described above will not change the price paid by RiverSource for the purchase of the applicable Fund's shares or the amount that any particular Fund will receive as proceeds from such sales. AIM or AIM Distributors determines the cash payments described above in its discretion in response to requests fromRiverSource, based on factors it deems relevant. RiverSource may not use sales of the Funds' shares to qualify for any incentives to the extent that such incentives may be prohibited by the laws of any state.
A list of certain entities that received payments as described in this Statement of Additional Information during the 2006 calendar year is attached as Appendix L. The list is not necessarily current and will change over time. Certain arrangements are still being negotiated, and there is a possibility that
payments will be made retroactively to entities not listed below. Accordingly, please contact your Participating Insurance Company to determine whether they currently may be receiving such payments and to obtain further information regarding any such payments.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS
It is the present policy of each Fund to declare and distribute dividends representing substantially all net investment income as follows:
DIVIDENDS DIVIDENDS
DECLARED PAID
--------- ---------
AIM V.I. Basic Balanced Fund ......... annually annually
AIM V.I. Basic Value Fund ............ annually annually
AIM V.I. Capital Appreciation Fund ... annually annually
AIM V.I. Capital Development Fund .... annually annually
AIM V.I. Core Equity Fund ............ annually annually
AIM V.I. Diversified Income Fund ..... annually annually
AIM V.I. Dynamics Fund ............... annually annually
AIM V.I. Financial Services Fund ..... annually annually
AIM V.I. Global Health Care Fund ..... annually annually
AIM V.I. Global Real Estate Fund ..... annually annually
AIM V.I. Government Securities Fund .. annually annually
AIM V.I. High Yield Fund ............. annually annually
AIM V.I. International Growth Fund ... annually annually
AIM V.I. Large Cap Growth Fund ....... annually annually
AIM V.I. Leisure Fund ................ annually annually
AIM V.I. Mid Cap Core Equity Fund .... annually annually
AIM V.I. Money Market Fund ........... daily monthly
AIM V.I. Small Cap Equity Fund ....... annually annually
AIM V.I. Technology Fund ............. annually annually
AIM V.I. Utilities Fund .............. annually annually
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It is also each Fund's intention to distribute annually substantially all of its net investment income and realized net capital gains. In determining the amount of capital gains, if any, available for distribution, capital gains will be offset against available net capital losses, if any, carried forward from previous fiscal periods.
All such distributions will be automatically reinvested, at the election of Participating Insurance Companies, in shares of the Fund issuing the distribution at the net asset value determined on the reinvestment date.
AIM V.I. Money Market Fund declares net investment income dividends daily and pays net investment income dividends monthly and declares and pays annually any capital gain distributions. The Fund does not expect to realize any long-term capital gains and losses. The Fund may distribute net realized short-term gain, if any, more frequently.
It is each Fund's intention to distribute substantially all of its net investment income and realized net capital gain to separate accounts of participating life insurance companies. At the election of participating life insurance companies, dividends and distributions will be reinvested at the net asset value per share determined on the ex-dividend date.
Should the Trust incur or anticipate any unusual expense, loss or depreciation, which would adversely affect the net asset value per share of AIM V.I. Money Market Fund or the net income per share of a class of the Fund for a particular period, the Board would at that time consider whether to
adhere to the present dividend policy described above or to revise it in light of then prevailing circumstances. For example, if the net asset value per share of AIM V.I. Money Market Fund was reduced, or was anticipated to be reduced, below $1.00, the Board might suspend further dividend payments on shares of the Fund until the net asset value returns to $1.00. Thus, such expense, loss or depreciation might result in a shareholder receiving no dividends for the period during which it held shares of the Fund and/or its receiving upon redemption a price per share lower than that which it paid.
TAX MATTERS
The following is only a summary of certain additional tax considerations generally affecting the Funds and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of each Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning.
Holders of Contracts under which assets are invested in the Funds should refer to the prospectus for the Contracts for information regarding the tax aspects of ownership of such Contracts.
Each series of shares of each Fund is treated as a separate association taxable as a corporation. Each Fund intends to qualify under the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated investment company ("RIC") for each taxable year. As a RIC, a Fund will not be subject to federal income tax to the extent it distributes to its shareholders its investment company taxable income and net capital gains as discussed below.
Because each Fund intends to qualify under the Code as a RIC for each taxable year, each Fund must, among other things, meet the following requirements: (A) Each Fund must generally derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities, foreign currencies, or other income derived with respect to its business of investing in such stock, securities or currencies and net income derived from certain publicly traded partnerships; and (B) Each Fund must satisfy an asset diversification test (the "Asset Diversification Test").
The Asset Diversification Test requires that at the close of each quarter of each Fund's taxable year, at least 50% of the value of the Fund's assets must consist of cash and cash items, U.S. Government securities, securities of other RICs, and securities of other issuers, as to which the Fund has not invested more than 5% of the value of the Fund's total assets in securities of such issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of such issuer, and no more than 25% of the value of its total assets may be invested in the securities of any one issuer (other than U.S. Government securities and securities of other regulated investment companies), or of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses, or, collectively, in the securities of certain publicly traded partnerships.
For purposes of the Asset Diversification Test, the IRS has ruled that the issuer of a purchased listed call option on stock is the issuer of the stock underlying the option. The IRS has also informally ruled that, in general, the issuers of purchased or written call and put options on securities, of long and short positions on futures contracts on securities and of options on such futures contracts are the issuers of the securities underlying such financial instruments where the instruments are traded on an exchange.
Where the writer of a listed call option owns the underlying securities, the IRS has ruled that the Asset Diversification Test will be applied solely to such securities and not to the value of the option itself. With respect to options on securities indexes, futures contracts on securities indexes and options on such futures contracts, the IRS has informally ruled that the issuers of such options and futures contracts are the separate entities whose securities are listed on the index, in proportion to the weighing of securities in the computation of the index. It is unclear under present law who should be treated as the issuer of forward foreign currency exchange contracts, of options on foreign currencies, or of foreign currency futures and related options. It has been suggested that the issuer in each case may be the foreign central bank or the foreign government backing the particular currency. Due to this uncertainty and
because the Funds may not rely on informal rulings of the IRS, the Funds may find it necessary to seek a ruling from the IRS as to the application of the Asset Diversification Test to certain of the foregoing types of financial instruments or to limit its holdings of some or all such instruments in order to stay within the limits of such test.
Under an IRS revenue procedure, a Fund may treat its position as lender under a repurchase agreement as a U.S. Government security for purposes of the Asset Diversification Test where the repurchase agreement is fully collateralized (under applicable SEC standards) with securities that constitute U.S. Government securities.
Each Fund intends to comply with the diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on each Fund by the 1940 Act and Subchapter M of the Code, place certain
limitations on (i) the assets of the insurance company separate accounts that
may be invested in securities of a single issuer and (ii) eligible investors.
Because Section 817(h) and those regulations treat the assets of each Fund as
assets of the corresponding division of the insurance company separate accounts,
each Fund intends to comply with these diversification requirements.
Specifically, the regulations provide that, except as permitted by the "safe
harbor" described below, as of the end of each calendar quarter or within 30
days thereafter no more than 55% of a Fund's total assets may be represented by
any one investment, no more than 70% by any two investments, no more than 80% by
any three investments and no more than 90% by any four investments. For this
purpose, all securities of the same issuer are considered a single investment,
and while each U.S. Government agency and instrumentality is considered a
separate issuer, a particular foreign government and its agencies,
instrumentalities and political subdivisions all will be considered the same
issuer. Section 817(h) provides, as a safe harbor, that a separate account will
be treated as being adequately diversified if the Asset Diversification is
satisfied and no more than 55% of the value of the account's total assets are
cash and cash items (including receivables), government securities and
securities of other RICs. The regulations also provide that a Fund's
shareholders are limited, generally, to life insurance company separate
accounts, general accounts of the same life insurance company, an investment
adviser or affiliate in connection with the creation or management of a Fund or
the trustee of a qualified pension plan. Failure of a Fund to satisfy the
Section 817(h) requirements would result in taxation of and treatment of the
Contract holders investing in a corresponding insurance company division other
than as described in the applicable prospectuses of the various insurance
company separate accounts.
As a RIC, each Fund will not be subject to federal income tax on its income and gains distributed to shareholders if it distributes at least (i) 90% of its investment company taxable income for the taxable year; and (ii) 90% of the excess of its tax-exempt interest income under Code Section 103(a) over its deductions disallowed under Code Sections 265 and 171(a)(2) (the "Distribution Requirement"). Distributions by a Fund made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year, will be considered distributions of income and gain of the taxable year and can therefore satisfy the Distribution Requirement.
The Code imposes a nondeductible 4% excise tax on a RIC that fails to distribute during each calendar year the sum of 98% of its ordinary income for the calendar year, plus 98% of its capital gain net income for the 12-month period ending on October 31 of the calendar year. The amount which must be distributed is increased by undistributed income and gains from prior years and decreased by certain distributions in prior years. In any calendar year in which the investment made by AIM and its affiliates in a Fund does not exceed $250,000, the Fund will qualify for an exemption from the excise tax regardless of whether it has satisfied the foregoing distribution requirements. Funds that do not qualify for this exemption intend to make sufficient distributions to avoid imposition of the excise tax.
The holding of the foreign currencies and investments by a Fund in certain "passive foreign investment companies" may be limited in order to avoid imposition of a tax on such Fund.
Each Fund investing in foreign securities may be subject to foreign withholding taxes on income from its investments. In any year in which more than 50% in value of a Fund's total assets at the close of
the taxable year consists of securities of foreign corporations, the Fund may elect to treat any foreign taxes paid by it as if they had been paid by its shareholders. The insurance company segregated asset accounts holding Fund shares should consider the impact of this election.
SWAP AGREEMENTS AND CREDIT DEFAULT SWAP AGREEMENTS. Each Fund, other than AIM V.I. Government Securities Fund and AIM V.I. Money Market Fund, may enter into swap agreements. AIM V.I. Basic Balanced Fund, AIM V.I. Diversified Income Fund and AIM V.I. High Yield Fund may also enter into credit default swap agreements as permitted by each Fund's prospectus. Certain requirements that must be met under the Code in order for a Fund to qualify as a RIC may limit the extent to which a Fund will be able to engage in certain types of swap agreements and credit default swap agreements. Moreover, the rules governing the tax aspects of certain types of these agreements are in a developing stage and are not entirely clear in certain respects. Accordingly, while a Fund intends to account for such transactions in a manner deemed to be appropriate, the IRS might not accept such treatment. If it did not, the status of a Fund as a regulated investment company might be affected. Each Fund intends to monitor developments in this area.
DISTRIBUTION OF SECURITIES
DISTRIBUTION PLAN
The Trust has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Series II shares (the "Plan"). Each Fund, pursuant to the Plan, pays AIM Distributors compensation at the annual rate of 0.25% of average daily net assets of Series II shares.
The Plan compensates AIM Distributors for the purpose of financing any activity which is primarily intended to result in the sale of Series II shares of the Funds. Distribution activities appropriate for financing under the Plan include, but are not limited to, the following: expenses relating to the development, preparation, printing and distribution of advertisements and sales literature and other promotional materials describing and/or relating to the Fund; expenses of training sales personnel regarding the Fund; expenses of organizing and conducting seminars and sales meetings designed to promote the distribution of the Series II shares; compensation to financial intermediaries and broker-dealers to pay or reimburse them for their services or expenses in connection with the distribution of the Series II shares to fund variable annuity and variable insurance contracts investing directly in the Series II shares; compensation to sales personnel in connection with the allocation of cash values and premium of variable annuity and variable insurance contracts to investments in the Series II shares; compensation to and expenses of employees of AIM Distributors, including overhead and telephone expenses, who engage in the distribution of the Series II shares; and the costs of administering the Plan.
Amounts payable by a Fund under the Plan need not be directly related to the expenses actually incurred by AIM Distributors on behalf of each Fund. The Plan does not obligate the Funds to reimburse AIM Distributors for the actual expenses AIM Distributors may incur in fulfilling its obligations under the Plan. Thus, even if AIM Distributors' actual expenses exceed the fee payable to AIM Distributors at any given time, the Funds will not be obligated to pay more than that fee. If AIM Distributors' expenses are less than the fee it receives, AIM Distributors will retain the full amount of the fee. No provision of this Distribution Plan shall be interpreted to prohibit any payments by the Trust during periods when the Trust has suspended or otherwise limited sales. Payments pursuant to the Plan are subject to any applicable limitations imposed by rules of the National Association of Securities Dealers, Inc. ("NASD").
AIM Distributors may from time to time waive or reduce any portion of its 12b-1 fee for Series II shares. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM Distributors will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM Distributors and the Fund.
AIM Distributors has entered into agreements with Participating Insurance Companies and other financial intermediaries to provide the distribution services in furtherance of the Plan. Currently, AIM Distributors pays Participating Insurance Companies and others at the annual rate of 0.25% of average daily net assets of Series II shares attributable to the Contracts issued by the Participating Insurance Company as compensation for providing such distribution services. AIM Distributors does not act as principal, but rather as agent for the Funds, in making distribution service payments. These payments are an obligation of the Funds and not of AIM Distributors.
See Appendix M for a list of the amounts paid by Series II shares to AIM Distributors pursuant to the Plan for the year, or period, ended December 31, 2006 and Appendix N for an estimate by category of the allocation of actual fees paid by Series II shares of each Fund pursuant to its respective distribution plan for the year or period ended December 31,2006.
As required by Rule 12b-1, the Plan approved by the Board, including a majority of the trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related to the Plan (the "Rule 12b-1 Trustees"). In approving the Plans in accordance with the requirements of Rule 12b-1, the Trustees considered various factors and determined that there is a reasonable likelihood that the Plan would benefit each Series II class of the Funds and its respective shareholders by, among other things, providing broker-dealers with an incentive to sell additional shares of the Trust, thereby helping to satisfy the Trust's liquidity needs and helping to increase the Trust's investment flexibility.
Unless terminated earlier in accordance with its terms, the Plan continues from year to year as long as such continuance is specifically approved, in person, at least annually by the Board, including a majority of the Rule 12b-1 Trustees. The Plan requires AIM Distributors to provide the Board at least quarterly with a written report of the amounts expended pursuant to the Distribution Plan and the purposes for which such expenditures were made. The Board reviews these reports in connection with their decisions with respect to the Plan. A Plan may be terminated as to any Fund or Series II shares by the vote of a majority of the Rule 12b-1 Trustees or, with respect to the Series II shares, by the vote of a majority of the outstanding voting securities of the Series II shares.
Any change in the Plan that would increase materially the distribution expenses paid by the Series II shares requires shareholder approval. No material amendment to the Plan may be made unless approved by the affirmative vote of a majority of the Rule 12b-1 Trustees cast in person at a meeting called for the purpose of voting upon such amendment.
DISTRIBUTOR
The Trust has entered into a master distribution agreement relating to the Funds (the "Distribution Agreement") with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which AIM Distributors acts as the distributor of shares of the Funds. The address of AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees and officers of the Trust are affiliated with AIM Distributors. See "Management of the Trust."
The Distribution Agreement provides AIM Distributors with the exclusive right to distribute shares of the Funds on a continuous basis.
The Trust (on behalf of any class of any Fund) or AIM Distributors may terminate the Distribution Agreement on sixty (60) days' written notice without penalty. The Distribution Agreement will terminate automatically in the event of its assignment.
FINANCIAL STATEMENTS
Each Fund's Financial Statements for the period ended December 31, 2006, including the Financial Highlights and the report of the independent registered public accounting firm pertaining thereto,
are incorporated by reference into this Statement of Additional Information ("SAI") from such Fund's Annual Report to shareholders contained in the Trust's Form N-CSR filed on February 23, 2007.
The portions of such Annual Reports that are not specifically listed above are not incorporated by reference into this SAI and are not a part of this Registration Statement.
PENDING LITIGATION
Regulatory Action Alleging Market Timing
On August 30, 2005, the West Virginia Office of the State Auditor - Securities Commission ("WVASC") issued a Summary Order to Cease and Desist and Notice of Right to Hearing to AIM and ADI (Order No. 05-1318). The WVASC makes findings of fact that AIM and ADI entered into certain arrangements permitting market timing of the AIM Funds and failed to disclose these arrangements in the prospectuses for such Funds, and conclusions of law to the effect that AIM and ADI violated the West Virginia securities laws. The WVASC orders AIM and ADI to cease any further violations and seeks to impose monetary sanctions, including restitution to affected investors, disgorgement of fees, reimbursement of investigatory, administrative and legal costs and an "administrative assessment," to be determined by the Commissioner. Initial research indicates that these damages could be limited or capped by statute. By agreement with the commissioner of securities, AIM's time to respond to that order has been indefinitely suspended.
Private Civil Actions Alleging Market Timing
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, certain AIM Funds, INVESCO Funds Group, Inc., the former investment advisor to certain AIM Funds ("IFG"), AIM, AIM Management, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and AIM, certain related entities, certain of their current and former officers and/or certain unrelated third parties) based on allegations of improper market timing and related activity in the AIM Funds. These 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 ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated in both Federal and state courts and seek such remedies as compensatory damages; restitution; injunctive relief; disgorgement of management fees; imposition of a constructive trust; removal of certain directors and/or employees; various corrective measures under ERISA; rescission of certain Funds' advisory agreements; interest; and attorneys' and experts' fees. A list identifying such lawsuits (excluding those lawsuits that have been recently transferred as mentioned herein) that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived is set forth in Appendix O-1.
All lawsuits based on allegations of market timing, late trading, and related issues have been transferred to the United States District Court for the District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs in these lawsuits consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties. A list identifying the amended complaints in the MDL Court is included in Appendix P-1. Plaintiffs in two of the underlying lawsuits transferred to the MDL Court continue to seek remand of their action to state court. These lawsuits are identified in Appendix O-1.
Private Civil Actions Alleging Improper Use of Fair Value Pricing
Multiple civil class action lawsuits have been filed against various
parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)
alleging that certain AIM Funds inadequately employed fair value pricing. These
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These
lawsuits have been filed in both
Federal and state courts and seek such remedies as compensatory and punitive damages; interest; and attorneys' fees and costs. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived is set forth in Appendix O-2.
Private Civil Actions Alleging Improper Mutual Fund Sales Practices and Directed-Brokerage Arrangements
Multiple civil lawsuits, including purported class action and shareholder derivative suits, have been filed against various parties (including, depending on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") and/or certain of the trustees of the AIM Funds) alleging that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively promote the sale of the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits allege a variety of theories of recovery, including but not limited to: (i) violation of various provisions of the Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a breach of fiduciary duty. These lawsuits have been filed in Federal courts and seek such remedies as compensatory and punitive damages; rescission of certain Funds' advisory agreements and distribution plans and recovery of all fees paid; an accounting of all fund-related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees. A list identifying such lawsuits that have been served on IFG, AIM, the AIM Funds or related entities, or for which service of process has been waived is set forth in Appendix O-3.
APPENDIX A
RATINGS OF DEBT SECURITIES
The following is a description of the factors underlying the debt ratings of Moody's, S&P and Fitch:
MOODY'S LONG-TERM DEBT RATINGS
Moody's corporate ratings areas follows:
AAA: Bonds and preferred stock which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt-edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
AA: Bonds and preferred stock which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. These are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk in Aa rated bonds appear somewhat larger than those securities rated Aaa.
A: Bonds and preferred stock which are rated A possess many favorable investment attributes and are to be considered as upper-medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
BAA: Bonds and preferred stock which are rated Baa are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
BA: Bonds and preferred stock which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B: Bonds and preferred stock which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
CAA: Bonds and preferred stock which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest.
CA: Bonds and preferred stock which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds and preferred stock which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM
Moody's short-term ratings are opinions of the ability of issuers to honor senior financial obligations and contracts. Such obligations generally have an original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following designations, all judged to be investment grade, to indicate the relative repayment ability of rated issuers.
PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior
ability for repayment of senior short-term obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay senior short-term debt obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of senior short-term debt obligations. The effect of industry characteristics and market compositions may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating categories.
Note: In addition, in certain countries the prime rating may be modified by the issuer's or guarantor's senior unsecured long-term debt rating.
Moody's municipal ratings are as follows:
MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS
Municipal Ratings are opinions of the investment quality of issuers and issues in the US municipal and tax-exempt markets. As such, these ratings incorporate Moody's assessment of the default probability and loss severity of these issuers and issues.
Municipal Ratings are based upon the analysis of four primary factors relating to municipal finance: economy, debt, finances, and administration/management strategies. Each of the factors is evaluated individually and for its effect on the other factors in the context of the municipality's ability to repay its debt.
AAA: Issuers or issues rated Aaa demonstrate the strongest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
AA: Issuers or issues rated Aa demonstrate very strong creditworthiness relative to other US municipal or tax-exempt issuers or issues.
A: Issuers or issues rated A present above-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
BAA: Issuers or issues rated Baa represent average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
BA: Issuers or issues rated Ba demonstrate below-average creditworthiness relative to other US municipal or tax-exempt issuers or issues.
B: Issuers or issues rated B demonstrate weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
CAA: Issuers or issues rated Caa demonstrate very weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
CA: Issuers or issues rated Ca demonstrate extremely weak creditworthiness relative to other US municipal or tax-exempt issuers or issues.
C: Issuers or issues rated C demonstrate the weakest creditworthiness relative to other US municipal or tax-exempt issuers or issues.
Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each generic rating classification from Aa to Caa. The modifier 1 indicates that the issue ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic category.
MOODY'S MIG/VMIG US SHORT-TERM RATINGS
In municipal debt issuance, there are three rating categories for short-term obligations that are considered investment grade. These ratings are designated as Moody's Investment Grade (MIG) and are divided into three levels - MIG 1 through MIG 3.
In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade.
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned. The first element represents Moody's evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moody's evaluation of the degree of risk associated with the demand feature, using the MIG rating scale.
The short-term rating assigned to the demand feature of VRDOs is designated as VMIG. When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.
MIG ratings expire at note maturity. By contrast, VMIG rating expirations will be a function of each issue's specific structural or credit features.
Gradations of investment quality are indicated by rating symbols, with each symbol representing a group in which the quality characteristics are broadly the same.
MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support or demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of protection are ample although not as large as in the preceding group.
MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well established.
SG: This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS
Issue credit ratings are based in varying degrees, on the following considerations: likelihood of payment - capacity and willingness of the obligor to meet its financial commitment on an obligation in accordance with the terms of the obligation; nature of and provisions of the obligation; and protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights.
The issue ratings definitions are expressed in terms of default risk. As such, they pertain to senior obligations of an entity. Junior obligations are typically rated lower than senior obligations, to reflect the lower priority in bankruptcy, as noted above.
S&P describes its ratings for corporate and municipal bonds as follows:
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree.
A: Debt rated A has a strong capacity to meet its financial commitments although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to meet its financial commitment on the obligation.
BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant speculative characteristics with respect to capacity to pay interest and repay principal. BB indicates the least degree of speculation and C the highest. While such debt will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
NR: Not Rated.
S&P DUAL RATINGS
S&P assigns "dual" ratings to all debt issues that have a put option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term debt rating symbols are used for bonds to denote the long-term maturity and the commercial paper rating symbols for the put option (for example,
AAA/A-1+). With short-term demand debt, the note rating symbols are used with the commercial paper rating symbols (for example, SP-1+/A-1+).
S&P COMMERCIAL PAPER RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days.
These categories are as follows:
A-1: This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.
A-2: Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated A-1.
A-3: Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
B: Issues rated 'B' are regarded as having only speculative capacity for timely payment.
C: This rating is assigned to short-term debt obligations with a doubtful capacity for payment.
D: Debt rated 'D' is in payment default. The 'D' rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless Standard & Poor's believes such payments will be made during such grace period.
S&P SHORT-TERM MUNICIPAL RATINGS
An S&P note rating reflect the liquidity factors and market-access risks unique to notes. Notes due in three years or less will likely receive a note rating. Notes maturing beyond three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note); and source of payment (the more dependant the issue is on the market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
FITCH LONG-TERM CREDIT RATINGS
Fitch Ratings provides an opinion on the ability of an entity or of a securities issue to meet financial commitments, such as interest, preferred dividends, or repayment of principal, on a timely basis. These credit ratings apply to a variety of entities and issues, including but not limited to sovereigns,
governments, structured financings, and corporations; debt, preferred/preference stock, bank loans, and counterparties; as well as the financial strength of insurance companies and financial guarantors.
Credit ratings are used by investors as indications of the likelihood
of getting their money back in accordance with the terms on which they invested.
Thus, the use of credit ratings defines their function: "investment grade"
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -
'F3') indicate a relatively low probability of default, while those in the
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- 'D'; Short-term 'B' - 'D') either signal a higher probability of default or
that a default has already occurred. Ratings imply no specific prediction of
default probability. However, for example, it is relevant to note that over the
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and
for 'B' rated bonds, 3.0%.
Fitch ratings do not reflect any credit enhancement that may be provided by insurance policies or financial guaranties unless otherwise indicated.
Entities or issues carrying the same rating are of similar but not necessarily identical credit quality since the rating categories do not fully reflect small differences in the degrees of credit risk.
Fitch credit and research are not recommendations to buy, sell or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature of taxability of payments of any security.
The ratings are based on information obtained from issuers, other obligors, underwriters, their experts, and other sources Fitch Ratings believes to be reliable. Fitch Ratings does not audit or verify the truth or accuracy of such information. Ratings may be changed or withdrawn as a result of changes in, or the unavailability of, information or for other reasons.
Our program ratings relate only to standard issues made under the
program concerned; it should not be assumed that these ratings apply to every
issue made under the program. In particular, in the case of non-standard issues,
i.e., those that are linked to the credit of a third party or linked to the
performance of an index, ratings of these issues may deviate from the applicable
program rating.
Credit ratings do not directly address any risk other than credit risk. In particular, these ratings do not deal with the risk of loss due to changes in market interest rates and other market considerations.
AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong capacity for timely payment of financial commitments, which is unlikely to be affected by foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The obligor has a very strong capacity for timely payment of financial commitments which is not significantly vulnerable to foreseeable events.
A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of good credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances are more likely to impair this capacity.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in the "AAA" category.
NR: Indicates that Fitch does not rate the specific issue.
WITHDRAWN: A rating will be withdrawn when an issue matures or is called or refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of information available to be inadequate for ratings purposes.
RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is a reasonable possibility of a rating change and the likely direction of such change. These are designated as "Positive," indicating a potential upgrade, "Negative," for potential downgrade, or "Evolving," if ratings may be raised, lowered or maintained. RatingWatch is typically resolved over a relatively short period.
FITCH SPECULATIVE GRADE BOND RATINGS
BB: Bonds are considered speculative. There is a possibility of credit risk developing, particularly as the result of adverse economic changes over time. However, business and financial alternatives may be available to allow financial commitments to be met.
B: Bonds are considered highly speculative. Significant credit risk is present but a limited margin of safety remains. While bonds in this class are currently meeting financial commitments, the capacity for continued payment is contingent upon a sustained, favorable business and economic environment.
CCC: Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic developments.
CC: Default of some kind appears probable.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such bonds are extremely speculative and are valued on the basis of their prospects for achieving partial or full recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery on these bonds, and "D" represents the lowest potential for recovery.
PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to indicate the relative position of a credit within the rating category. Plus and minus signs, however, are not used in categories below CCC.
FITCH SHORT-TERM CREDIT RATINGS
The following ratings scale applies to foreign currency and local currency ratings. A Short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated "F-1+."
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as in the case of the higher ratings.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics suggesting that the degree of assurance for timely payment is adequate, however, near-term adverse changes could result in a reduction to non-investment grade.
B: Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.
C: High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
D: Default. Issues assigned this rating are in actual or imminent payment default.
APPENDIX B
PERSONS TO WHOM AIM PROVIDES
NON-PUBLIC PORTFOLIO HOLDINGS ON AN ONGOING BASIS
(AS OF APRIL 16, 2007)
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
ABN AMRO Financial Services, Inc. Broker (for certain AIM funds)
A.G. Edwards & Sons, Inc. Broker (for certain AIM funds)
AIM Investment Services, Inc. Transfer Agent
Anglemyer & Co. Analyst (for certain AIM funds)
Ballard Spahr Andrews & Ingersoll, LLP Legal Counsel
BB&T Capital Markets Broker (for certain AIM funds)
Bear, Stearns Pricing Direct Pricing Vendor (for certain AIM funds)
Belle Haven Investments L.P. Broker (for certain AIM funds)
Bloomberg System Provider (for certain AIM funds)
BOSC, Inc. Broker (for certain AIM funds)
BOWNE & Co. Financial Printer
Brown Brothers Harriman & Co. Securities Lender (for certain AIM funds)
Cabrera Capital Markets Broker (for certain AIM funds)
CENVEO Financial Printer
Citigroup Global Markets Broker (for certain AIM funds)
Classic Printers Inc. Financial Printer
Coastal Securities, LP Broker (for certain AIM funds)
Color Dynamics Financial Printer
D.A. Davidson (formerly Kirkpatrick,
Pettis, Smith, Pollian, Inc.) Broker (for certain AIM funds)
Duncan-Williams, Inc. Broker (for certain AIM funds)
Earth Color Houston Financial Printer
EMCO Press Financial Printer
Empirical Research Partners Analyst (for certain AIM funds)
Fidelity Investments Broker (for certain AIM funds)
First Albany Capital Broker (for certain AIM funds)
First Tryon Securities Broker (for certain AIM funds)
F T Interactive Data Corporation Pricing Vendor
GainsKeeper Software Provider (for certain AIM funds)
GCom2 Solutions Software Provider (for certain AIM funds)
George K. Baum & Company Broker (for certain AIM funds)
Glass, Lewis & Co. System Provider (for certain AIM funds)
Global Trend Alert Analyst (for certain AIM funds)
Grover Printing Financial Printer
Gulfstream Graphics Corp. Financial Printer
Hattier, Sanford & Reynoir Broker (for certain AIM funds)
Howe Barnes Investments, Inc. Broker (for certain AIM funds)
Hutchinson, Shockey, Erley & Co. Broker (for certain AIM funds)
iMoneyNet Rating & Ranking Agency (for certain AIM funds)
Infinity Web, Inc. Financial Printer
Initram Data, Inc. Pricing Vendor
Institutional Shareholder Services, Inc. Proxy Voting Service (for certain AIM funds)
INVESCO Senior Secured Management System Provider (for certain AIM funds)
ITG, Inc. Pricing Vendor (for certain AIM funds)
|
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
J.P. Morgan Securities, Inc. Analyst (for certain AIM funds)
JPMorgan Securities Inc.\Citigroup Global
Markets Inc.\JPMorgan Chase Bank, N.A. Lender (for certain AIM funds)
John Hancock Investment Management
Services, LLC Sub-advisor (for certain sub-advised accounts)
Jorden Burt LLP Special Insurance Counsel
Kevin Dann & Partners Analyst (for certain AIM funds)
Kramer, Levin Naftalis & Frankel LLP Legal Counsel
Legg Mason Wood Walker Broker (for certain AIM funds)
Lehman Brothers, Inc. Broker (for certain AIM funds)
Lipper, Inc. Rating & Ranking Agency (for certain AIM funds)
Loan Pricing Corporation Pricing Service (for certain AIM funds)
Loop Capital Markets Broker (for certain AIM funds)
MarkIt Valuations Ltd. Pricing Vendor (for certain AIM funds)
McDonald Investments Inc. Broker (for certain AIM funds)
Merrill Corporation Financial Printer
Mesirow Financial, Inc. Broker (for certain AIM funds)
Moody's Investors Service Rating & Ranking Agency (for certain AIM funds)
Moore Wallace North America Financial Printer
Morgan Keegan & Company, Inc. Broker (for certain AIM funds)
Morrison Foerster LLP Legal Counsel
M.R. Beal & Company Broker (for certain AIM funds)
MS Securities Services, Inc. and Morgan
Stanley & Co. Incorporated Securities Lender (for certain AIM funds)
Muzea Insider Consulting Services, LLC Analyst (for certain AIM funds)
Noah Financial, LLC Analyst (for certain AIM funds)
OMGEO/Oasys Trading System
Page International Financial Printer
Piper Jaffray Analyst (for certain AIM funds)
Piper Jaffray &Co. Broker (for certain AIM funds)
PricewaterhouseCoopers LLP Independent Registered Public Accounting Firm
(for all AIM funds)
Printing Arts of Houston Financial Printer
Protective Securities Broker (for certain AIM funds)
Ramirez & Co., Inc. Broker (for certain AIM funds)
Raymond James & Associates, Inc. Broker (for certain AIM funds)
RBC Capital Markets Corporation Analyst (for certain AIM funds)
RBC Dain Rauscher Incorporated Broker (for certain AIM funds)
Reuters America Inc. Pricing Service (for certain AIM funds)
Robert W. Baird & Co. Incorporated Broker (for certain AIM funds)
RR Donnelley Financial Financial Printer
Ryan Beck & Co. Broker (for certain AIM funds)
Salomon Smith Barney Broker (for certain AIM funds)
SBK Brooks Investment Corp. Broker (for certain AIM funds)
Seattle Northwest Securities Corporation Broker (for certain AIM funds)
Siebert Brandford Shank & Co., L.L.C. Broker (for certain AIM funds)
Signature Press Financial Printer
Simon Printing Company Financial Printer
Southwest Precision Printers, Inc. Financial Printer
Standard and Poor's - a Division of
McGraw-Hill Rating and Ranking Agency (for certain AIM funds)
Standard and Poor's/Standard and Poor's
Securities Evaluations, Inc. Pricing Service (for certain AIM funds)
State Street Bank and Trust Company Custodian (for certain AIM funds); Lender (for
certain AIM Funds); Securities Lender (for
certain AIM funds) and System Provider (for
|
SERVICE PROVIDER DISCLOSURE CATEGORY
---------------- -------------------
certain AIM funds)
Sterne, Agee & Leach, Inc. Broker (for certain AIM funds)
Stifel, Nicholaus & Company, Incorporated Broker (for certain AIM funds)
The Bank of New York Custodian (for certain AIM funds)
The MacGregor Group, Inc. Software Provider
Thomson Information Services Incorporated Software Provider
UBS Financial Services, Inc. Broker (for certain AIM funds)
VCI Group Inc. Financial Printer
Wachovia National Bank, N.A. Broker (for certain AIM funds)
Western Lithograph Financial Printer
Wiley Bros. Aintree Capital L.L.C. Broker (for certain AIM funds)
William Blair & Co. Broker (for certain AIM funds)
XSP, LLC\Solutions Plus, Inc. Software Provider
|
APPENDIX C
TRUSTEES AND OFFICERS
As of March 31, 2007
The address of each trustee and officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. Each trustee oversees 110 portfolios in the AIM Funds complex. The trustees serve for the life of the Trust, subject to their earlier death, incapacitation, resignation, retirement or removal as more specifically provided in the Trust's organizational documents. Column two below includes length of time served with predecessor entities, if any.
TRUSTEE OTHER
AND/OR TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND OFFICER DIRECTORSHIPS(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE/DIRECTOR
------------------------------- ------- ------------------------------------------------------ ------------------------
INTERESTED PERSONS
Martin L. Flanagan(1) - 1960 2007 Director, Chief Executive Officer and President, None
Trustee AMVESCAP PLC (parent of AIM and a global investment
management firm); Chairman, A I M Advisors, Inc.
(registered investment advisor); and Director,
Chairman, Chief Executive Officer and President, AVZ
Inc. (holding company); INVESCO North American
Holdings, Inc. (holding company); Chairman and
President, AMVESCAP Group Services, Inc. (service
provider); Trustee, The AIM Family of
Funds- -Registered Trademark--; Chairman, Investment
Company Institute; and Member of Executive Board, SMU
Cox School of Business
Formerly: President, Co-Chief Executive Officer,
Co-President, Chief Operating Officer and Chief
Financial Officer, Franklin Resources, Inc. (global
investment management organization)
Robert H. Graham(2) - 1946 1993 Director and Chairman, A I M Management Group Inc. None
Trustee and Vice Chair (financial services holding company); Director and
Vice Chairman, AMVESCAP PLC; Chairman, AMVESCAP PLC -
AIM Division; and Trustee and Vice Chair, The AIM
Family of Funds --Registered Trademark--
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); Chief Executive Officer, AMVESCAP PLC -
Managed Products; and President and Principal
Executive Officer, The AIM Family of Funds--Registered
Trademark--
|
(2) Mr. Graham is considered an interested person of the Trust because he is a director of AMVESCAP PLC, parent of the advisor to the Trust.
TRUSTEE OTHER
AND/OR TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND OFFICER DIRECTORSHIPS(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE/DIRECTOR
------------------------------- ------- ------------------------------------------------------ ------------------------
Philip A. Taylor(3) - 1954 2006 Director, Chief Executive Officer and President, None
Trustee, President and Principal A I M Management Group Inc., AIM Mutual Fund Dealer
Executive Officer Inc. (registered broker dealer), A I M Advisors,
Inc., A I M Capital Management, Inc., AIM Funds
Management Inc. d/b/a AMVESCAP Enterprise Services
(registered investment advisor and registered
transfer agent) and 1371 Preferred Inc. (holding
company), Director and President, A I M Advisors,
Inc., INVESCO Funds Group, Inc. (registered
investment advisor and registered transfer agent) and
AIM GP Canada Inc. (general partner for limited
partnership); Director, A I M Distributors, Inc.;
Director and Chairman, AIM Investment Services, Inc.,
Fund Management Company and INVESCO Distributors,
Inc. (registered broker dealer); Director, President
and Chairman, AVZ Callco Inc. (holding company),
AMVESCAP Inc. (holding company) and AIM Canada
Holdings Inc. (holding company); Director and Chief
Executive Officer, AIM Trimark Corporate Class Inc.
(formerly AIM Trimark Global Fund Inc.) (corporate
mutual fund company) and AIM Trimark Canada Fund Inc.
(corporate mutual fund company); Trustee, President
and Principal Executive Officer, The AIM Family of
Funds--Registered Trademark-- (other than AIM
Treasurer's Series Trust, Short-Term Investments Trust
and Tax-Free Investments Trust); Trustee and Executive
Vice President, The AIM Family of Funds--Registered
Trademark-- (AIM Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free Investments Trust only)
; and Manager, Powershares Capital Management LLC
Formerly: President and Principal Executive Officer,
The AIM Family of Funds --Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust
and Tax-Free Investments Trust only); Chairman, AIM
Canada Holdings, Inc.; President, AIM Trimark Global
Fund Inc. and AIM Trimark Canada Fund Inc.; and
Director, Trimark Trust (federally regulated Canadian
trust company)
INDEPENDENT TRUSTEES
Bruce L. Crockett - 1944 1993 Chairman, Crockett Technology Associates (technology ACE Limited (insurance
Trustee and Chair consulting company) company); and Captaris,
Inc. (unified messaging
provider)
Bob R. Baker - 1936 2004 Retired None
Trustee
Frank S. Bayley - 1939 2001 Retired Badgley Funds, Inc.
Trustee Formerly: Partner, law firm of Baker & McKenzie (registered investment
company) (2 portfolios)
|
TRUSTEE OTHER
AND/OR TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND OFFICER DIRECTORSHIPS(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE/DIRECTOR
------------------------------- ------- ------------------------------------------------------ ------------------------
James T. Bunch - 1942 2004 Founder, Green, Manning & Bunch Ltd. (investment None
Trustee banking firm); and Director, Policy Studies, Inc. and
Van Gilder Insurance Corporation
Albert R. Dowden - 1941 2000 Director of a number of public and private business None
Trustee corporations, including the Boss Group, Ltd. (private
investment and management), Reich & Tang Funds
(Chairman) (registered investment company) (7
portfolios), Daily Income Fund (4 portfolios),
California Daily Tax Free Income Fund, Inc.,
Connecticut Daily Tax Free Income Fund, Inc. and New
Jersey Daily Municipal Income Fund, Inc., Annuity and
Life Re (Holdings), Ltd. (insurance company),
CompuDyne Corporation (provider of products and
services to the public security market), and
Homeowners of America Holding Corporation (property
casualty company)
Formerly: Director, President and Chief Executive
Officer, Volvo Group North America, Inc.; Senior Vice
President, AB Volvo; Director of various affiliated
Volvo companies; and Director, Magellan Insurance
Company
Jack M. Fields - 1952 1997 Chief Executive Officer, Twenty First Century Group, Administaff
Trustee Inc. (government affairs company); Owner and Chief
Executive Officer, Dos Angelos Ranch, L.P. (cattle,
hunting, corporate entertainment); and Discovery
Global Education Fund (non-profit)
Formerly: Chief Executive Officer, Texana Timber LP
(sustainable forestry company)
Carl Frischling - 1937 1993 Partner, law firm of Kramer Levin Naftalis and Director, Reich & Tang
Trustee Frankel LLP Funds (7 portfolios)
Prema Mathai-Davis - 1950 1998 Formerly: Chief Executive Officer, YWCA of the USA None
Trustee
Lewis F. Pennock - 1942 1993 Partner, law firm of Pennock & Cooper None
Trustee
Ruth H. Quigley - 1935 2001 Retired None
Trustee
Larry Soll - 1942 2004 Retired None
Trustee
Raymond Stickel, Jr. - 1944 2005 Retired Director, Mainstay VP
Trustee Formerly: Partner, Deloitte & Touche Series Funds, Inc.
(25 portfolios)
OTHER OFFICERS
Russell C. Burk - 1958 Senior Vice President and Senior Officer, The AIM N/A
Senior Vice President and Senior Family of Funds --Registered Trademark--
Officer
Formerly: Director of Compliance and Assistant
General Counsel, ICON Advisers, Inc.; Financial
Consultant, Merrill Lynch; General Counsel and
Director of Compliance, ALPS Mutual Funds, Inc.
|
TRUSTEE OTHER
AND/OR TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND OFFICER DIRECTORSHIPS(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE/DIRECTOR
------------------------------- ------- ------------------------------------------------------ ------------------------
John M. Zerr - 1962 2006 Director, Senior Vice President, Secretary and N/A
Senior Vice President, Chief General Counsel, A I M Management Group Inc., A I M
Legal Officer and Secretary Advisors, Inc. and A I M Capital Management, Inc.;
Director, Vice President and Secretary, INVESCO
Distributors, Inc.; Vice President and Secretary, AIM
Investment Services, Inc. and Fund Management
Company; Senior Vice President and Secretary, A I M
Distributors, Inc.; Director and Vice President,
INVESCO Funds Group, Inc.; Senior Vice President,
Chief Legal Officer and Secretary, The AIM Family of
Funds --Registered Trademark--; and Manager,
Powershares Capital Management LLC
Formerly: Vice President, A I M Capital Management,
Inc.; Chief Operating Officer, Senior Vice President,
General Counsel and Secretary, Liberty Ridge Capital,
Inc. (an investment adviser); Vice President and
Secretary, PBHG Funds (an investment company); Vice
President and Secretary, PBHG Insurance Series Fund
(an investment company); General Counsel and
Secretary, Pilgrim Baxter Value Investors (an
investment adviser); Chief Operating Officer, General
Counsel and Secretary, Old Mutual Investment Partners
(a broker-dealer); General Counsel and Secretary, Old
Mutual Fund Services (an administrator); General
Counsel and Secretary, Old Mutual Shareholder
Services (a shareholder servicing center); Executive
Vice President, General Counsel and Secretary, Old
Mutual Capital, Inc. (an investment adviser); and
Vice President and Secretary, Old Mutual Advisors
Funds (an investment company)
Lisa O. Brinkley - 1959 2004 Global Compliance Director, AMVESCAP PLC; and Vice N/A
Vice President President, The AIM Family of Funds --Registered
Trademark--
Formerly: Senior Vice President, A I M Management
Group Inc.; Senior Vice President and Chief Compliance
Officer, A I M Advisors, Inc.; Vice President and
Chief Compliance Officer, A I M Capital Management,
Inc. and A I M Distributors, Inc.; Vice President, AIM
Investment Services, Inc. and Fund Management Company;
Senior Vice President and Chief Compliance Officer,
The AIM Family of Funds--Registered Trademark--; and
Senior Vice President and Compliance Director,
Delaware Investments Family of Funds
|
TRUSTEE OTHER
AND/OR TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND OFFICER DIRECTORSHIPS(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE/DIRECTOR
------------------------------- ------- ------------------------------------------------------ ------------------------
Kevin M. Carome - 1956 2003 Senior Vice President and General Counsel, AMVESCAP N/A
Vice President PLC; Director, INVESCO Funds Group, Inc. and Vice
President, The AIM Family of Funds--Registered
Trademark--
Formerly: Director, Senior Vice President, Secretary
and General Counsel, A I M Management Group Inc. and A
I M Advisors, Inc.; Senior Vice President, A I M
Distributors, Inc.; Director, Vice President and
General Counsel, Fund Management Company; Vice
President, A I M Capital Management, Inc. and AIM
Investment Services, Inc.; and Senior Vice President,
Chief Legal Officer and Secretary, The AIM Family of
Funds--Registered Trademark--; Director and Vice
President, INVESCO Distributors, Inc.; Chief Executive
Officer and President, INVESCO Funds Group; Senior
Vice President and General Counsel, Liberty Financial
Companies, Inc.; and Senior Vice President and General
Counsel, Liberty Funds Group, LLC
Sidney M. Dilgren - 1961 2004 Vice President , A I M Advisors, Inc. and A I M N/A
Vice President, Treasurer and Capital Management Inc. and Vice President, Treasurer
Principal Financial Officer and Principal Financial Officer, The AIM Family of
Funds--Registered Trademark--
Formerly: Fund Treasurer, A I M Advisors, Inc.;
Senior Vice President, AIM Investment Services, Inc.
and Vice President, A I M Distributors, Inc.
Karen Dunn Kelley - 1960 1993 Director of Cash Management and Senior Vice N/A
Vice President President, A I M Capital Management, Inc.; Director
and President, Fund Management Company; Vice
President, A I M Advisors, Inc.; Vice President, The
AIM Family of Funds--Registered Trademark-- (other
than AIM Treasurer's Series Trust, Short-Term
Investments Trust and Tax-Free Investments Trust); and
President and Principal Executive Officer, The AIM
Family of Funds--Registered Trademark-- (AIM
Treasurer's Series Trust, Short-Term Investments Trust
and Tax-Free Investments Trust only)
Formerly: Chief Cash Management Officer and Managing
Director, A I M Capital Management, Inc.; Vice
President, A I M Advisors, Inc. and The AIM Family of
Funds--Registered Trademark-- (AIM Treasurer's Series
Trust, Short-Term Investments Trust and Tax-Free
Investments Trust only)
Patrick J.P. Farmer - 1962 2006 Head of North American Retail Investments, Director, N/A
Vice President Chief Investment Officer and Executive Vice President,
AIM Funds Management Inc. d/b/a AIM Trimark
Investments; Senior Vice President and Head of Equity
Investments, A I M Advisors, Inc. and A I M Capital
Management, Inc.; and Vice President, The AIM Family
of Funds--Registered Trademark--
Formerly: Director, Trimark Trust
Stephen M. Johnson - 1961 2006 Chief Investment Officer of INVESCO Fixed Income and N/A
Vice President Vice President, INVESCO Institutional (N.A.), Inc.;
Senior Vice President and Fixed Income Chief
Investment Officer, A I M Advisors, Inc. and A I M
Capital Management, Inc.; and Vice President, The AIM
Family of Funds--Registered Trademark--
|
TRUSTEE OTHER
AND/OR TRUSTEESHIP(S)/
NAME, YEAR OF BIRTH AND OFFICER DIRECTORSHIPS(S)
POSITION(S) HELD WITH THE TRUST SINCE PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS HELD BY TRUSTEE/DIRECTOR
------------------------------- ------- ------------------------------------------------------ ------------------------
Lance A. Rejsek - 1967 2006 Anti-Money Laundering Compliance Officer, A I M N/A
Anti-Money Laundering Compliance Advisors, Inc., A I M Capital Management, Inc., A I M
Officer Distributors, Inc., AIM Investment Services, Inc.,
AIM Private Asset Management, Inc., Fund Management
Company and The AIM Family of Funds--Registered
Trademark--
Formerly: Manager of the Fraud Prevention Department,
AIM Investment Services, Inc.
Todd L. Spillane - 1958 2006 Senior Vice President, A I M Management Group Inc.; N/A
Chief Compliance Officer Senior Vice President and Chief Compliance Officer,
A I M Advisors, Inc. and A I M Capital Management,
Inc.; Chief Compliance Officer, The AIM Family of
Funds--Registered Trademark--; and Vice President, A I
M Distributors, Inc., AIM Investment Services, Inc.
and Fund Management Company
Formerly: Vice President, A I M Capital Management,
Inc.; Global Head of Product Development, AIG-Global
Investment Group, Inc.; Chief Compliance Officer and
Deputy General Counsel, AIG-SunAmerica Asset
Management, and Chief Compliance Officer, Chief
Operating Officer and Deputy General Counsel,
American General Investment Management
|
TRUSTEE OWNERSHIP OF FUND SHARES AS OF DECEMBER 31, 2006
Aggregate Dollar Range of Equity
Securities in All Registered
Investment Companies Overseen by
Dollar Range of Equity Securities Trustee in The AIM Family of
Name of Trustee Per Fund Funds--Registered Trademark--
--------------- --------------------------------- --------------------------------
Martin L. Flanagan(4) N/A N/A
Robert H. Graham -0- Over $100,000
Philip A. Taylor(5) -0- -0-
Bob R. Baker -0- Over $100,000
Frank S. Bayley -0- Over $100,000
James T. Bunch -0- Over $100,000(6)
Bruce L. Crockett -0- Over $100,000(6)
Albert R. Dowden -0- Over $100,000
Jack M. Fields -0- Over $100,000(6)
Carl Frischling -0- Over $100,000(6)
Prema Mathai-Davis -0- Over $100,000(6)
Lewis F. Pennock -0- Over $100,000
Ruth H. Quigley -0- Over $100,000
Larry Soll -0- Over $100,000(6)
Raymond Stickel, Jr. -0- Over $100,000
|
(5) Mr. Taylor was elected as a trustee of the Trust effective September 20, 2006.
(6) Includes the total amount of compensation deferred by the trustee at his or her election pursuant to a deferred compensation plan. Such deferred compensation is placed in a deferral account and deemed to be invested in one or more of the AIM Funds.
APPENDIX D
TRUSTEE AND OFFICER COMPENSATION TABLE
Set forth below is information regarding compensation paid or accrued for each trustee of the Trust who was not affiliated with AIM during the year ended December 31,2006:
RETIREMENT
AGGREGATE BENEFITS TOTAL
COMPENSATION FROM ACCRUED ESTIMATED ANNUAL COMPENSATION
THE BY ALL BENEFITS UPON FROM ALL AIM
TRUSTEE TRUST(1) AIM FUNDS(2) RETIREMENT (3) FUNDS(4)
------- ----------------- ------------ ---------------- ------------
Bob R. Baker $35,001 $230,089 $177,882 $225,000
Frank S. Bayley 37,497 160,600 126,750 241,000
James T. Bunch 31,605 149,379 126,750 203,500
Bruce L. Crockett 62,618 83,163 126,750 402,000
Albert R. Dowden 37,660 105,204 126,750 242,000
Edward K. Dunn, Jr.(5) 9,789 146,326 126,750 59,750
Jack M. Fields 32,669 104,145 126,750 210,000
Carl Frischling(6) 32,669 91,932 126,750 210,000
Prema Mathai-Davis 33,860 102,401 126,750 217,500
Lewis F. Pennock 32,669 85,580 126,750 210,000
Ruth H. Quigley 37,660 187,330 126,750 242,000
Larry Soll 32,669 193,510 146,697 210,000
Raymond Stickel, Jr. 35,867 77,561 126,750 230,750
OFFICER
Russell Burk 67,263 N/A N/A N/A
|
(1) Amounts shown are based on the fiscal year ended December 31,2006. The total amount of compensation deferred by all trustees of the Trust during the fiscal year ended December 31, 2006, including earnings, was $108,551,.
(2) During the fiscal year ended December 31, 2006, the total amount of expenses allocated to the Trust in respect of such retirement benefits was $144,932.
(3) These amounts represent the estimated annual benefits payable by the AIM Funds upon the trustee's retirement and assumes each trustee serves until his or her normal retirement date.
(4) All trustees currently serve as trustees of 17 registered investment companies advised by AIM.
(5) Mr. Dunn retired effective March 31, 2006.
(6) During the fiscal year ended December 31, 2006 the Trust paid $107,170 in legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered by such firm as counsel to the independent trustees of the Trust. Mr. Frischling is a partner of such firm.
APPENDIX E
PROXY POLICIES AND PROCEDURES
AIM INVESTMENTS PROXY VOTING GUIDELINES
(Effective as of February 22, 2007)
The following Proxy Voting Guidelines are applicable to all funds managed by A I M Advisors, Inc. ("AIM").(1)
INTRODUCTION
OUR BELIEF
AIM's Trustees and investment professionals expect a high standard of corporate governance from the companies in our portfolios so that AIM may fulfill its fiduciary obligation to our fund shareholders. Well governed companies are characterized by a primary focus on the interests of shareholders, accountable boards of directors, ample transparency in financial disclosure, performance-driven cultures and appropriate consideration of all stakeholders. AIM believes well governed companies create greater shareholder wealth over the long term than poorly governed companies, so we endeavor to vote in a manner that increases the value of our investments and fosters good governance within our portfolio companies.
In determining how to vote proxy issues, AIM considers the probable business consequences of each issue and votes in a manner designed to protect and enhance fund shareholders' interests. Our voting decisions are intended to enhance each company's total shareholder value over the funds' typical investment horizon.
Proxy voting is an integral part of AIM's investment process. We believe that the right to vote proxies should be managed with the same care as all other elements of the investment process. The objective of AIM's proxy-voting activity is to promote good governance and advance the economic interests of our clients. At no time will AIM exercise its voting power to advance its own commercial interests, to pursue a social or political cause that is unrelated to our clients' economic interests, or to favor a particular client or business relationship to the detriment of others.
PROXY ADMINISTRATION
The AIM Proxy Committee consists of seven members representing AIM's Legal, Compliance and Investments departments. AIM's Proxy Voting Guidelines are revised annually by the Proxy Committee, and are approved by the AIM Funds Boards of Trustees. The Proxy Committee implements the Guidelines and oversees proxy voting.
The Proxy Committee has retained outside experts to assist with the analysis and voting of proxy issues. In addition to the advice offered by these experts, AIM uses information gathered from our own research, company managements, AIM's portfolio managers and outside shareholder groups to reach our voting decisions.
Generally speaking, AIM's investment-research process leads us to invest in companies led by management teams we believe have the ability to conceive and execute strategies to outperform their competitors. We select companies for investment based in large part on our assessment of their management teams' ability to create shareholder wealth. Therefore, in formulating our proxy-voting decisions, AIM gives proper consideration to the recommendations of a company's Board of Directors.
IMPORTANT PRINCIPLES UNDERLYING THE AIM PROXY VOTING GUIDELINES
I. ACCOUNTABILITY
Management teams of companies are accountable to their boards of directors, and directors of publicly held companies are accountable to their shareholders. AIM endeavors to vote the proxies of its portfolio companies in a manner that will reinforce the notion of a board's accountability to its shareholders. Consequently, AIM votes against any actions that would impair the rights of shareholders or would reduce shareholders' influence over the board or over management.
The following are specific voting issues that illustrate how AIM applies this principle of accountability.
- Elections of directors. In uncontested director elections for companies that do not have a controlling shareholder, AIM votes in favor of slates if they are comprised of at least a majority of independent directors and if the boards' key committees are fully independent. Key committees include the Audit, Compensation and Governance or Nominating Committees. AIM's standard of independence excludes directors who, in addition to the directorship, have any material business or family relationships with the companies they serve.
Contested director elections are evaluated on a case-by-case basis and are decided within the context of AIM's investment thesis on a company.
- Director performance. AIM withholds votes from directors who exhibit a lack of accountability to shareholders, either through their level of attendance at meetings or by enacting egregious corporate-governance or other policies. In cases of material financial restatements, accounting fraud, habitually late filings, adopting shareholder rights plan ("poison pills") without shareholder approval, or other areas of poor performance, AIM may withhold votes from some or all of a company's directors. In situations where directors' performance is a concern, AIM may also support shareholder proposals to take corrective actions such as so-called "clawback" provisions.
- Auditors and Audit Committee members. AIM believes a company's Audit Committee has a high degree of responsibility to shareholders in matters of financial disclosure, integrity of the financial statements and effectiveness of a company's internal controls. Independence, experience and financial expertise are critical elements of a well-functioning Audit Committee. When electing directors who are members of a company's Audit Committee, or when ratifying a company's auditors, AIM considers the past performance of the Committee and holds its members accountable for the quality of the company's financial statements and reports.
- Majority standard in director elections. The right to elect directors is the single most important mechanism shareholders have to promote accountability. AIM supports the nascent effort to reform the U.S. convention of electing directors, and votes in favor of proposals to elect directors by a majority vote.
- Classified boards. AIM supports proposals to elect directors annually instead of electing them to staggered multi-year terms because annual elections increase a board's level of accountability to its shareholders.
- Supermajority voting requirements. Unless proscribed by law in the state of incorporation, AIM votes against actions that would impose any supermajority voting requirement, and supports actions to dismantle existing supermajority requirements.
- Responsiveness. AIM withholds votes from directors who do not adequately respond to shareholder proposals that were approved by a majority of votes cast the prior year.
- Cumulative voting. The practice of cumulative voting can enable minority shareholders to have representation on a company's board. AIM supports proposals to institute the practice of cumulative voting at companies whose overall corporate-governance standards indicate a particular need to protect the interests of minority shareholders.
- Shareholder access. On business matters with potential financial consequences, AIM votes in favor of proposals that would increase shareholders' opportunities to express their views to boards of directors, proposals that would lower barriers to shareholder action and proposals to promote the adoption of generally accepted best practices in corporate governance.
II. INCENTIVES
AIM believes properly constructed compensation plans that include equity ownership are effective in creating incentives that induce managements and employees of our portfolio companies to create greater shareholder wealth. AIM supports equity compensation plans that promote the proper alignment of incentives, and votes against plans that are overly dilutive to existing shareholders, plans that contain objectionable structural features, and plans that appear likely to reduce the value of the fund's investment.
Following are specific voting issues that illustrate how AIM evaluates incentive plans.
- Executive compensation. AIM evaluates compensation plans for executives within the context of the company's performance under the executives' tenure. AIM believes independent compensation committees are best positioned to craft executive-compensation plans that are suitable for their company-specific circumstances. We view the election of those independent compensation committee members as the appropriate mechanism for shareholders to express their approval or disapproval of a company's compensation practices. Therefore, AIM generally does not support shareholder proposals to limit or eliminate certain forms of executive compensation. In the interest of reinforcing the notion of a compensation committee's accountability to shareholders, AIM supports proposals requesting that companies subject each year's compensation record to an advisory shareholder vote, or so-called "say on pay" proposals..
- Equity-based compensation plans. When voting to approve or reject equity-based compensation plans, AIM compares the total estimated cost of the plans, including stock options and restricted stock, against a carefully selected peer group and uses multiple performance metrics that help us determine whether the incentive structures in place are creating genuine shareholder wealth. Regardless of a plan's estimated cost relative to its peer group, AIM votes against plans that contain structural features that would impair the alignment of incentives between shareholders and management. Such features include the ability to reprice or reload options without shareholder approval, the ability to issue options below the stock's current market price, or the ability to automatically replenish shares without shareholder approval.
- Employee stock-purchase plans. AIM supports employee stock-purchase plans that are reasonably designed to provide proper incentives to a broad base of employees, provided that the price at which employees may acquire stock is at most a 15 percent discount from the market price.
- Severance agreements. AIM generally votes in favor of proposals requiring advisory shareholder ratification of executives' severance agreements. However, we oppose proposals requiring such agreements to be ratified by shareholders in advance of their adoption.
III. CAPITALIZATION
Examples of management proposals related to a company's capital structure include authorizing or issuing additional equity capital, repurchasing outstanding stock, or enacting a stock split or reverse stock split. On
requests for additional capital stock, AIM analyzes the company's stated reasons for the request. Except where the request could adversely affect the fund's ownership stake or voting rights, AIM generally supports a board's decisions on its needs for additional capital stock. Some capitalization proposals require a case-by-case analysis within the context of AIM's investment thesis on a company. Examples of such proposals include authorizing common or preferred stock with special voting rights, or issuing additional stock in connection with an acquisition.
IV. MERGERS, ACQUISITIONS AND OTHER CORPORATE ACTIONS
Issuers occasionally require shareholder approval to engage in certain corporate actions such as mergers, acquisitions, name changes, dissolutions, reorganizations, divestitures and reincorporations. AIM analyzes these proposals within the context of our investment thesis on the company, and determines its vote on a case-by-case basis.
V. ANTI-TAKEOVER MEASURES
Practices designed to protect a company from unsolicited bids can adversely affect shareholder value and voting rights, and they create conflicts of interests among directors, management and shareholders. Except under special issuer-specific circumstances, AIM votes to reduce or eliminate such measures. These measures include adopting or renewing "poison pills", requiring supermajority voting on certain corporate actions, classifying the election of directors instead of electing each director to an annual term, or creating separate classes of common or preferred stock with special voting rights. AIM generally votes against management proposals to impose these types of measures, and generally votes for shareholder proposals designed to reduce such measures. AIM supports shareholder proposals directing companies to subject their anti-takeover provisions to a shareholder vote.
VI. SHAREHOLDER PROPOSALS ON CORPORATE GOVERNANCE
AIM generally votes for shareholder proposals that are designed to protect shareholder rights if a company's corporate-governance standards indicate that such additional protections are warranted.
VII. SHAREHOLDER PROPOSALS ON SOCIAL RESPONSIBILITY
The potential costs and economic benefits of shareholder proposals seeking to amend a company's practices for social reasons are difficult to assess. Analyzing the costs and economic benefits of these proposals is highly subjective and does not fit readily within our framework of voting to create greater shareholder wealth over AIM's typical investment horizon. Therefore, AIM abstains from voting on shareholder proposals deemed to be of a purely social, political or moral nature.
VIII. ROUTINE BUSINESS MATTERS
Routine business matters rarely have a potentially material effect on the economic prospects of fund holdings, so we generally support the board's discretion on these items. However, AIM votes against proposals where there is insufficient information to make a decision about the nature of the proposal. Similarly, AIM votes against proposals to conduct other unidentified business at shareholder meetings.
SUMMARY
These Guidelines provide an important framework for making proxy-voting decisions, and should give fund shareholders insight into the factors driving AIM's decisions. The Guidelines cannot address all potential proxy issues, however. Decisions on specific issues must be made within the context of these Guidelines and within the context of the investment thesis of the funds that own the company's stock. Where a different investment
thesis is held by portfolio managers who may hold stocks in common, AIM may vote the shares held on a fund-by-fund basis.
EXCEPTIONS
In certain circumstances, AIM may refrain from voting where the economic cost of voting a company's proxy exceeds any anticipated benefits of that proxy proposal.
SHARE-LENDING PROGRAMS
One reason that some portion of AIM's position in a particular security might not be voted is the securities lending program. When securities are out on loan and earning fees for the lending fund, they are transferred into the borrower's name. Any proxies during the period of the loan are voted by the borrower. The lending fund would have to terminate the loan to vote the company's proxy, an action that is not generally in the best economic interest of fund shareholders. However, whenever AIM determines that the benefit to shareholders of voting a particular proxy outweighs the revenue lost by terminating the loan, we recall the securities for the purpose of voting the fund's full position.
"SHARE-BLOCKING"
Another example of a situation where AIM may be unable to vote is in countries where the exercise of voting rights requires the fund to submit to short-term trading restrictions, a practice known as "share-blocking." AIM generally refrains from voting proxies in share-blocking countries unless the portfolio manager determines that the benefit to fund shareholders of voting a specific proxy outweighs the fund's temporary inability to sell the security.
INTERNATIONAL CONSTRAINTS
An additional concern that sometimes precludes our voting non-U.S. proxies is our inability to receive proxy materials with enough time and enough information to make a voting decision. In the great majority of instances, however, we are able to vote non-U.S. proxies successfully. It is important to note that AIM makes voting decisions for non-U.S. issuers using these Proxy Voting Guidelines as our framework, but also takes into account the corporate-governance standards, regulatory environment and generally accepted best practices of the local market.
EXCEPTIONS TO THESE GUIDELINES
AIM retains the flexibility to accommodate company-specific situations where strictly adhering to the Guidelines would lead to a vote that the AIM Proxy Committee deems not to be in the best interest of the funds' shareholders. In these situations, the Proxy Committee will vote the proxy in the manner deemed to be in the best interest of the funds' shareholders, and will promptly inform the funds' Boards of Trustees of such vote and the circumstances surrounding it.
RESOLVING POTENTIAL CONFLICTS OF INTEREST
A potential conflict of interest arises when AIM votes a proxy for an issuer with which it also maintains a material business relationship. Examples could include issuers that are distributors of AIM's products, or issuers that employ AIM to manage portions of their retirement plans or treasury accounts. AIM reviews each proxy proposal to assess the extent, if any, to which there may be a material conflict between the interests of the fund shareholders and AIM.
AIM takes reasonable measures to determine whether a potential conflict may exist. A potential conflict is deemed to exist only if one or more of the Proxy Committee members actually knew or should have known of the potential conflict.
If a material potential conflict is deemed to exist, AIM may resolve the potential conflict in one of the following ways: (1) if the proposal that gives rise to the potential conflict is specifically addressed by AIM's Proxy Voting Guidelines, AIM may vote the proxy in accordance with the predetermined Guidelines; (2) AIM may engage an independent third party to determine how the proxy should be voted; or (3) AIM may establish an ethical wall or other informational barrier between the persons involved in the potential conflict and the persons making the proxy-voting decision in order to insulate the potential conflict from the decision makers.
Because the Guidelines are pre-determined and crafted to be in the best economic interest of shareholders, applying the Guidelines to vote client proxies should, in most instances, adequately resolve any potential conflict of interest. As an additional safeguard against potential conflicts, persons from AIM's marketing, distribution and other customer-facing functions are precluded from becoming members of the AIM Proxy Committee.
On a quarterly basis, the AIM Funds Boards of Trustees review a report from AIM's Internal Compliance Controls Committee. The report contains a list of all known material business relationships that AIM maintains with publicly traded issuers. That list is cross-referenced with the list of proxies voted over the period. If there are any instances where AIM's voting pattern on the proxies of its material business partners is inconsistent with its voting pattern on all other issuers, they are brought before the Trustees and explained by the Chairman of the AIM Proxy Committee.
Personal conflicts of interest. If any member of the AIM Proxy Committee has a personal conflict of interest with respect to a company or an issue presented for voting, that Committee member will inform the Committee of such conflict and will abstain from voting on that company or issue.
Funds of funds. Some AIM funds offering diversified asset allocation within one investment vehicle own shares in other AIM funds. A potential conflict of interest could arise if an underlying AIM fund has a shareholder meeting with any proxy issues to be voted on, because AIM's asset-allocation funds or target-maturity funds may be large shareholders of the underlying fund. In order to avoid any potential for a conflict, the asset-allocation funds and target maturity funds vote their shares in the same proportion as the votes of the external shareholders of the underlying fund.
POLICIES AND VOTE DISCLOSURE
A copy of these Proxy Voting Guidelines and the voting record of each AIM fund are available on our web site, www.aiminvestments.com. In accordance with Securities and Exchange Commission regulations, all funds file a record of all proxy-voting activity for the prior 12 months ending June 30th. That filing is made on or before August 31st of each year.
FOOTNOTES
1. AIM funds not managed by A I M Advisors, Inc., are governed by the proxy voting policies of their respective advisers.
To see the Proxy Voting Guidelines applicable to the AIM TRIMARK ENDEAVOR FUND, the AIM TRIMARK FUND or the AIM TRIMARK SMALL COMPANIES FUND, click here (hyperlink to AIM Funds Management Inc.'s proxy policy).
To see the Proxy Voting Guidelines applicable to the AIM INTERNATIONAL TOTAL RETURN FUND, click here (hyperlink to INVESCO Asset Management Limited's proxy policy).
To see the Proxy Voting Guidelines applicable to the AIM JAPAN FUND, click here (hyperlink to INVESCO Asset Management (Japan) Limited's proxy policy).
To see the Proxy Voting Guidelines applicable to the AIM CHINA FUND, click here (hyperlink to INVESCO Hong Kong Limited's proxy policy).
To see the Proxy Voting Guidelines applicable to the AIM LIBOR ALPHA FUND, the AIM FLOATING RATE FUND, the AIM GLOBAL REAL ESTATE FUND, the AIM INTERNATIONAL CORE EQUITY FUND, the AIM REAL ESTATE FUND, the AIM S&P 500 INDEX FUND, the AIM SELECT REAL ESTATE FUND, the AIM STRUCTURED CORE FUND, the AIM STRUCTURED GROWTH FUND, the AIM STRUCTURED VALUE FUND, the AIM V. I. GLOBAL REAL ESTATE FUND, or the AIM V.I. INTERNATIONAL CORE EQUITY FUND, click here (hyperlink to INVESCO Institutional (N.A.), Inc.'s proxy policy).
PROXY POLICIES AND PROCEDURES
(AIM V.I. Global Real Estate Fund)
DATED APRIL 1, 2006
INVESCO Institutional (N.A.), Inc. and its wholly-owned subsidiaries, and INVESCO Global Asset Management (N.A.), Inc. (collectively, "INVESCO"), each has responsibility for making investment decisions that are in the best interests of its clients. As part of the investment management services it provides to clients, INVESCO may be authorized by clients to vote proxies appurtenant to the shares for which the clients are beneficial owners.
INVESCO believes that it has a duty to manage clients' assets in the best economic interests of the clients and that the ability to vote proxies is a client asset.
INVESCO reserves the right to amend its proxy policies and procedures from time to time without prior notice to its clients.
PROXY VOTING POLICIES
VOTING OF PROXIES
INVESCO will vote client proxies in accordance with the procedures set forth below unless the client for non-ERISA clients retains in writing the right to vote, the named fiduciary (e.g., the plan sponsor) for ERISA clients retains in writing the right to direct the plan trustee or a third party to vote proxies or INVESCO determines that any benefit the client might gain from voting a proxy would be outweighed by the costs associated therewith.
BEST ECONOMIC INTERESTS OF CLIENTS
In voting proxies, INVESCO will take into consideration those factors that may affect the value of the security and will vote proxies in a manner in which, in its opinion, is in the best economic interests of clients. INVESCO endeavors to resolve any conflicts of interest exclusively in the best economic interests of clients.
ISS SERVICES
INVESCO has contracted with Institutional Shareholder Services ("ISS"), an
independent third party service provider, to vote INVESCO's clients' proxies
according to ISS's proxy voting recommendations. In addition, ISS will provide
proxy analyses, vote recommendations, vote execution and record-keeping services
for clients for which INVESCO has proxy voting responsibility. On an annual
basis, INVESCO will review information obtained from ISS to ascertain whether
ISS (i) has the capacity and competency to adequately analyze proxy issues, and
(ii) can make such recommendations in an impartial manner and in the best
economic interest of INVESCO's clients. This may include a review of ISS'
Policies, Procedures and Practices Regarding Potential Conflicts of Interests
and obtaining information about the work ISS does for corporate issuers and the
payments ISS receives from such issuers.
Custodians forward proxy materials for clients who rely on INVESCO to vote proxies to ISS. ISS is responsible for exercising the voting rights in accordance with the ISS proxy voting guidelines. If INVESCO receives proxy materials in connection with a client's account where the client has, in writing, communicated to INVESCO that the client, plan fiduciary or other third party has reserved the right to vote proxies, INVESCO will forward to the party appointed by client any proxy materials it receives with respect to the account. In order to avoid voting proxies in circumstances where INVESCO, or any of its affiliates have or may have any conflict of interest, real or perceived, INVESCO has engaged ISS to provide the proxy analyses, vote recommendations and voting of proxies.
In the event that (i) ISS recuses itself on a proxy voting matter and makes no recommendation or (ii) INVESCO decides to override the ISS vote recommendation, the Proxy Committee will review the issue and direct ISS how to vote the proxies as described below.
PROXY COMMITTEE
The Proxy Committee shall have seven (7) members, which shall include representatives from portfolio management, operations, and legal/compliance or other functional departments as deemed appropriate who are knowledgeable regarding the proxy process. A majority of the members of the Proxy Committee shall constitute a quorum and the Proxy Committee shall act by a majority vote. The chair of the Proxy Committee shall be chosen by the Chief Compliance Officer of INVESCO. The Proxy Committee shall keep minutes of its meetings that shall be kept with the proxy voting records of INVESCO. The Proxy Committee will appoint a Proxy Manager to manage the proxy voting process, which includes the voting of proxies and the maintenance of appropriate records.
Proxy Committee meetings shall be called by the Proxy Manager when override submissions are made and in instances when ISS has recused itself from a vote recommendation. In these situations, the Proxy Committee shall meet and determine how proxies are to be voted in the best interests of clients.
The Proxy Committee periodically reviews new types of corporate governance issues, evaluates proposals not addressed by the ISS proxy voting guidelines in instances when ISS has recused itself, and determines how INVESCO should vote. The Committee monitors adherence to these Procedures, industry trends and reviews the ISS proxy voting guidelines.
ISS RECUSAL
When ISS makes no recommendation on a proxy voting issue or is recused due to a conflict of interest, the Proxy Committee will review the issue and, if INVESCO does not have a conflict of interest, direct ISS how to vote the proxies. In such cases where INVESCO has a conflict of interest, INVESCO, in its sole discretion, shall either (a) vote the proxies pursuant to ISS's general proxy voting guidelines, (b) engage an independent third party to provide a vote recommendation, or (c) contact its client(s) for direction as to how to vote the proxies.
OVERRIDE OF ISS RECOMMENDATION
There may be occasions where the INVESCO investment personnel, senior officers or a member of the Proxy Committee seek to override ISS's recommendations if they believe that ISS's recommendations are not in accordance with the best economic interests of clients. In the event that an individual listed above in this section disagrees with an ISS recommendation on a particular voting issue, the individual shall document in writing the reasons that he/she believes that the ISS recommendation is not in accordance with clients' best economic interests and submit such written documentation to the Proxy Manager for consideration by the Proxy Committee. Upon review of the documentation and consultation with the individual and others as the Proxy Committee deems appropriate, the Proxy Committee may make a determination to override the ISS voting recommendation if the Committee determines that it is in the best economic interests of clients and the Committee has addressed conflict of interest issues as discussed below.
PROXY COMMITTEE MEETINGS
When a Proxy Committee Meeting is called, whether because of an ISS recusal or request for override of an ISS recommendation, the Proxy Committee shall review the report of the Chief Compliance Officer as to whether any INVESCO person has reported a conflict of interest.
The Proxy Committee shall review the information provided to it to determine if a real or perceived conflict of interest exists and the minutes of the Proxy Committee shall:
(1) describe any real or perceived conflict of interest,
(2) discuss any procedure used to address such conflict of interest,
(3) report any contacts from outside parties (other than routine communications from proxy solicitors), and
(4) include confirmation that the recommendation as to how the proxies are to be voted is in the best economic interests of clients and was made without regard to any conflict of interest.
Based on the above review and determinations, the Proxy Committee will direct ISS how to vote the proxies.
CERTAIN PROXY VOTES MAY NOT BE CAST
In some cases, INVESCO may determine that it is not in the best economic interests of clients to vote proxies. For example, proxy voting in certain countries outside the United States requires share blocking. Shareholders who wish to vote their proxies must deposit their shares 7 to 21 days before the date of the meeting with a designated depositary. During the blocked period, shares to be voted at the meeting cannot be sold until the meeting has taken place and the shares have been returned to the Custodian/Sub-Custodian bank. In addition, voting certain international securities may involve unusual costs to clients. In other cases, it may not be possible to vote certain proxies despite good faith efforts to do so, for instance when inadequate notice of the matter is provided. In the instance of loan securities, voting of proxies typically requires termination of the loan, so it is not usually in the best economic interests of clients to vote proxies on loaned securities. INVESCO typically will not, but reserves the right to, vote where share blocking restrictions, unusual costs or other barriers to efficient voting apply. If INVESCO does not vote, it would have made the determination that the cost of voting exceeds the expected benefit to the client. The Proxy Manager shall record the reason for any proxy not being voted, which record shall be kept with the proxy voting records of INVESCO.
PROXY VOTING RECORDS
Clients may obtain information about how INVESCO voted proxies on their behalf by contacting their client services representative. Alternatively, clients may make a written request for proxy voting information to: Proxy Manager, 1360 Peachtree Street, N.E., Atlanta, Georgia 30309.
CONFLICTS OF INTEREST
PROCEDURES TO ADDRESS CONFLICTS OF INTEREST AND IMPROPER INFLUENCE
In order to avoid voting proxies in circumstances where INVESCO or any of its affiliates have or may have any conflict of interest, real or perceived, INVESCO has contracted with ISS to provide proxy analyses, vote recommendations and voting of proxies. Unless noted otherwise by ISS, each vote recommendation provided by ISS to INVESCO includes a representation from ISS that ISS faces no conflict of interest with respect to the vote. In instances where ISS has recused itself and makes no recommendation on a particular matter or if an override submission is requested, the Proxy Committee shall determine how the proxy is to be voted and instruct the Proxy Manager accordingly in which case the conflict of interest provisions discussed below shall apply.
In effecting the policy of voting proxies in the best economic interests of clients, there may be occasions where the voting of such proxies may present a real or perceived conflict of interest between INVESCO, as the investment manager, and clients.
For each director, officer and employee of INVESCO ("INVESCO person"), the interests of INVESCO's clients must come first, ahead of the interest of INVESCO and any person within the INVESCO organization, which includes INVESCO's affiliates.
Accordingly, each INVESCO person must not put "personal benefit," whether tangible or intangible, before the interests of clients of INVESCO or otherwise take advantage of the relationship to INVESCO's clients. "Personal benefit" includes any intended benefit for oneself or any other individual, company, group or organization of any kind whatsoever, except a benefit for a client of INVESCO, as appropriate. It is imperative that each of INVESCO's directors, officers and employees avoid any situation that might compromise, or call into question, the exercise of fully independent judgment in the interests of INVESCO's clients.
Occasions may arise where a person or organization involved in the proxy voting process may have a conflict of interest. A conflict of interest may also exist if INVESCO has a business relationship with (or is actively soliciting business from) either the company soliciting the proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote. An INVESCO person (excluding members of the Proxy Committee) shall not be considered to have a conflict of interest if the INVESCO person did not know of the conflict of interest and did not attempt to influence the outcome of a proxy vote. Any individual with actual knowledge of a conflict of interest relating to a particular referral item shall disclose that conflict to the Chief Compliance Officer.
The following are examples of situations where a conflict may exist:
- Business Relationships - where INVESCO manages money for a company or an employee group, manages pension assets or is actively soliciting any such business, or leases office space from a company;
- Personal Relationships - where a INVESCO person has a personal relationship with other proponents of proxy proposals, participants in proxy contests, corporate directors, or candidates for directorships; and
- Familial Relationships - where an INVESCO person has a known familial relationship relating to a company (e.g. a spouse or other relative who serves as a director of a public company or is employed by the company).
In the event that INVESCO (or an affiliate) manages assets for a company, its pension plan, or related entity or where any member of the Proxy Committee has a personal conflict of interest, and where clients' funds are invested in that company's shares, the Proxy Committee will not take into consideration this relationship and will vote proxies in that company solely in the best economic interest of its clients.
It is the responsibility of the Proxy Manager and each member of the Proxy Committee to report any real or potential conflict of interest of which such individual has actual knowledge to the Chief Compliance Officer, who shall present any such information to the Proxy Committee. However, once a particular conflict has been reported to the Chief Compliance Officer, this requirement shall be deemed satisfied with respect to all individuals with knowledge of such conflict.
In addition, the Proxy Manager and each member of the Proxy Committee shall certify annually as to their compliance with this policy. In addition, any INVESCO person who submits an ISS override recommendation to the Proxy Committee shall certify as to their compliance with this policy concurrently with the submission of their override recommendation. A form of such certification is attached as Appendix A hereto.
In addition, members of the Proxy Committee must notify INVESCO's Chief Compliance Officer, with impunity and without fear of retribution or retaliation, of any direct, indirect or perceived improper influence made by anyone within INVESCO or by an affiliated company's representatives with regard to how INVESCO should vote proxies. The Chief Compliance Officer will investigate the allegations and will report his or her findings to the INVESCO Risk Management Committee. In the event that it is determined that improper influence was made, the Risk Management Committee will determine the appropriate action to take which may include, but is not limited to, (1) notifying the affiliated company's Chief Executive Officer, its Management Committee or Board of Directors, (2) taking remedial action, if necessary, to correct the result of any improper influence where clients have been harmed, or (3) notifying the appropriate regulatory agencies of the improper influence and to fully cooperate with these regulatory agencies as required. In all cases, the Proxy Committee shall not take into consideration the improper influence in determining how to vote proxies and will vote proxies solely in the best economic interest of clients.
Furthermore, members of the Proxy Committee must advise INVESCO's Chief Compliance Officer and fellow Committee members of any real or perceived conflicts of interest he or she may have with regard to how proxies are to be voted regarding certain companies (e.g., personal security ownership in a company, or personal or business relationships with participants in proxy contests, corporate directors or candidates for corporate directorships). After reviewing such conflict, upon advice from the Chief Compliance Officer, the Committee may require such Committee member to recuse himself or herself from participating in the discussions regarding the proxy vote item and from casting a vote regarding how INVESCO should vote such proxy.
ISS PROXY VOTING GUIDELINES
A copy of the most recent ISS US Proxy Voting Guidelines Summary can be found on ISS's website at www.issproxy.com.
APPENDIX A
ACKNOWLEDGEMENT AND CERTIFICATION
I acknowledge that I have read the INVESCO Proxy Voting Policy (a copy of which has been supplied to me, which I will retain for future reference) and agree to comply in all respects with the terms and provisions thereof. I have disclosed or reported all real or potential conflicts of interest to the INVESCO Compliance Officer and will continue to do so as matters arise. I have complied with all provisions of this Policy.
APPENDIX F
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
To the best knowledge of the Trust, the names and addresses of the record and beneficial holders of 5% or more of the outstanding shares of each class of the Trust's equity securities and the percentage of the outstanding shares held by such holders are set forth below. Unless otherwise indicated below, the Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned beneficially.
A shareholder who owns beneficially 25% or more of the outstanding securities of a Fund is presumed to "control" that Fund as defined in the 1940 Act. Such control may affect the voting rights of other shareholders.
All information listed below is as of April 16, 2007.
AIM V.I. BASIC BALANCED FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
ALLSTATE LIFE INS CO OF NEW YORK 6.18% --
NY PROPRIETARY
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE OF NEW YORK -- 5.49%
3100 SANDERAS ROAD
NORTHBROOK IL 60062-7155
ALLSTATE LIFE INSURANCE COMPANY 5.46% --
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE COMPANY 50.51% --
GLAC PROPRIETARY
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE COMPANY 12.93% --
GLAC VA1
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE CO -- 34.85%
GLAC VA3
PO BOX 94200
PALATINE IL 60094-4200
MINNESOTA LIFE INSURANCE CO -- 55.33%
ATTN: A6-5216
400 ROBERT ST N
ST PAUL MN 55101-2015
|
AIM V.I. BASIC BALANCED FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
UNION CENTRAL LIFE INSURANCE 14.88% --
FBO VARIABLE UNIVERSAL LIFE
ATTN ROBERTA UJVARY
PO BOX 40888
CINCINNATI OH 45240-0888
|
AIM V.I. BASIC VALUE FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
ALLSTATE LIFE INSURANCE CO -- 5.66%
AIM VI-AIM VA3
3100 SANDERS RD STE K4A
NORTHBROOK IL 60062-7154
ALLSTATE LIFE INSURANCE COMPANY 5.23% --
GLAC PROPRIETARY
P.O. BOX 94200
PALATINE IL 60094-4200
AMERICAN ENTERPRISE LIFE INS CO -- 13.15%
1497 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0014
COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY -- 8.37%
440 LINCOLN ST
SEPARATE ACCOUNTING
MAIL STATION S310
WORCESTER MA 01653-0002
GE LIFE AND ANNUITY ASSURANCE CO -- 9.08%
VARIABLE EXTRA CREDIT
ATTN: VARIABLE ACCOUNTING
6610 W BROAD ST
RICHMOND VA 23230-1702
HARTFORD LIFE AND ANNUITY 56.12% --
SEPARATE ACCOUNT
ATTN DAVE TEN BROECK
PO BOX 2999
HARTFORD CT 06104-2999
HARTFORD LIFE SEPARATE ACCOUNT 19.37% --
ATTN DAVE TEN BROECK
PO BOX 2999
HARTFORD CT 06104-2999
|
AIM V.I. BASIC VALUE FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
LINCOLN BENEFIT LIFE 5.46% --
2940 S 84TH ST
LINCOLN NE 68506-4142
NATIONWIDE INSURANCE COMPANY NWVAII -- 16.03%
C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS OH 43218-2029
TRANSAMERICA LIFE INSURANCE CO -- 14.70%
LANDMARK
ATTN FMD OPERATIONAL ACCOUNTING
4333 EDGEWOOD RD NE
CEDAR RAPIDS IA 52499-0001
|
AIM V.I. CAPITAL APPRECIATION FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
ALLSTATE LIFE INSURANCE CO 7.25% --
ATTN FINANCIAL CONTROL-CIGNA
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE COMPANY 8.58% --
GLAC PROPRIETARY
P.O. BOX 94200
PALATINE IL 60094-4200
AMERICAN ENTERPRISE LIFE INS VARIABLE ANNUITY -- 5.50%
ATTN AMY WILCOX T11/229
1497 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0014
HARTFORD LIFE AND ANNUITY 9.25% --
SEPARATE ACCOUNT
ATTN: DAVE TEN BROECK
PO BOX 2999
HARTFORD CT 06104-2999
IDS LIFE INSURANCE CO 8.50% 61.81%
222 AXP FINANCIAL CENTER
MINNEAPOLIS MN 55474-0002
|
AIM V.I. CAPITAL APPRECIATION FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
ING LIFE INSURANCE AND ANNUITY CO
CONVEYOR
ATTN FUND OPERATIONS 5.94% --
151 FARMINGTON AVE TN41
HARTFORD CT 06156-0001
MERRILL LYNCH PIERCE FENNER & SMITH
FBO THE SOLE BENEFIT OF CUSTOMERS 7.53% --
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
PHOENIX HOME LIFE
ATTN BRIAN COOPER 5.87% --
P.O. BOX 22012
ALBANY NY 12201-2012
|
AIM V.I. CAPITAL DEVELOPMENT FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
ALLSTATE LIFE INSURANCE COMPANY 13.75% --
GLAC PROPRIETARY
P.O. BOX 94200
PALATINE IL 60094-4200
ANNUITY INVESTORS LIFE INSURANCE CO 15.59% --
ATTN TODD GAYHART
580 WALNUT ST
CINCINNATI OH 45202-3110
IDS LIFE INSURANCE CO 46.67% 53.87%
222 AXP FINANCIAL CENTER
MINNEAPOLIS MN 55474-0002
NATIONWIDE INSURANCE CO NWLVI4 -- 8.98%
C/O IPO PORTFOLIO ACCOUNTING
P.O. BOX 182029
COLUMBUS OH 43218-2029
NATIONWIDE INSURANCE CO NWVAII -- 20.30%
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
|
AIM V.I. CAPITAL DEVELOPMENT FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
SECURITY BENEFIT LIFE -- 5.16%
VARIFLEX Q NAVISYS
1 SW SECURITY BENEFIT PL
TOPEKA KS 66636-0001
|
AIM V.I. CORE EQUITY FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
-- 10.31%
ALLSTATE LIFE INSURANCE CO
AIMVI-AIM VA3
PO BOX 94200
PALATINE IL 60094-4200
HARTFORD LIFE SEPARATE ACCOUNT
ATTN DAVE TEN BROECK 5.24% --
PO BOX 2999
HARTFORD CT 06104-2999
HARTFORD LIFE AND ANNUITY SEPARATE ACCOUNT
ATTN DAVE TEN BROECK 13.72% --
PO BOX 2999
HARTFORD CT 06104-2999
IDS LIFE INSURANCE COMPANY
222 AXP FINANCIAL CTR 24.75% --
MINNEAPOLIS MN 55474-0002
LINCOLN NATIONAL LIFE INS COMPANY
ATTN SHIRLEY SMITH -- 20.79%
1300 S CLINTON ST
FORT WAYNE IN 46802-3506
LINCOLN BENEFIT LIFE
2940 S 84TH ST -- 19.43%
LINCOLN NE 68506-4142
MERRILL LYNCH PIERCE FENNER & SMITH
THE SOLE BENEFIT OF CUSTOMERS 5.51% --
4800 DEER LAKE DR E
JACKSONVILLE FL 32246-6484
|
AIM V.I. CORE EQUITY FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
METLIFE INSURANCE COMPANY OF CONNECTICUT -- 5.72%
ATTN SHAREHOLDER ACCOUNTING
ONE TOWER SQUARE 6MS
HARTFORD CT 06183-0002
NATIONWIDE INSURANCE COMPANY NWVA7 -- 5.86%
C/O IPO PORTFOLIO ACCOUNTING
PO BOX 182029
COLUMBUS OH 43218-2029
PRINCIPAL LIFE INSURANCE COMPANY -- 6.51%
ATTN ROSE PFALTZGRAFF
711 HIGH ST
DES MOINES IA 50392-9992
PRUDENTIAL INSURANCE CO OF AMERICA 7.00% --
ATTN IGG FINL REP SEP ACCTS
213 WASHINGTON ST 7TH FL
NEWARK NJ 07102-2992
|
AIM V.I. DIVERSIFIED INCOME FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
NAME AND ADDRESS OF OF OF
PRINCIPAL HOLDER RECORD RECORD
------------------- ---------------- ----------------
ALLSTATE LIFE INSURANCE CO 19.07% --
ATTN FINANCIAL CONTROL-CIGNA
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE OF NEW YORK -- 14.90%
3100 SANDERS ROAD
NORTHBROOK IL 60062-7155
ALLSTATE LIFE INSURANCE COMPANY 32.91%
GLAC PROPRIETARY
PO BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE COMPANY 17.53% --
GLAC VA1
PO BOX 94200
PALATINE IL 60094-4200
|
AIM V.I. DIVERSIFIED INCOME FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE INSURANCE CO -- 85.10%
GLAC VA3
PO BOX 94200
PALATINE IL 60094-4200
GENERAL AMERICAN LIFE INSURANCE 5.92% --
13045 TESSON FERRY RD
ST LOUIS MO 63128-3499
|
AIM V.I. DYNAMICS FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
A I M ADVISORS, INC -- 100.00%
ATTN: CORPORATE CONTROLLER
11 E GREENWAY PLZ STE 1919
HOUSTON TX 77046-1103
AMERICAN SKANDIA LIFE ASSURANCE CO 55.89% --
VARIABLE ACCOUNT / SAQ
ATTN INVESTMENT ACCOUNTING
P.O. BOX 883
1 CORPORATE DR
SHELTON CT 06484-6208
AMERITAS LIFE INSURANCE CORP 5.86% --
SEPARATE ACCOUNT VA
5900 O ST
LINCOLN NE 68510-2234
IDS LIFE INSURANCE COMPANY 13.71% --
222 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0002
|
AIM V.I. FINANCIAL SERVICES FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
AMERICAN SKANDIA LIFE ASSURANCE CO 48.73% --
VARIABLE ACCOUNT / SAQ
ATTN INVESTMENT ACCOUNTING
P.O. BOX 883
1 CORPORATE DR
SHELTON CT 06484-6208
CM LIFE INSURANCE CO 7.06% --
FUND OPERATIONS
1295 STATE ST
SPRINGFIELD MA 01111-0001
IDS LIFE INSURANCE COMPANY 22.67% --
222 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0002
IDS LIFE INSURANCE COMPANY -- 90.27%
222 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0002
IDS LIFE INSURANCE COMPANY -- 9.73%
222 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0002
MASS MUTUAL LIFE INS CO 5.74% --
FUND OPERATIONS/N255
1295 STATE ST
SPRINGFIELD MA 01111-0001
|
AIM V.I. GLOBAL HEALTH CARE FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
AMERICAN SKANDIA LIFE ASSURANCE CO 43.33% --
VARIABLE ACCOUNT / SAQ
ATTN INVESTMENT ACCOUNTING
P.O. BOX 883
1 CORPORATE DR
SHELTON CT 06484-6208
COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY 7.23% --
440 LINCOLN ST
SEPARATE ACCOUNTING
MAIL STATION S310
WORCESTER PA 01653-0002
|
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
CM LIFE INSURANCE CO 8.08% --
FUND OPERATIONS/N255
1295 STATE ST
SPRINGFIELD MA 01111-0001
IDS LIFE INSURANCE COMPANY -- 93.83%
222 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0002
IDS LIFE INSURANCE COMPANY OF NY -- 6.17%
222 AXP FINANCIAL CENTER
MINNEAPOLIS MN 55474-0014
MASS MUTUAL LIFE INS CO 7.77% --
FUND OPERATIONS/N255
1295 STATE ST
SPRINGFIELD MA 01111-0001
PRINCIPAL LIFE INSURANCE CO 5.95% --
FVA-PRINCIPAL VARIABLE ANNUITY
ATTN LISA DAGUE - IND ACG G-008-N10
711 HIGH ST
DES MOINES IA 50392-0001
|
AIM V.I. GLOBAL REAL ESTATE FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
GE CAPITAL LIFE ASSURANCE CO OF NY -- 64.29%
NY CHOICE 160BP
6610 W BROAD ST
RICHMOND VA 23230-1702
GE LIFE AND ANNUITY ASSURANCE CO -- 9.91%
VARIABLE EXTRA CREDIT
ATTN VARIABLE ACCOUNTING
6610 W BROAD ST
RICHMOND VA 23230-1702
|
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
JEFFERSON NATIONAL LIFE INSURANCE 7.72% --
9920 CORPORATE CAMPUS DR STE 1000
LOUISVILLE KY 40223-4051
KEMPER INVESTORS LIFE INSURANCE CO 11.10% --
VARIABLE SEPARATE ACCOUNT
1600 MCCONNOR PKWY
SCHAUMBURG IL 60196-6801
MIDLAND NATIONAL LIFE INSURANCE CO -- 25.80%
ANNUITY DIVISION
ATTN VARIABLE ANNUITIES
PO BOX 79907
DES MOINES IA 50325-0907
SECURITY BENEFIT LIFE 21.37% --
FBO UNBUNDLED
C/O VARIABLE ANNUITY DEPARTMENT
1 SW SECURITY BENEFIT PL
TOPEKA KS 66636-1000
SECURITY BENEFIT LIFE
VARIFLEX Q NAVISYS 9.39% --
1 SW SECURITY BENEFIT PL
TOPEKA KS 66606-2444
SYMETRA LIFE INSURANCE CO 17.15% --
ATTN: MICHEAL ZHANG
SEP ACCTS SC-15
777 108TH AVE NE STE 1200
BELLEVUE WA 98004-5135
|
AIM V.I. GOVERNMENT SECURITIES FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE INSURANCE CO -- 7.26%
GLAC VA3
P.O. BOX 94200
PALATINE IL 60094-4200
GUARDIAN INSURANCE & ANNUITY -- 27.03%
ATTN: PAUL IANNELLI
3900 BURGESS PL
EQUITY ACCOUNTING 3-S
BETHLEHEM PA 18017-9097
|
AIM V.I. GOVERNMENT SECURITIES FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
GUARDIAN INSURANCE & ANNUITY -- 20.03%
ATTN: PAUL IANNELLI
3900 BURGESS PL
EQUITY ACCOUNTING 3-S
BETHLEHEM PA 18017-9097
HARTFORD LIFE AND ANNUITY 66.49% --
SEPARATE ACCOUNT
ATTN DAVE TEN BROECK
PO BOX 2999
HARTFORD CT 06104-2999
HARTFORD LIFE 26.11% --
SEPARATE ACCOUNT
ATTN DAVE TEN BROECK
P.O. BOX 2999
HARTFORD CT 06104-2999
SAGE LIFE ASSURANCE OF AMERICA -- 11.69%
175 KING ST
ARMONK NY 10504-1606
LINCOLN NATIONAL LIFE INS CO -- 9.78%
ATTN SHIRLEY SMITH
1300 SOUTH CLINTON STREET
FORT WAYNE IN 46802-3506
TRANSAMERICA LIFE INSURANCE CO -- 19.53%
PREFERRED ADVANTAGE
ATTN FMD OPERATIONAL ACCOUNTING
4333 EDGEWOOD RD NE
CEDAR RAPIDS IA 52499
|
AIM V.I. HIGH YIELD FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE INSURANCE COMPANY 18.01% --
GLAC PROPRIETARY
PO BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE CO -- 94.22%
GLAC VA3
P.O. BOX 94200
PALATINE IL 60094-4200
|
AIM V.I. HIGH YIELD FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE OF NEW YORK -- 5.78%
3100 SANDERS ROAD
NORTHBROOK IL 60062-7155
ANNUITY INVESTORS LIFE INS CO 6.52% --
ATTN: TODD GAYHART
580 WALNUT ST
CINCINNATI OH 45202-3110
AUL AMERICAN INDIVIDUAL VARIABLE ANNUITY UNIT 17.34% --
TRUST B
AMERICAN UNITED LIFE INS CO.
ONE AMERICAN SQUARE
PO BOX 368
INDIANAPOLIS IN 46206-0368
GREAT-WEST LIFE & ANNUITY 10.59% --
UNIT VALUATIONS 2T2
ATTN: MUTUAL FUND TRADING 2T2
8515 E ORCHARD RD
ENGLEWOOD CO 80111-5002
HARTFORD LIFE INSURANCE CO 10.37% --
SEPARATE ACCOUNT 2
ATTN DAVID TEN BROECK
PO BOX 2999
HARTFORD CT 06104-2999
JEFFERSON NATIONAL LIFE INSURANCE 14.93% --
9920 CORPORATE CAMPUS DR STE 1000
LOUISVILLE KY 40223-4051
|
AIM V.I. INTERNATIONAL GROWTH FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE INSURANCE CO. 7.33% --
ATTN: FINANCIAL CONTROL-CIGNA
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE COMPANY 6.56 --
GLAC PROPRIETARY
P.O. BOX 94200
PALATINE IL 60094-4200
|
AIM V.I. INTERNATIONAL GROWTH FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
GE LIFE AND ANNUITY ASSURANCE CO -- 28.86%
VARIABLE EXTRA CREDIT
ATTN: VARIABLE ACCOUNTING
6610 WEST BROAD ST
RICHMOND VA 23230-1702
HARTFORD LIFE AND ANNUITY 21.44% --
SEPARATE ACCOUNT
ATTN: DAVE TEN BROECK
PO BOX 2999
HARTFORD CT 06104-2999
HARTFORD LIFE SEPARATE ACCOUNT 7.69% --
ATTN DAVE TEN BROECK
P.O. BOX 2999
HARTFORD CT 06104-2999
IDS LIFE INSURANCE COMPANY -- 6.09%
222 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0002
LINCOLN NATIONAL LIFE INSURANCE COMPANY 5.24% --
1300 S. CLINTON STREET
FORT WAYNE IN 46802-3506
SECURITY BENEFIT LIFE -- 20.97%
FBO UNBUNDLED
C/O VARIABLE ANNUITY DEPT
1 SW SECURITY BENEFIT PL
TOPEKA KS 66606-2444
SECURITY BENEFIT LIFE -- 11.76%
SBL ADVANCE DESIGNS
C/O VARIABLE ANNUITY DEPT
1 SW SECURITY BENEFIT PL
TOPEKA KS 66636-0001
SECURITY BENEFIT LIFE INSURANCCE CO -- 7.26%
FBO SBL ADVISOR DESIGNS - NAVISYS
UNBUNDLED VARIABLE
1 SW SEURITY BENEFIT PL
TOPEKA KS 66636-0001
SUN LIFE FINANCIAL 6.00% --
RETIREMENT PRODUCTS & SERVICES
PO BOX 9134
WELLESLEY HILLS, MA 02481
|
AIM V.I. INTERNATIONAL GROWTH FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
SUN LIFE ASSURANCE COMPANY OF CANADA (US) 6.13% --
P.O. BOX 9133
WELLESLEY HILLS MA 02481-9133
|
AIM V.I. LARGE CAP GROWTH FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
A I M ADVISORS, INC. -- 36.34%
ATTN: CORPORATE CONTROLLER
11 GREENWAY PLAZA SUITE 1919
HOUSTON TX 77046-1103
ALLSTATE LIFE OF NEW YORK -- 10.63%
3100 SANDERS RD
NORTHBROOK IL 60062-7155
ALLSTATE LIFE INSURANCE COMPANY 14.87% --
GLAC PROPRIETARY
PO BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE CO. -- 53.03%
GLAC VA3
PO BOX 94200
PALATINE IL 60094-4200
COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY 12.61% --
1 SW SECURITY BENEFIT PL
TOPEKA KS 66636-0001
HARTFORD LIFE AND ANNUITY 42.85% --
SEPARATE ACCOUNT
P.O. BOX 2999
HARTFORD CT 06104-2999
HARTFORD LIFE SEPARATE ACCOUNT 19.01% --
ATTN DAVE TEN BROECK
P.O. BOX 2999
HARTFORD CT 06104-2999
|
AIM V.I. LEISURE FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
A I M ADVISORS, INC -- 100.00%
ATTN: CORPORATE CONTROLLER
11 E GREENWAY PLZ STE 1919
HOUSTON TX 77046-1103
ING USA ANNUITY AND LIFE INSURANCE CO 99.33% --
1475 DUNWOODY DR
WEST CHESTER PA 19380-1478
|
AIM V.I. MID CAP CORE EQUITY FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE INSURANCE CO -- 7.94%
AIM VI-AIM VA3
3100 SANDERS RD STE K4A
NORTHBROOK IL 60062-7054
AMERICAN ENTERPRISE LIFE INS CO -- 11.01%
1497 AXP FINANCIAL CTR
MINNEAPOLIC MN 55474-0014
HARTFORD LIFE AND ANNUITY 65.17% --
SEPARATE ACCOUNT
ATTN DAVE TEN BROECK
PO BOX 2999
HARTFORD CT 06104-2999
HARTFORD LIFE SEPARATE ACCOUNT 20.00% --
ATTN DAVE TEN BROECK
PO BOX 2999
HARTFORD CT 06104-2999
LINCOLN BENEFIT LIFE -- 26.61%
2940 S 84TH ST
LINCOLN NE 68506-4142
METLIFE INSURANCE COMPANY OF CONNECTICUT -- 8.18%
ATTN SHAREHOLDER ACCOUNTING
ONE TOWER SQUARE 6MS
HARTFORD CT 06183-0002
|
AIM V.I. MID CAP CORE EQUITY FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
METLIFE INSURANCE COMPANY OF CONNECTICUT -- 5.71%
ATTN SHAREHOLDER ACCOUNTING
ONE TOWER SQUARE 6MS
HARTFORD CT 06183-0003
SECURITY BENEFIT LIFE INSURANCE CO -- 8.20%
FBO SBL ADVISOR DESIGNS - NAVISYS
UNBUNDLED VARIABLE
1 SW SECURITY BENEFIT PL
TOPEKA KS 66606-2444
SECURITY BENEFIT LIFE -- 8.05%
FBO UNBUNDLED
C/O VARIABLE ANNUITY DEPARTMENT
1 SW SECURITY BENEFIT PL
TOPEKA KS 66636-1000
|
AIM V.I. MONEY MARKET FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE INSURANCE CO 16.88% --
ATTN FINANCIAL CONTROL- CIGNA
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE OF NEW YORK -- 8.07%
3100 SANDERS ROAD
NORTHBROOK IL 60062-7155
ALLSTATE LIFE INSURANCE COMPANY 39.76% --
GLAC PROPRIETARY
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE COMPANY 17.33% --
GLAC VA1
P.O. BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE CO -- 91.93%
GLAC VA3
PO BOX 94200
PALATINE IL 60094-4200
|
AIM V.I. MONEY MARKET FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
SAGE LIFE ASSURANCE OF AMERICA
175 KING ST 13.58% --
ARMONK NY 10504-1606
|
AIM V.I. SMALL CAP EQUITY FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
A I M ADVISORS INC -- 90.64%
ATTN: CORPORATE CONTROLLER
11 GREENWAY PLAZA SUITE 1919
HOUSTON TX 77046-1103
ANNUITY INVESTORS LIFE INSURANCE -- 9.36%
580 WALNUT ST
CINCINNATI OH 45202-3110
HARTFORD LIFE & ANNUITY 75.05% --
SEPARATE ACCOUNT
ATTN DAVE TEN BROECK
P.O. BOX 2999
HARTFORD CT 06104-2999
HARTFORD LIFE INSURANCE COMPANY
SEPARATE ACCOUNT
ATTN DAVE TEN BROECK 21.71% --
P.O. BOX 2999
HARTFORD CT 06104-2999
|
AIM V.I. TECHNOLOGY FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE INSURANCE CO -- 92.85%
GLAC VA3
PO BOX 94200
PALATINE IL 60094-4200
|
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE OF NEW YORK -- 7.15%
3100 SANDERS RD
NORTHBROOK IL 60062-7155
AMERICAN SKANDIA LIFE ASSURANCE CO 34.76% --
VARIABLE ACCOUNT / SAQ
ATTN INVESTMENT ACCOUNTING
P.O. BOX 883
1 CORPORATE DR
SHELTON CT 06484-6208
CM LIFE INSURANCE CO 6.24% --
FUND OPERATIONS/N255
1295 STATE ST
SPRINGFIELD MA 01111-0001
IDS LIFE INSURANCE COMPANY 21.64% --
222 AXP FINANCIAL CTR
MINNEAPOLIS MN 55474-0002
MASS MUTUAL LIFE INS CO 6.23% --
FUND OPERATIONS/N255
1295 STATE ST
SPRINGFIELD MA 01111-0001
|
AIM V.I. UTILITIES FUND
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
ALLSTATE LIFE INSURANCE CO -- 33.26%
GLAC VA3
PO BOX 94200
PALATINE IL 60094-4200
ALLSTATE LIFE INSURANCE COMPANY 7.68% --
GLAC PROPRIETARY
P.O. BOX 94200
PALATINE IL 60094-4200
ANNUITY INVESTORS LIFE INSURANCE -- 65.91%
580 WALNUT
CINCINNATI OH 45202-3110
|
SERIES I SERIES II
SHARES SHARES
---------------- ----------------
PERCENTAGE OWNED PERCENTAGE OWNED
OF OF
NAME AND ADDRESS OF PRINCIPAL HOLDER RECORD RECORD
------------------------------------ ---------------- ----------------
COMMONWEALTH ANNUITY AND LIFE INSURANCE COMPANY 11.00% --
440 LINCOLN ST
SEPARATE ACCOUNTING
MAIL STATION S310
WORCESTER MA 01653-0002
GUARDIAN INSURANCE & ANNUITY CO 6.43% --
ATTN EQUITY ACCOUNTING DEPT 3-S-18
BETHLEHEM PA 18017-9097
KEMPER INVESTORS LIFE INSURANCE CO 33.26% --
ATTN INVESTMENT ACCOUNTING LL-2W
P.O. BOX 19097
GREENVILLE SC 29602-9097
|
MANAGEMENT OWNERSHIP
As of April 16, 2007, the trustees and officers as a gro up owned less than 1% of the shares outstanding of each class of any Fund.
APPENDIX G
MANAGEMENT FEES
For the last three fiscal years ended December 31, the management fees payable by each Fund, the amounts waived by AIM and the net fees paid by each Fund were as follows:
2006 2005 2004
------------------------------------ ---------------------------------- ----------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT NET
FEE FEE MANAGEMENT FEE FEE MANAGEMENT FEE FEE MANAGEMENT
FUND NAME PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID
--------- ----------- ---------- ----------- ---------- ---------- ---------- ---------- ---------- ----------
AIM V.I. Basic
Balanced Fund $ 695,975 $223,387 $ 472,588 $ 740,114 $199,504 $ 540,610 $ 776,652 $ 156 $ 776,496
AIM V.I. Basic Value
Fund 5,871,702 393,306 5,478,396 6,010,305 404,786 5,605,519 5,071,350 5,972 5,065,378
AIM V.I. Capital
Appreciation Fund 8,764,720 6,238 8,758,482 6,447,166 8,070 6,439,096 6,192,972 6,076 6,186,896
AIM V.I. Capital
Development Fund 1,709,822 13,606 1,696,216 1,427,053 11,009 1,416,044 1,138,855 1,414 1,137,441
AIM V.I. Core Equity
Fund 13,537,705 73,332 13,464,373 8,283,089 24,520 8,258,569 9,144,411 22,212 9,122,199
AIM V.I. Diversified
Income Fund 308,867 179,148 129,719 365,805 111,016 254,789 417,563 217 417,346
AIM V.I. Dynamics
Fund 981,967 7,647 974,320 859,238 7,530 851,708 1,032,136 2,585 1,029,551
AIM V.I. Financial
Services Fund 1,003,239 1,374 1,001,865 1,254,039 2,512 1,251,527 1,589,014 3,538 1,585,476
|
2006 2005 2004
------------------------------------ ---------------------------------- ----------------------------------
MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT NET MANAGEMENT MANAGEMENT NET
FEE FEE MANAGEMENT FEE FEE MANAGEMENT FEE FEE MANAGEMENT
FUND NAME PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID PAYABLE WAIVERS FEE PAID
--------- ----------- ---------- ----------- ---------- ---------- ---------- ---------- ---------- ----------
AIM V.I. Global
Health Care Fund $2,129,997 $ 7,362 $2,122,635 $2,307,364 $ 9,866 $2,297,498 $2,740,016 $ 8,321 $2,731,695
AIM V.I. Global Real
Estate Fund 1,195,348 200,570 994,778 774,807 131,049 643,758 413,031 50,176 362,855
AIM V.I. Government
Securities Fund 4,037,516 449,190 3,588,326 3,556,610 218,537 3,338,073 2,816,229 35,684 2,780,545
AIM V.I. High Yield
Fund 337,335 120,651 216,684 460,257 112,430 347,827 468,562 623 467,939
AIM V.I.
International
Growth Fund 4,271,146 6,840 4,264,306 2,975,590 5,724 2,969,866 2,340,955 2,156 2,338,799
AIM V.I. Large Cap
Growth Fund 534,625 148,589 386,036 17,816 17,816 -0- 8,341 8,341 -0-
AIM V.I. Leisure
Fund 389,712 130,401 259,311 391,455 82,448 309,007 320,330 22,726 297,604
AIM V.I. Mid Cap
Core Equity Fund 4,575,563 23,981 4,551,582 4,227,362 20,795 4,206,567 2,917,207 12,691 2,904,516
AIM V.I. Money
Market Fund 193,553 -0- 193,553 218,849 -0- 218,849 279,009 -0- 279,009
AIM V.I. Small Cap
Equity Fund 569,320 116,879 452,441 278,323 115,253 163,070 124,241 103,556 20,685
AIM V.I. Technology
Fund 1,365,254 1,278 1,363,976 1,352,694 2,094 1,350,600 1,387,379 2,413 1,384,966
AIM V.I. Utilities
Fund 726,202 29,683 696,519 1,043,296 43,450 999,846 614,369 3,095 611,274
|
APPENDIX H
PORTFOLIO MANAGERS
PORTFOLIO MANAGER FUND HOLDINGS AND INFORMATION ON OTHER MANAGED ACCOUNTS
AIM's portfolio managers develop investment models which are used in
connection with the management of certain AIM funds as well as other mutual
funds for which AIM or an affiliate acts as sub-advisor, other pooled investment
vehicles that are not registered mutual funds, and other accounts managed for
organizations and individuals. The following chart reflects the portfolio
managers' investments in the Funds that they manage. The chart also reflects
information regarding accounts other than the Funds for which each portfolio
manager has day-to-day management responsibilities. Accounts are grouped into
three categories: (i) mutual funds, (ii) other pooled investment vehicles, and
(iii) other accounts. To the extent that any of these accounts pay advisory fees
that are based on account performance ("performance-based fees"), information on
those accounts is specifically broken out. In addition, any assets denominated
in foreign currencies have been converted into U.S. Dollars using the exchange
rates as of the applicable date.
The following table reflects information as of December 31, 2006:
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS (ASSETS INVESTMENT VEHICLES OTHER ACCOUNTS
IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)
DOLLAR RANGE --------------------- -------------------- --------------------
OF INVESTMENTS NUMBER OF NUMBER OF NUMBER OF
PORTFOLIO MANAGER IN EACH FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
----------------- --------------- --------- --------- --------- -------- --------- --------
AIM V.I. BASIC BALANCED FUND
R. Canon Coleman II None 7 $ 8,850.6 1 $ 7.2 2460 $ 737.0(2)
Jan H. Friedli None 5 $ 2,721.9 2 $1,045.3 None None
Brendan D. Gau None 5 $ 2,721.9 2 $1,045.3 None None
Matthew W.
Seinsheimer None 6 $ 8,614.1 1 $ 7.2 2460 $ 737.0(2)
Michael J. Simon None 10 $10,366.0 1 $ 7.2 2460 $ 737.0(2)
Bret W. Stanley None 7 $ 8,850.6 1 $ 7.2 2460 $ 737.0(2)
AIM V.I. BASIC VALUE FUND
R. Canon Coleman II None 7 $ 8,111.7 1 $ 7.2 2460 $ 737.0(2)
Matthew W.
Seinsheimer None 6 $ 7,875.2 1 $ 7.2 2460 $ 737.0(2)
Michael J. Simon None 10 $ 9,627.1 1 $ 7.2 2460 $ 737.0(2)
Bret W. Stanley None 7 $ 8,111.7 1 $ 7.2 2460 $ 737.0(2)
|
(2) These are accounts of individual investors for which AIM's affiliate, AIM Private Asset Management, Inc. ("APAM") provides investment advice. APAM offers separately managed accounts that are managed according to the investment models developed by AIM's portfolio managers and used in connection with the management of certain AIM funds. APAM accounts may be invested in accordance with one or more of those investment models and investments held in those accounts are traded in accordance with the applicable models.
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS (ASSETS INVESTMENT VEHICLES OTHER ACCOUNTS
IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)
DOLLAR RANGE --------------------- -------------------- --------------------
OF INVESTMENTS NUMBER OF NUMBER OF NUMBER OF
PORTFOLIO MANAGER IN EACH FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
----------------- --------------- --------- --------- --------- -------- --------- --------
AIM V.I. CAPITAL APPRECIATION FUND
Kirk L. Anderson None 6 $ 8,894.6 2 $ 58.1 None None
James G. Birdsall None 6 $ 9,464.8 1 $ 53.1 None None
Robert J. Lloyd None 6 $10,831.7 1 $ 53.1 None None
Lanny H. Sachnowitz None 5 $ 8,444.9 1 $ 53.1 None None
AIM V.I. CAPITAL DEVELOPMENT FUND
Karl F. Farmer(3) None 3 $ 2,100.5 None None None None
Paul J. Rasplicka None 4 $ 3,686.2 None None 5 $ 0.2
Warren Tennant(3) None None None None None None None
AIM V.I. CORE EQUITY FUND
Tyler Dann II(4) None None None None None None None
Brian Nelson(4) None None None None None None None
Ronald S. Sloan None 4 $ 9,926.7 1 $ 9.7 6248 $1,562.7(2)
AIM V.I. DIVERSIFIED INCOME FUND
Peter Ehret None 3 $ 1,501.7 1 $ 6.6 None None
Jan H. Friedli None 5 $ 2,764.6 2 $1,045.3 None None
Brendan D. Gau None 5 $ 2,767.6 2 $1,045.3 None None
Carolyn L. Gibbs None 3 $ 1,501.7 1 $ 6.6 None None
Darren S. Hughes None 3 $ 1,501.7 1 $ 6.6 None None
AIM V.I. DYNAMICS FUND
Karl Farmer None 2 $ 1,979.4 None None None Non
Paul J. Rasplicka None 4 $ 3,842.9 None None 5 $ 0.2
AIM V.I. FINANCIAL SERVICES FUND
Michael J. Simon None 10 $10,308.2 1 $ 7.2 2460 $ 737.0(2)
Meggan M. Walsh None 2 $ 2,691.5 None None None None
AIM V.I. GLOBAL HEALTH CARE FUND
Derek Tanner None 5 $ 2,360.6(5) 4 $ 299.1 None None
|
(4) Mr. Dann and Mr. Nelson began serving as portfolio managers on AIM V.I.
Core Equity Fund on May 1, 2007.
(5) This amount includes one fund that pays performance-based fees with $140.0 M in total assets under management.
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS (ASSETS INVESTMENT VEHICLES OTHER ACCOUNTS
IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)
DOLLAR RANGE --------------------- -------------------- --------------------
OF INVESTMENTS NUMBER OF NUMBER OF NUMBER OF
PORTFOLIO MANAGER IN EACH FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
----------------- --------------- --------- --------- --------- -------- --------- --------
AIM V.I. GLOBAL REAL ESTATE FUND
Mark D. Blackburn None 6 $ 4,117.1 9 $ 988.7 53 $4,385.1
Paul Curbo(6)
Joe V. Rodriguez, None None None None None None None
Jr. None 6 $ 4,117.1 9 $ 988.7 53 $4,385.1
James W. Trowbridge None 6 $ 4,117.1 9 $ 988.7 53 $4,385.1
Ping-Ying Wang None 5 $ 3,438.9 9 $ 988.7 53 $4,385.1
AIM V.I. GOVERNMENT SECURITIES FUND
Jan H. Friedli(7) None 6 $ 2,812.1 2 $1,045.3 None None
Brendan G. Gau(7) None 6 $ 2,812.1 2 $1,045.3 None None
AIM V.I. HIGH YIELD FUND
Peter Ehret None 3 $ 1,489.9 1 $ 6.6 None None
Carolyn L. Gibbs None 3 $ 1,489.9 1 $ 6.6 None None
Darren S. Hughes None 3 $ 1,489.9 1 $ 6.6 None None
AIM V.I. INTERNATIONAL GROWTH FUND
Shuxin Cao None 8 $ 6,573.8 1 $ 134.3 1748 $ 722.1(2)
Matthew W. Dennis None 6 $ 5,368.4 5 $ 411.8 1748 $ 722.1(2)
Jason T. Holzer None 8 $ 7,304.6 10 $3,340.6 1748 $ 722.1(2)
Clas G. Olsson None 6 $ 5,368.4 10 $3,340.6 1748 $ 722.1(2)
Barrett K. Sides None 6 $ 4,387.0 2 $ 139.4 1748 $ 722.1(2)
AIM V.I. LARGE CAP GROWTH FUND
Geoffrey V. Keeling None 3 $ 2,981.3 None None 41 $ 11.5(2)
Robert L. Shoss None 3 $ 2,981.3 None None 41 $ 11.5(2)
AIM V.I. LEISURE FUND
Mark D. Greenberg None 2 $ 1,507.6 1 $ 101.4 None None
AIM V.I. MID CAP CORE EQUITY FUND
Doug Asiello(8) None None None None None None None
|
(7) Mr. Friedli and Mr. Gau began serving as portfolio manager of AIM V.I.
Government Securities Fund on May 1, 2007.
(8) Mr. Asiello and Mr. Nelson began serving as portfolio manager on AIM V.I.
Mid Cap Core Equity Fund on May 1, 2007.
OTHER REGISTERED OTHER POOLED
MUTUAL FUNDS (ASSETS INVESTMENT VEHICLES OTHER ACCOUNTS
IN MILLIONS) (ASSETS IN MILLIONS) (ASSETS IN MILLIONS)
DOLLAR RANGE --------------------- -------------------- --------------------
OF INVESTMENTS NUMBER OF NUMBER OF NUMBER OF
PORTFOLIO MANAGER IN EACH FUND(1) ACCOUNTS ASSETS ACCOUNTS ASSETS ACCOUNTS ASSETS
----------------- --------------- --------- --------- --------- -------- --------- --------
Brian Nelson(8) None None None None None None None
Ronald S. Sloan None 4 $12,025.4 1 $ 9.7 6248 $1,562.7(2)
AIM V.I. SMALL CAP EQUITY FUND
Juliet S. Ellis None 7 $ 3,807.7 None None None None
Juan R. Hartsfield None 7 $ 3,807.7 None None None None
AIM V.I. TECHNOLOGY FUND
Lanny Sachnowitz(9) None 6 $10,024.3 1 $ 53.1 None None
AIM V.I. UTILITIES FUND
John S. Segner None 4 $ 2,587.2 1 $ 289.0 2 $ 24.7(2)
|
POTENTIAL CONFLICTS OF INTEREST
Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one Fund or other account. More specifically, portfolio managers who manage multiple Funds and /or other accounts may be presented with one or more of the following potential conflicts:
- The management of multiple Funds and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each Fund and/or other account. AIM seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the Funds.
- If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one Fund or other account, a Fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible Funds and other accounts. To deal with these situations, AIM and the Funds have adopted procedures for allocating portfolio transactions across multiple accounts.
- With respect to securities transactions for the Funds, AIM determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds for which AIM or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), AIM may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, trades for a Fund in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the possible detriment of the Fund or other account(s) involved.
- Finally, the appearance of a conflict of interest may arise where AIM has an incentive, such as a performance-based management fee, which relates to the management of one Fund or account but not all Funds and accounts with respect to which a portfolio manager has day-to-day management responsibilities.
AIM and the Funds have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
DESCRIPTION OF COMPENSATION STRUCTURE
A I M ADVISORS, INC.
AIM seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Portfolio managers receive a base salary, an incentive bonus opportunity, an equity compensation opportunity, a benefits package, and a relocation package if such benefit is applicable. Portfolio manager compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. AIM evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Each portfolio manager's compensation consists of the following five elements:
- BASE SALARY. Each portfolio manager is paid a base salary. In setting the base salary, AIM's intention is to be competitive in light of the particular portfolio manager's experience and responsibilities.
- ANNUAL BONUS. Each portfolio manager is eligible to receive an annual cash bonus which has quantitative and non-quantitative components. Generally, 70% of the bonus is quantitatively determined, based typically on a four-year rolling average of pre-tax performance of all registered investment company accounts for which a portfolio manager has day-to-day management responsibilities versus the performance of a pre-determined peer group. In instances where a portfolio manager has responsibility for management of more than one fund, an asset weighted four-year rolling average is used.
High fund performance (against applicable peer group) would deliver compensation generally associated with top pay in the industry (determined by reference to the third-party provided compensation survey information) and poor fund performance (versus applicable peer group) could result in no bonus. The amount of fund assets under management typically has an impact on the bonus potential (for example, managing more assets increases the bonus potential); however, this factor typically carries less weight than relative performance. The remaining 30% portion of the bonus is discretionary as determined by AIM and takes into account other subjective factors.
- EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to purchase common shares and/or granted restricted shares of AMVESCAP stock from pools determined from time to time by the Remuneration Committee of the AMVESCAP Board of Directors. Awards of equity-based compensation typically vest over time, so as to create incentives to retain key talent.
- PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided life insurance coverage in the form of a group variable universal life insurance policy, under which they may make additional contributions to purchase additional insurance coverage or for investment purposes.
- PARTICIPATION IN DEFERRED COMPENSATION PLAN. Portfolio managers are eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation.
Portfolio managers also participate in benefit plans and programs available generally to all employees.
INVESCO INSTITUTIONAL (N.A.), INC. (SUB-ADVISOR TO AIM V.I. GLOBAL REAL ESTATE FUND)
INVESCO Institutional (N.A.), Inc. seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Portfolio managers receive, as more fully described below, a base salary, an incentive bonus opportunity, an equity compensation opportunity, a benefits package, and a relocation package if such benefit is applicable. Portfolio manager compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. INVESCO Institutional (N.A.), Inc. evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Each portfolio manager's compensation consists of the following five elements:
- BASE SALARY. Each portfolio manager is paid a base salary which is set at a level determined to be appropriate based upon an individual's experience and responsibilities through the use of independent compensation surveys of the investment management industry.
- ANNUAL BONUS. Each portfolio manager is paid an annual cash bonus which has a performance driven component and a discretionary component, the combined total of which will typically range from 50 to over 100 percent of the manager's base salary. Generally, the majority of the bonus is pre-tax performance driven, based on the success of the team's investment results which are measured against appropriate market benchmarks and peer groups. The remaining portion of the bonus is discretionary and is determined by the sub-advisor's Chief Investment Officer and Chief Executive Officer.
- EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to purchase common shares and/or granted restricted shares or deferred shares of AMVESCAP stock from pools determined from time to time by the Remuneration Committee of the AMVESCAP Board of Directors. Awards of equity-based compensation typically vest over time, so as to create incentives to retain key talent.
- PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided life insurance coverage in the form of a group variable universal life insurance policy, under which they may make additional contributions to purchase additional insurance coverage or for investment purposes.
PARTICIPATION IN DEFERRED COMPENSATION PLAN. Portfolio managers are eligible to participate in a non-qualified deferred compensation plan, which affords participating employees the tax benefits of deferring the receipt of a portion of their cash compensation.
Portfolio managers also participate in benefit plans and programs available generally to all employees.
APPENDIX I
ADMINISTRATIVE SERVICES FEES
The Funds paid AIM the following amounts for administrative services for the last three fiscal periods:
FUND NAME 2006 2005 2004
--------- ---------- ---------- ----------
AIM V.I. Basic Balanced Fund $ 244,188 $ 255,807 $ 265,946
AIM V.I. Basic Value Fund 2,219,812 2,271,261 1,908,101
AIM V.I. Capital Appreciation Fund 3,684,721 2,660,779 2,510,722
AIM V.I. Capital Development Fund 613,485 506,813 410,377
AIM V.I. Core Equity Fund 5,785,524 3,555,685 3,911,626
AIM V.I. Diversified Income Fund 141,102 154,692 164,221
AIM V.I. Dynamics Fund 376,725 335,943 381,088
AIM V.I. Financial Services Fund 384,973 465,794 577,778
AIM V.I. Global Health Care Fund 781,280 840,377 994,456
AIM V.I. Global Real Estate Fund(1) 350,878 241,239 130,388
AIM V.I. Government Securities Fund 2,318,900 2,024,797 1,561,525
AIM V.I. High Yield Fund 175,709 223,050 223,282
AIM V.I. International Growth Fund 1,500,504 996,048 737,999
AIM V.I. Large Cap Growth Fund 221,467 51,916 50,049
AIM V.I. Leisure Fund 179,720 180,452 145,439
AIM V.I. Mid Cap Core Equity Fund 1,724,200 1,586,512 1,088,325
AIM V.I. Money Market Fund 141,239 151,196 177,043
AIM V.I. Small Cap Equity Fund 215,952 130,414 84,182
AIM V.I. Technology Fund 499,415 494,632 500,491
AIM V.I. Utilities Fund 322,038 463,332 277,440
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(1) Prior to April 30, 2004, INVESCO either directly or through affiliated companies, provided certain administrative subaccounting, and recordkeeping services to AIM V.I. Global Real Estate Fund under a prior administrative service agreement.
APPENDIX J
BROKERAGE COMMISSIONS
Set forth below are brokerage commissions(1) paid by each of the Funds listed below during the last three fiscal years or period ended December 31. Unless otherwise indicated, the amount of brokerage commissions paid by a Fund may change from year to year because of, among other things, changing asset levels, shareholder activity, and/or portfolio turnover:
FUND 2006 2005 2004
---- ------------- ---------- ----------
AIM V.I. Basic Balanced Fund .............. $ 32,225.66 $ 21,203 $ 28,539
AIM V.I. Basic Value Fund ................. 374,179.34 294,952 303,397
AIM V.I. Capital Appreciation Fund(2) ..... 3,474,201.60 2,068,125 1,715,908
AIM V.I. Capital Development Fund ......... 615,385.29 525,615 396,080
AIM V.I. Core Equity Fund ................. 2,023,109.37 1,662,414 1,863,698
AIM V.I. Diversified Income Fund .......... -0- -0- 68
AIM V.I. Dynamics Fund .................... 387,058.18 299,712 468,914
AIM V.I. Financial Services Fund .......... 31,895.23 48,974 350,290
AIM V.I. Global Health Care Fund .......... 526,067.31 614,742 1,471,720
AIM V.I. Global Real Estate Fund .......... 343,505 129,032 75,806
AIM V.I. Government Securities Fund ....... N/A N/A -0-
AIM V.I. High Yield Fund .................. 220.52 150 2,287
AIM V.I. International Growth Fund ........ 951,596.93 672,128 694,935
AIM V.I. Large Cap Growth Fund(3) ......... 119,740.71 6,368 2,882
AIM V.I. Leisure Fund ..................... 28,333.52 33,323 33,290
AIM V.I. Mid Cap Core Equity Fund ......... 1,144,457.35 881,607 609,099
AIM V.I. Money Market Fund ................ N/A N/A -0-
AIM V.I. Small Cap Equity Fund ............ 104,484.66 62,530 88,814
AIM V.I. Technology Fund .................. 744,727.86 760,447 992,768
AIM V.I. Utilities Fund ................... 93,988.33 150,751 273,041
|
(2) This Fund acquired assets of three other Funds in reorganization transactions that occurred in 2006 fiscal year. In addition to the factors set forth above, the variation in brokerage commissions paid by the Fund for the 2006 fiscal year compared to the prior fiscal years is attributable to an increase in portfolio turnover occurring after such reorganizations.
(3) This Fund acquired assets of one other Fund in a reorganization transaction that occurred in 2006 fiscal year. In addition to the factors set forth above, the variation in brokerage commissions paid by the Fund for the 2006 fiscal year compared to the prior fiscal years is attributable to an increase in portfolio turnover occurring after such reorganization.
APPENDIX K
DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF
SECURITIES OF REGULAR BROKERS OR DEALERS
During the last fiscal year ended December 31, 2006, each Fund allocated the following amount of transactions to broker-dealers that provided AIM with certain research, statistics and other information:
Related
Brokerage
Fund Transactions Commissions
---- ----------------- -------------
AIM V.I. Basic Balanced Fund ........... $ 8,974,917.44 $ 26,815.71
AIM V.I. Basic Value Fund .............. 285,854,948.64 317,704.54
AIM V.I. Capital Appreciation Fund ..... 2,847,395,048.73 3,212,528.98
AIM V.I. Capital Development Fund ...... 392,288,299.00 1,014,398.20
AIM V.I. Core Equity Fund .............. 1,577,961,622.56 1,857,427.41
AIM V.I. Diversified Income Fund ....... 0.00 0.00
AIM V.I. Dynamics Fund ................. 282,157,219.89 608,754.53
AIM V.I. Financial Services Fund ....... 46,496,890.15 79,546.73
AIM V.I. Global Health Care Fund ....... 335,551,777.02 697,907.13
AIM V.I. Global Real Estate Fund ....... 198,402,382 298,122
AIM V.I. Government Securities Fund .... N/A N/A
AIM V.I. High Yield Fund ............... 144,421.99 220.08
AIM V.I. International Growth Fund ..... 439,582,314.75 994,749.71
AIM V.I. Large Cap Growth Fund ......... 188,303,372.28 113,909.16
AIM V.I. Leisure Fund .................. 20,626,864.63 51,357.78
AIM V.I. Mid Cap Core Equity Fund ...... 743,197,672.92 1,106,448.44
AIM V.I. Money Market Fund ............. N/A N/A
AIM V.I. Small Cap Equity Fund ......... 77,740,389.62 215,164.14
AIM V.I. Technology Fund ............... 382,935,924.20 885,510.84
AIMI V.I. Utilities Fund ............... 78,142,667.42 85,441.85
|
* Amounts reported are inclusive of commissions paid to, and brokerage transactions placed with, certain brokers that provide execution, research and other services.
Information concerning the Funds' acquisition of securities of their regular brokers or dealers during the last fiscal year ended December 31, 2006 were as follows:
FUND/ISSUER SECURITY MARKET VALUE ----------- -------------------------- ------------ AIM V.I. Basic Balanced Fund Barclays Bank PLC. Floating Rate Global Notes 100,035 Citigroup Inc. Common Stock 1,877,424 JPMorgan Chase & Co. Common Stock 2,232,185 Merrill Lynch & Co., Inc. Common Stock 1,635,860 Morgan Stanley Common Stock 1,532,513 AIM V.I. Basic Value Fund Citigroup Inc. Common Stock 24,396,433 JPMorgan Chase & Co. Common Stock 30,895,433 Merrill Lynch & Co., Inc. Common Stock 22,862,846 Morgan Stanley Common Stock 22,728,823 AIM V.I. Capital Appreciation Fund Goldman Sachs Group, Inc. (The) Common Stock 31,098,600 |
FUND/ISSUER SECURITY MARKET VALUE ----------- -------------------------- ------------ JP Morgan Chase & Co. Common Stock 32,034,154 Merrill Lynch & Co., Inc. Common Stock 28,121,134 Morgan Stanley Common Stock 19,999,697 AIM V.I. Core Equity Fund Barclays Bank PLC Common Stock 36,161,414 Citigroup, Inc. Common Stock 38,678,136 UBS A.G. Common Stock 31,850,822 AIM V.I. Diversified Income Fund Barclays Bank PLC Floating Rate Global Notes 100,035 AIM V.I. Financial Services Fund Bank of America Corp. Common Stock 4,990,150 Citigroup Inc. Common Stock 9,427,169 JPMorgan Chase & Co.. Common Stock 10,324,656 Merrill Lynch & Co., Inc. Common Stock 9,892,527 Morgan Stanley Common Stock 6,743,218 UBS A.G. Common Stock 3,000,452 AIM V.I. International Growth Fund Credit Suisse Group Common Stock 6,515,388 UBS A.G. Common Stock 12,444,917 AIM V.I. Large Cap Growth Fund Bear Stearns Cos. Inc. (The) Common Stock 1,484,065 Goldman Sachs Group, Inc. (The) Common Stock 4,420,387 JP Morgan Chase & Co. Common Stock 1,513,915 Lehman Brothers Holdings Inc. Common Stock 2,672,329 Morgan Stanley Common Stock 1,593,422 AIM V.I. Money Market Fund Citigroup Global Markets Inc. Corporate Obligations 2,000,000 |
APPENDIX L
CERTAIN FINANCIAL ADVISORS THAT RECEIVE ONE OR MORE TYPES OF PAYMENTS
1st Global Capital Corporation
A G Edwards & Sons, Inc.
ADP Broker Dealer, Inc.
Advantage Capital Corporation
American General Securities, Inc.
American Skandia Life Assurance Corporation
American United Life Insurance Company
Ameriprise Financial Services, Inc.
APS Financial
Associated Securities Corporation
AXA Advisors, LLC
Bank of New York
Bank of Oklahoma N.A.
BBVA Investments
Bear Stearns Securities Co
Brown Brothers Harriman
Cadaret Grant & Company, Inc.
Cambridge Investment Research, Inc.
Cantella
Cantor Fitzgerald
Centennial Bank
Charles Schwab & Company, Inc.
Chase Investment Services Corporation
Chicago Mercantile Exchange
Citigroup
CitiCorp Investment Services
Citigroup Global Markets, Inc.
Citistreet Equities LLC
Comerica Bank
Commonwealth Financial Network
Compass Brokerage, Inc.
Contemporary Financial Solutions, Inc.
Credit Suisse
CUNA Brokerage Services, Inc.
CUSO Financial Services, Inc.
Equity Services, Inc.
Fidelity Brokerage Services, LLC
Fidelity Institutional Operations Company, Inc.
Fifth Third Bank
Financial Network Investment Corporation
Fiserv
Frost Brokerage Services, Inc.
Frost National Bank
FSC Securities Corporation
Fund Services Advisors
Goldman Sachs
Great West Life & Annuity Company
Guaranty Bank & Trust
Guardian Insurance & Annuity Company, Inc.
GunnAllen Finanical
Harris Nesbitt Burns
H. D. Vest Investment Securities, Inc.
Hilliard Lyons, Inc.
Hornor Townsend & Kent, Inc.
Huntington
ING Financial Partners, Inc.
ING USA Annuity and Life Insurance Company
Intersecurities, Inc.
INVEST Financial Corporation, Inc.
Investment Centers of America, Inc.
Jefferson Pilot Securities Corporation
JM Lummis Securities
JP Morgan Chase
LaSalle
Lincoln Financial Advisors Corporation
Lincoln Investment Planning, Inc.
Linsco/Private Ledger Corporation
M & I Trust
M & T Securities, Inc.
M M L Investors Services, Inc.
Matrix
McDonald Investments, Inc.
Mellon Financial
Merrill Lynch & Company, Inc.
Merrill Lynch Life Insurance Company
Metlife Securities, Inc.
Meyer Financial Group
Money Concepts Capital Corporation
Morgan Keegan & Company, Inc.
Morgan Stanley
Morgan Stanley DW Inc.
Multi-Financial Securities Corporation
Mutual Service Corporation
N F P Securities, Inc.
NatCity Investments, Inc.
National Planning Corporation
Nationwide Investment Services Corporation
New England Securities Corporation
Next Financial Group, Inc.
Northwestern Mutual Investment Services
NYLIFE Distributors, LLC
Oppenheimer & Company, Inc.
Pershing LLC
PFS Investments, Inc.
Piper Jaffray & Company
PNC Capital Markets
Primevest Financial Services, Inc.
Proequities, Inc.
R B C Centura Securities, Inc.
R B C Dain Rauscher, Inc.
Raymond James & Associates, Inc.
Raymond James Financial Services, Inc.
Ross Sinclair and Associates
Royal Alliance Associates, Inc.
SCF Securities
S I I Investments, Inc.
Securities America, Inc.
Sentra Securities Corporation
Signator Investors, Inc.
Simmons 1st Investment Group
Spelman & Company, Inc.
State Farm VP Management Corp
State Street Bank & Trust Company
SunAmerica Securities, Inc.
SunGard Institutional Brokerage, Inc.
Sungard Investment Products, Inc.
SunTrust Bank, Central Florida, N.A.
SunTrust Robinson Humphrey
SWS Financial Services
The (Wilson) William Financial
Tower Square Securities, Inc.
Transamerica Financial Advisors, Inc.
Transamerica Life Insurance & Annuity Company
Trust Management Network
U.S. Bancorp Investments, Inc.
UBS Financial Services Inc.
Union Bank of California
United Planner Financial Service
USAllianz Securities, Inc.
US Bank
UVEST Financial Services, Inc.
V S R Financial Services, Inc.
VALIC Financial Advisors, Inc.
vFinance Investments
Wachovia Capital Markets LLC
Wachovia Securities, LLC
Walnut Street Securities, Inc.
Waterstone Financial Group, Inc.
Wells Fargo Investments, LLC
Woodbury Financial Services, Inc.
X C U Capital Corporation, Inc.
Zions Bank
APPENDIX M
AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLAN
A list of amounts paid by each class of shares to AIM Distributors pursuant to the Plan for the fiscal year or period ended December 31, 2006 are as follows:
SERIES I SERIES II
FUND SHARES SHARES
---- -------- ---------
AIM V.I. Basic Balanced Fund ........... N/A $ 14,454
AIM V.I. Basic Value Fund .............. N/A 851,531
AIM V.I. Capital Appreciation Fund ..... N/A 920,561
AIM V.I. Capital Development Fund ...... N/A 256,263
AIM V.I. Core Equity Fund .............. N/A 62,257
AIM V.I. Diversified Income Fund ....... N/A 2,084
AIM V.I. Dynamics Fund ................. N/A 33
AIM V.I. Financial Services Fund ....... N/A 831
AIM V.I. Global Health Care Fund ....... N/A 84,977
AIM V.I. Global Real Estate Fund ....... N/A 453
AIM V.I. Government Securities Fund .... N/A 43,361
AIM V.I. High Yield Fund ............... N/A 2,631
AIM V.I. International Growth Fund ..... N/A 236,205
AIM V.I. Large Cap Growth Fund ......... N/A 3,477
AIM V.I. Leisure Fund .................. N/A 30
AIM V.I. Mid Cap Core Equity Fund ...... N/A 134,968
AIM V.I. Money Market Fund ............. N/A 6,227
AIM V.I. Small Cap Equity Fund ......... N/A 1,925
AIM V.I. Technology Fund ............... N/A 360
AIM V.I. Utilities Fund ................ N/A 4,225
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APPENDIX N
ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLAN
An estimate by category of the allocation of actual fees paid by Series II shares of the Funds during the fiscal year or period ended December 31, 2006 follows:
PRINTING COMPENSATION COMPENSATION ANNUAL
& TO TO SALES REPORT
ADVERTISING MAILING SEMINARS DEALER* PERSONNEL TOTAL
----------- -------- -------- ------------ ------------ --------
AIM V.I. Basic Balanced Fund -- -- -- $ 14,454 -- $ 14,454
AIM V.I. Basic Value Fund -- -- -- 851,531 -- 851,531
AIM V.I. Capital Appreciation Fund -- -- -- 920,561 -- 920,561
AIM V.I. Capital Development Fund -- -- -- 256,263 -- 256,263
AIM V.I. Core Equity Fund -- -- -- 62,257 -- 62,257
AIM V.I. Diversified Income Fund -- -- -- 2,084 -- 2,084
AIM V.I. Dynamics Fund -- -- -- 33 -- 33
AIM V.I. Financial Services Fund -- -- -- 831 -- 831
AIM V.I. Global Health Care Fund -- -- -- 84,977 -- 84,977
AIM V.I. Global Real Estate Fund -- -- -- 453 -- 453
AIM V.I. Government Securities Fund -- -- -- 43,361 -- 43,361
AIM V.I. High Yield Fund -- -- -- 2,631 -- 2,631
AIM V.I. International Growth Fund -- -- -- 236,205 -- 236,205
AIM V.I. Large Cap Growth Fund -- -- -- 3,477 -- 3,477
AIM V.I. Leisure Fund -- -- -- 30 -- 30
AIM V.I. Mid Cap Core Equity Fund -- -- -- 134,968 -- 13,496
AIM V.I. Money Market Fund -- -- -- 6,227 -- 6,227
AIM V.I. Small Cap Equity Fund -- -- -- 1,925 -- 1,925
AIM V.I. Technology Fund -- -- -- 360 -- 360
AIM V.I. Utilities Fund -- -- -- 4,225 -- 4225
|
* Compensation to financial intermediaries and broker-dealers to pay or reimburse them for their services or expenses in connection with the distribution of the Shares to fund variable annuity and variable insurance contracts investing directly in the Shares.
APPENDIX O-1
PENDING LITIGATION ALLEGING MARKET TIMING
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of their current and former officers and/or certain unrelated third parties and are based on allegations of improper market timing and related activity in the AIM Funds. These lawsuits either have been served or have had service of process waived (with the exception of the Sayegh lawsuit discussed below).
RICHARD LEPERA, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC.,
INVESCO BOND FUNDS, INC., INVESCO SECTOR FUNDS, INC. AND DOE
DEFENDANTS 1-100, in the District Court, City and County of Denver,
Colorado, (Civil Action No. 03-CV-7600), filed on October 2, 2003.
This claim alleges: common law breach of fiduciary duty; common law
breach of contract; and common law tortious interference with
contract. The plaintiff in this case is seeking: compensatory and
punitive damages; injunctive relief; disgorgement of revenues and
profits; and costs and expenses, including counsel fees and expert
fees.
MIKE SAYEGH, ON BEHALF OF THE GENERAL PUBLIC, V. JANUS CAPITAL CORPORATION, JANUS CAPITAL MANAGEMENT LLC, JANUS INVESTMENT FUND, EDWARD J. STERN, CANARY CAPITAL PARTNERS LLC, CANARY INVESTMENT MANAGEMENT LLC, CANARY CAPITAL PARTNERS LTD., KAPLAN & CO. SECURITIES
INC., BANK ONE CORPORATION, BANC ONE INVESTMENT ADVISORS, THE ONE
GROUP MUTUAL FUNDS, BANK OF AMERICA CORPORATION, BANC OF AMERICA
CAPITAL MANAGEMENT LLC, BANC OF AMERICA ADVISORS LLC, NATIONS FUND
INC., ROBERT H. GORDON, THEODORE H. SIHPOL III, CHARLES D. BRYCELAND,
SECURITY TRUST COMPANY, STRONG CAPITAL MANAGEMENT INC., JB OXFORD &
COMPANY, ALLIANCE CAPITAL MANAGEMENT HOLDING L.P., ALLIANCE CAPITAL
MANAGEMENT L.P., ALLIANCE CAPITAL MANAGEMENT CORPORATION, AXA
FINANCIAL INC., ALLIANCEBERNSTEIN REGISTRANTS, GERALD MALONE, CHARLES
SCHAFFRAN, MARSH & MCLENNAN COMPANIES, INC., PUTNAM INVESTMENTS TRUST,
PUTNAM INVESTMENT MANAGEMENT LLC, PUTNAM INVESTMENT FUNDS, AND DOES
1-500, in the Superior Court of the State of California, County of Los
Angeles (Case No. BC304655), filed on October 22, 2003 and amended on
December 17, 2003 to substitute INVESCO Funds Group, Inc. and Raymond
R. Cunningham for unnamed Doe defendants. This claim alleges unfair
business practices and violations of Sections 17200 and 17203 of the
California Business and Professions Code. The plaintiff in this case
is seeking: injunctive relief; restitution, including pre-judgment
interest; an accounting to determine the amount to be returned by the
defendants and the amount to be refunded to the public; the creation
of an administrative process whereby injured customers of the
defendants receive their losses; and counsel fees.
RAJ SANYAL, DERIVATIVELY ON BEHALF OF NATIONS INTERNATIONAL EQUITY FUND, V. WILLIAM P. CARMICHAEL, WILLIAM H. GRIGG, THOMAS F. KELLER, CARL E. MUNDY, JR., CORNELIUS J. PINGS, A. MAX WALKER, CHARLES B. WALKER, EDMUND L. BENSON, III, ROBERT H. GORDON, JAMES B. SOMMERS, THOMAS S. WORD, JR., EDWARD D. BEDARD, GERALD MURPHY, ROBERT B.
CARROLL, INVESCO GLOBAL ASSET MANAGEMENT, PUTNAM INVESTMENT MANAGEMENT, BANK OF AMERICA CORPORATION, MARSICO CAPITAL MANAGEMENT, LLC, BANC OF AMERICA ADVISORS, LLC, BANC OF AMERICA CAPITAL
MANAGEMENT, LLC, AND NATIONS FUNDS TRUST, in the Superior Court
Division, State of North Carolina (Civil Action No. 03-CVS-19622),
filed on November 14, 2003. This claim alleges common law breach of
fiduciary duty; abuse of control; gross mismanagement; waste of fund
assets; and unjust enrichment. The plaintiff in this case is seeking:
injunctive relief, including imposition of a constructive trust;
damages; restitution and disgorgement; and costs and expenses,
including counsel fees and expert fees.
L. SCOTT KARLIN, DERIVATIVELY ON BEHALF OF INVESCO FUNDS GROUP, INC.
V. AMVESCAP, PLC, INVESCO, INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., in the
United States District Court, District of Colorado (Civil Action No.
03-MK-2406), filed on November 28, 2003. This claim alleges violations
of Section 36(b) of the Investment Company Act of 1940 ("Investment
Company Act"), and common law breach of fiduciary duty. The plaintiff
in this case is seeking damages and costs and expenses, including
counsel fees and expert fees.
RICHARD RAVER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC, AIM
MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC.,
AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 03-F-2441), filed on December
2, 2003. This claim alleges violations of: Sections 11 and 15 of the
Securities Act of 1933 (the "Securities Act"); Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 (the "Exchange Act");
Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b)
of the Investment Company Act. The claim also alleges common law
breach of fiduciary duty. The plaintiffs in this case are seeking:
damages; pre-judgment and post-judgment interest; counsel fees and
expert fees; and other relief.
JERRY FATTAH, CUSTODIAN FOR BASIM FATTAH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE
FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND,
INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND,
INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL
ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE
BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT
SECURITIES FUND, INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN
GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK
FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND
FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS
THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP
INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD STERN,
AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL
PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL
PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District
Court, District of Colorado (Civil Action No. 03-F-2456), filed on
December 4, 2003. This claim alleges violations of: Sections 11 and 15
of Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule
10b-5 under the Exchange Act; and Section 206 of the Investment
Advisers Act of 1940, as amended (the "Advisers Act"). The plaintiffs
in this case are seeking: compensatory damages; rescission; return of
fees paid; accounting for wrongfully gotten gains, profits and
compensation; restitution and disgorgement; and other costs and
expenses, including counsel fees and expert fees.
EDWARD LOWINGER AND SHARON LOWINGER, INDIVIDUALLY AND ON BEHALF OF ALL
OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND,
INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND
(FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND,
INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES
FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM
INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S
TAX-EXEMPT RESERVE FUND, AIM INVESCO U.S. GOVERNMENT MONEY FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME
FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND,
INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO;
INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO
FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS
INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC.,
AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC.
(COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC,
INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS
KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO.,
INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC,
CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United
States District Court, Southern District of New York (Civil Action No.
03-CV-9634), filed on December 4, 2003. This claim alleges violations
of: Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a)
of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section
206 of the Advisers Act. The plaintiffs in this case are seeking:
compensatory damages; rescission; return of fees
paid; accounting for wrongfully gotten gains, profits and compensation; restitution and disgorgement; and other costs and expenses, including counsel fees and expert fees.
JOEL GOODMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC. AND RAYMOND R. CUNNINGHAM, in
the District Court, City and County of Denver, Colorado (Case Number
03CV9268), filed on December 5, 2003. This claim alleges common law
breach of fiduciary duty and aiding and abetting breach of fiduciary
duty. The plaintiffs in this case are seeking: injunctive relief;
accounting for all damages and for all profits and any special
benefits obtained; disgorgement; restitution and damages; costs and
disbursements, including counsel fees and expert fees; and equitable
relief.
STEVEN B. EHRLICH, CUSTODIAN FOR ALEXA P. EHRLICH, UGTMA/FLORIDA, AND
DENNY P. JACOBSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY
KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND,
INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO
S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO
TREASURERS MONEY MARKET RESERVE FUND, AIM INVESCO TREASURERS
TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO
ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO
GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND,
INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND,
INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO
U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO LATIN
AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM
STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM
BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS
THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP,
INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J.
STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL
PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL
PARTNERS, LTD., AND JOHN DOES 1-100, in the United States District
Court, District of Colorado (Civil Action No. 03-N-2559), filed on
December 17, 2003. This claim alleges violations of: Sections 11 and
15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange
Act; Rule 10b-5 under the Exchange Act; and Section 206 of the
Advisers Act. The plaintiffs in this case are seeking: compensatory
damages; rescission; return of fees paid; accounting for wrongfully
gotten gains, profits and compensation; restitution and disgorgement;
and other costs and expenses, including counsel fees and expert fees.
JOSEPH R. RUSSO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE
MONEY FUND, AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, AIM
INVESCO TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT
MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO
EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO
GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO
SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO
TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND,
INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY
KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES
TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION
STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS
REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY
MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN
SKANDIA INC., BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC,
CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND
JOHN DOES 1-100, in the United States District Court, Southern
District of New York (Civil Action No. 03-CV-10045), filed on December
18, 2003. This claim alleges violations of: Sections 11 and 15 of the
Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule
10b-5 under the Exchange Act; and Section 206 of the Advisers Act. The
plaintiffs in this case are seeking: compensatory damages; rescission;
return of fees paid; accounting for wrongfully gotten gains, profits
and compensation; restitution and disgorgement; and other costs and
expenses, including counsel fees and expert fees.
MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AMVESCAP PLC, AVZ, INC., AMVESCAP RETIREMENT, INC.,
AMVESCAP NATIONAL TRUST COMPANY, ROBERT F. MCCULLOUGH, GORDON NEBEKER,
JEFFREY G. CALLAHAN, INVESCO FUNDS GROUP, INC., RAYMOND R. CUNNINGHAM,
AND DOES 1-100, in the United States District Court, District of
Colorado (Civil Action No. 03-M-2604), filed on December 24, 2003.
This claim alleges violations of Sections 404, 405 and 406B of the
Employee Retirement Income Security Act ("ERISA"). The plaintiffs in
this case are seeking: declarations that the defendants breached their
ERISA fiduciary duties and that they are not entitled to the
protection of Section 404(c)(1)(B) of ERISA; an order compelling the
defendants to make good all losses to a particular retirement plan
described in this case (the "Retirement Plan") resulting from the
defendants' breaches of their fiduciary duties, including losses to
the Retirement Plan resulting from imprudent investment of the
Retirement Plan's assets, and to restore to the Retirement Plan all
profits the defendants made through use of the Retirement Plan's
assets, and to restore to the Retirement Plan all profits which the
participants would have made if the defendants had fulfilled their
fiduciary obligations; damages on behalf of the Retirement Plan;
imposition of a constructive trust, injunctive relief, damages
suffered by the Retirement Plan, to be allocated proportionately to
the participants in the Retirement Plan; restitution and other costs
and expenses, including counsel fees and expert fees.
PAT B. GORSUCH AND GEORGE L. GORSUCH V. INVESCO FUNDS GROUP, INC. AND
AIM ADVISER, INC., in the United States District Court, District of
Colorado (Civil Action No. 03-MK-2612), filed on December 24, 2003.
This claim alleges violations of Sections 15(a), 20(a) and 36(b) of
the Investment Company Act. The plaintiffs in this case are seeking:
rescission and/or voiding of the investment advisory agreements;
return of fees paid; damages; and other costs and expenses, including
counsel fees and expert fees.
LORI WEINRIB, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. INVESCO FUNDS GROUP, INC., AIM STOCK FUNDS, AIM COUNSELOR
SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM
COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC.,
AIM INTERNATIONAL FUNDS INC., AMVESCAP PLC, TIMOTHY MILLER, RAYMOND
CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC.,
BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN
DOES 1-100, in the United States District Court, Southern District of
New York (Civil Action No. 04-CV-00492), filed on January 21, 2004.
This claim alleges violations of: Sections 11 and 15 of the 1933 Act;
Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the
Exchange Act; and Section 206 of the Advisers Act. The plaintiffs in
this case are seeking: compensatory damages; rescission; return of
fees paid; accounting for wrongfully gotten gains, profits and
compensation; restitution and disgorgement; and other costs and
expenses, including counsel fees and expert fees.
ROBERT S. BALLAGH, JR., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS
SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS,
INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS,
INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO
CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND,
INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME
FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0152), filed on January
28, 2004. This claim alleges violations of: Sections 11 and 15 of the
Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule
10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of
the Investment Company Act. The claim also alleges common law breach
of fiduciary duty. The plaintiffs in this case are seeking: damages;
pre-judgment and post-judgment interest; counsel fees and expert fees;
and other relief.
JONATHAN GALLO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO REAL ESTATE
OPPORTUNITY FUND, INVESCO SELECT FUND, INVESCO TAX-FREE BOND FUND,
INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
FUND, INVESCO VALUE FUND, EDWARD J. STERN, CANARY INVESTMENT
MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY CAPITAL
PARTNERS, LLC, AND DOES 1-100, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0151), filed on January
28, 2004. This claim alleges violations of: Sections 11 and 15 of the
Securities Act; Sections 10(b) and 20(a) of the Exchange Act; Rule
10b-5 under the Exchange Act; and Sections 34(b), 36(a) and 36(b) of
the Investment Company Act. The claim also alleges common law breach
of fiduciary duty. The plaintiffs in this case are seeking: damages;
pre-judgment and post-judgment interest; counsel fees and expert fees;
and other relief.
EILEEN CLANCY, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM AND THOMAS KOLBE, in the United States District Court, Southern District of New York (Civil Action No. 04-CV-0713), filed on January 30, 2004. This claim alleges violations of Sections 11 and 15 of the Securities Act. The plaintiffs in this case are seeking: compensatory damages, rescission; return of fees paid; and other costs and expenses, including counsel fees and expert fees.
SCOTT WALDMAN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED,
V. INVESCO FUNDS GROUP, INC., INVESCO DYNAMICS FUND, INVESCO EUROPEAN
FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, AIM
STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM
BOND FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC., AMVESCAP PLC, AND
RAYMOND CUNNINGHAM, in the United States District Court, Southern
District of New York (Civil Action No. 04-CV-00915), filed on February
3, 2004. This claim alleges violations of Sections 11 and 15 of the
Securities Act and common law breach of fiduciary duty. The plaintiffs
in this case are seeking compensatory damages; injunctive relief; and
costs and expenses, including counsel fees and expert fees.
CARL E. VONDER HAAR AND MARILYN P. MARTIN, ON BEHALF OF THEMSELVES AND
ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO
STOCK FUNDS, INC. AND DOE DEFENDANTS 1-100, in the United States
District Court, District of Colorado (Civil Action No. 04-CV-812),
filed on February 5, 2004. This claim alleges: common law breach of
fiduciary duty; breach of contract; and tortious interference with
contract. The plaintiffs in this case are seeking: injunctive relief;
damages; disgorgement; and costs and expenses, including counsel fees
and expert fees.
HENRY KRAMER, DERIVATIVELY ON BEHALF OF INVESCO ENERGY FUND, INVESCO
STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO
FUNDS GROUP, INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD., DEFENDANTS, AND
INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND INVESCO MUTUAL
FUNDS, NOMINAL DEFENDANTS, in the United States District Court,
District of Colorado (Civil Action No. 04-MK-0397), filed on March 4,
2004. This claim alleges violations of Section 36(b) of the Investment
Company Act and common law breach of fiduciary duty. The plaintiff in
this case is seeking damages and costs and expenses, including counsel
fees and expert fees.
CYNTHIA L. ESSENMACHER, DERIVATIVELY ON BEHALF OF THE INVESCO DYNAMICS
FUND AND THE REMAINING "INVESCO FUNDS" V. INVESCO FUNDS GROUPS, INC.,
AMVESCAP PLC, AIM MANAGEMENT GROUP, INC., RAYMOND CUNNINGHAM, TIMOTHY
MILLER, THOMAS KOLBE AND MICHAEL LEGOSKI, DEFENDANTS, AND INVESCO
DYNAMICS FUND AND THE "INVESCO FUNDS", NOMINAL DEFENDANTS, in the
United States District Court, District of Delaware (Civil Action No.
04-CV-188), filed on March 29, 2004. This claim alleges: violations of
Section 36(b) of the Investment Company Act; violations of Section 206
of the Advisers Act; common law breach of fiduciary duty; and civil
conspiracy. The plaintiff in this case is seeking: damages; injunctive
relief; and costs and expenses, including counsel fees and expert
fees.
ANNE G. PERENTESIS (WIDOW) V. AIM INVESTMENTS, ET AL (INVESCO FUNDS
GROUP, INC.), in the District Court of Maryland for Baltimore County
(Case No. 080400228152005), filed on July 21, 2005. This claim alleges
financial losses, mental anguish and emotional distress as a result of
unlawful market timing and related activity by the defendants. The
plaintiff in this case is seeking damages and costs and expenses.
Pursuant to an Order of the MDL Court, plaintiffs in the above lawsuits (with the exception of Carl E. Vonder Haar, et al. v. INVESCO Funds Group, Inc. et al. and Mike Sayegh v. Janus Capital Corporation, et al.) consolidated their claims for pre-trial purposes into three amended complaints against various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action Complaint purportedly brought on behalf of shareholders of the AIM Funds (the Lepera lawsuit discussed below); (ii) a Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of the AIM Funds and fund registrants (the Essenmacher lawsuit discussed below); and (iii) an Amended Class Action Complaint for Violations of the Employee Retirement Income Securities Act ("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k) plan (the Calderon lawsuit discussed below). The plaintiffs in the Vonder Haar and Sayegh lawsuits continue to seek remand of their lawsuits to state court. Set forth below is detailed information about these three amended complaints.
RICHARD LEPERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED (LEAD PLAINTIFF: CITY OF CHICAGO DEFERRED COMPENSATION PLAN), V. INVESCO FUNDS GROUP, INC., AMVESCAP, PLC, AIM INVESTMENTS, AIM ADVISORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS
MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM
STOCK FUNDS, AIM MUTUAL FUNDS, AIM COMBINATION STOCK & BOND FUNDS, AIM
SECTOR FUNDS, AIM TREASURER'S SERIES TRUST, INVESCO DISTRIBUTORS,
INC., AIM DISTRIBUTORS, INC., RAYMOND R. CUNNINGHAM, TIMOTHY J.
MILLER, THOMAS A. KOLBE, MICHAEL D. LEGOSKI, MICHAEL K. BRUGMAN, MARK
WILLIAMSON, EDWARD J. STERN, CANARY CAPITAL PARTNERS, LLC, CANARY
INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., RYAN
GOLDBERG, MICHAEL GRADY, CITIGROUP, INC., CITIGROUP GLOBAL MARKETS
HOLDINGS, INC., SALOMON SMITH BARNEY, INC., MORGAN STANLEY DW, ANNA
BRUGMAN, ANB CONSULTING, LLC, KAPLAN & CO. SECURITIES INC., SECURITY
TRUST COMPANY, N.A., GRANT D. SEEGER, JB OXFORD HOLDINGS, INC.,
NATIONAL CLEARING CORPORATION, JAMES G. LEWIS, KRAIG L. KIBBLE, JAMES
Y. LIN, BANK OF AMERICA CORPORATION, BANC OF AMERICA SECURITIES LLC,
THEODORE C. SIHPOL, III, BEAR STEARNS & CO., INC., BEAR STEARNS
SECURITIES CORP., CHARLES SCHWAB & CO., CREDIT SUISSE FIRST BOSTON
(USA) INC., PRUDENTIAL FINANCIAL, INC., PRUDENTIAL SECURITIES, INC.,
CANADIAN IMPERIAL BANK OF COMMERCE, JP MORGAN CHASE AND CO., AND JOHN
DOE DEFENDANTS 1-100, in the MDL Court (Case No. 04-MD-15864; No.
04-CV-00814-JFM) (originally in the United States District Court for
the District of Colorado), filed on September 29, 2004. This lawsuit
alleges violations of Sections 11, 12(a) (2), and 15 of the Securities
Act; Section 10(b) of the Exchange Act and Rule 10b-5 promulgated
thereunder; Section 20(a) of the Exchange Act; Sections 34(b), 36(a),
36(b) and 48(a) of the Investment Company Act; breach of fiduciary
duty/constructive fraud; aiding and abetting breach of fiduciary duty;
and unjust enrichment. The plaintiffs in this lawsuit are seeking:
compensatory damages, including interest; and other costs and
expenses, including counsel and expert fees.
CYNTHIA ESSENMACHER, SILVANA G. DELLA CAMERA, FELICIA BERNSTEIN AS CUSTODIAN FOR DANIELLE BROOKE BERNSTEIN, EDWARD CASEY, TINA CASEY, SIMON DENENBERG, GEORGE L. GORSUCH, PAT B. GORSUCH, L. SCOTT KARLIN, HENRY KRAMER, JOHN E. MORRISEY, HARRY SCHIPPER, BERTY KREISLER, GERSON SMITH, CYNTHIA PULEO, ZACHARY ALAN STARR, JOSHUA GUTTMAN, AND AMY SUGIN, DERIVATIVELY ON BEHALF OF THE MUTUAL FUNDS, TRUSTS AND CORPORATIONS COMPRISING THE INVESCO AND AIM FAMILY OF MUTUAL FUNDS V. AMVESCAP, PLC, INVESCO FUNDS GROUP, INC., INVESCO DISTRIBUTORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM MANAGEMENT GROUP, INC., AIM ADVISERS, INC., AIM INVESTMENT SERVICES, INC., AIM DISTRIBUTORS, INC., FUND MANAGEMENT COMPANY, MARK H. WILLIAMSON, RAYMOND R. CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE, MICHAEL LEGOSKI, MICHAEL BRUGMAN, FRED A. DEERING, VICTOR L. ANDREWS, BOB R. BAKER, LAWRENCE H. BUDNER, JAMES T. BUNCH, GERALD J. LEWIS, JOHN W. MCINTYRE, LARRY SOLL, RONALD L. GROOMS, WILLIAM J. GALVIN, JR., ROBERT H. GRAHAM, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JACK M. FIELDS, CARL FRISCHILING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR, OWEN DALY II, AURUM SECURITIES CORP., AURUM CAPITAL MANAGEMENT CORP., GOLDEN GATE FINANCIAL GROUP, LLC, BANK OF AMERICA CORP., BANC OF AMERICA SECURITIES LLC, BANK OF AMERICA, N.A., BEAR STEARNS & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY INVESTMENT MANAGEMENT, LLC, EDWARD J. STERN, CANADIAN IMPERIAL BANK OF COMMERCE, CIRCLE TRUST COMPANY, RYAN GOLDBERG, MICHAEL GRADY, KAPLAN & CO. SECURITIES, INC., JP MORGAN CHASE & CO., OPPENHEIMER & CO., INC., PRITCHARD CAPITAL PARTNERS LLC, TIJA MANAGEMENT, TRAUTMAN WASSERMAN & COMPANY, INC., DEFENDANTS, AND THE INVESCO FUNDS AND THE AIM FUNDS AND ALL TRUSTS AND
CORPORATIONS THAT COMPRISE THE INVESCO FUNDS AND AIM FUNDS THAT WERE MANAGED BY INVESCO AND AIM, NOMINAL DEFENDANTS, in the MDL Court (Case No. 04-MD-15864-FPS; No. 04-819), filed on September 29, 2004. This lawsuit alleges violations of Sections 206 and 215 of the Investment Advisers Act; Sections 36(a), 36(b) and 47 of the Investment Company Act; control person liability under Section 48 of the Investment Company Act; breach of fiduciary duty; aiding and abetting breach of fiduciary duty; breach of contract; unjust enrichment; interference with contract; and civil conspiracy. The plaintiffs in this lawsuit are seeking: removal of director defendants; removal of adviser, sub-adviser and distributor defendants; rescission of management and other contracts between the Funds and defendants; rescission of 12b-1 plans; disgorgement of management fees and other compensation/profits paid to adviser defendants; compensatory and punitive damages; and fees and expenses, including attorney and expert fees.
MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL
TRUST COMPANY, INVESCO FUNDS GROUP, INC., AMVESCAP, ROBERT F.
MCCULLOUGH, GORDON NEBEKER, JEFFREY G. CALLAHAN, AND RAYMOND R.
CUNNINGHAM, in the MDL Court (Case No. 1:04-MD-15864-FPS), filed on
September 29, 2004. This lawsuit alleges violations of ERISA Sections
404, 405 and 406. The plaintiffs in this lawsuit are seeking:
declaratory judgment; restoration of losses suffered by the plan;
disgorgement of profits; imposition of a constructive trust;
injunctive relief; compensatory damages; costs and attorneys' fees;
and equitable restitution.
On March 1, 2006, the MDL Court entered orders on Defendants' Motions to dismiss in the derivative (Essenmacher) and class action (Lepera) lawsuits. The MDL Court dismissed all derivative causes of action in the Essenmacher lawsuit but two: (i) the excessive fee claim under Section 36(b) of the Investment Company Act of 1940 (the "1940 Act"); and (ii) the "control person liability" claim under Section 48 of the 1940 Act. The MDL Court dismissed all claims asserted in the Lepera class action lawsuit but three: (i) the securities fraud claims under Section 10(b) of the Securities Exchange Act of 1934; (ii) the excessive fee claim under Section 36(b) of the 1940 Act (which survived only insofar as plaintiffs seek recovery of fees associated with the assets involved in market timing); and (iii) the "control person liability" claim under Section 48 of the 1940 Act. On June 14, 2006, the MDL Court entered an order dismissing the Section 48 claim in the derivative (Essenmacher) lawsuit. Based on the MDL Court's March 1, 2006 and June 14, 2006 orders, all claims asserted against the Funds that have been transferred to the MDL Court have been dismissed, although certain Funds remain nominal defendants in the derivative (Essenmacher) lawsuit. Defendants filed their Original Answer in the class action (Lepera) lawsuit on March 31, 2006. The MDL Court has indefinitely deferred Defendants' obligation to answer the derivative (Essenmacher) lawsuit. The Plaintiffs in the class action (Lepera) lawsuit stipulated that their claims against AIM, ADI and AIM Investment Services, Inc. ("AIS") are based solely on successor liability for alleged timing in the AIM Funds formerly advised by IFG and that they are not making any claims based on alleged timing in the other AIM Funds. Based upon this stipulation, AIM withdrew its pending Motion to Dismiss the claims against AIM, ADI and AIS.
On September 15, 2006, Judge Motz for the MDL Court granted the AMVESCAP Defendants' motion to dismiss the ERISA (Calderon) lawsuit and dismissed such lawsuit. The Plaintiff has commenced an appeal from Judge Motz's decision.
APPENDIX O-2
PENDING LITIGATION ALLEGING INADEQUATELY EMPLOYED FAIR VALUE PRICING
The following civil class action lawsuits involve, depending on the lawsuit, one or more AIM Funds, IFG and/or AIM and allege that the defendants inadequately employed fair value pricing. These lawsuits either have been served or have had service of process waived.
T.K. PARTHASARATHY, EDMUND WOODBURY, STUART ALLEN SMITH AND SHARON
SMITH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V.
T. ROWE PRICE INTERNATIONAL FUNDS, INC., T. ROWE PRICE INTERNATIONAL,
INC., ARTISAN FUNDS, INC., ARTISAN PARTNERS LIMITED PARTNERSHIP, AIM
INTERNATIONAL FUNDS, INC. AND AIM ADVISORS, INC., in the Third
Judicial Circuit Court for Madison County, Illinois (Case No.
2003-L-001253), filed on September 23, 2003. This claim alleges:
common law breach of duty and common law negligence and gross
negligence. The plaintiffs in these cases are seeking: compensatory
and punitive damages; interest; and attorneys' fees and costs. The
Third Judicial Circuit Court for Madison County, Illinois has issued
an order severing the claims of plaintiff Parthasarathy from the
claims of the other plaintiffs against AIM and other defendants. As a
result, AIM is a defendant in the following severed action: EDMUND
WOODBURY, STUART ALLEN SMITH and SHARON SMITH, Individually and On
Behalf of All Others Similarly Situated, v. AIM INTERNATIONAL FUNDS,
INC., ET AL., in the Third Judicial Circuit Court for Madison County,
Illinois (Case No. 03-L-1253A). The claims made by Plaintiffs and the
relief sought in the Woodbury lawsuit are identical to those in the
Parthasarathy lawsuit. Based on a recent Federal appellate court
decision (the "Kircher" case), AIM and the other defendants in the
Woodbury lawsuit removed the action to Federal District Court (U.S.
District Court, Southern District of Illinois, Cause No.
05-CV-302-DRH) on April 22, 2005. On June 10, 2005, the Court
dismissed the Woodbury lawsuit based upon the Kircher ruling and
ordered the court clerk to close this case. On August 27, 2005,
Plaintiffs filed their Notice of Appeal. On September 2, 2005, the
Federal Appellate Court consolidated the nine cases on this subject
matter, including the case against AIM. AIM has submitted a statement
to the Federal Appellate Court asserting that the U.S. Supreme Court's
holding in the Dabit case mandates the dismissal of the Plaintiffs'
appeals. The appeals were vacated and the suit remanded back to
Illinois state court. The Defendants removed the suit to Federal
District Court and the parties are contesting whether the proper venue
for this action is the Federal District Court or the Illinois state
court. On December 29, 2006, the Defendants filed a Motion to Dismiss.
JOHN BILSKI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
SITUATED, V. AIM INTERNATIONAL FUNDS, INC., AIM ADVISORS, INC.,
INVESCO INTERNATIONAL FUNDS, INC., INVESCO FUNDS GROUP, INC., T. ROWE
PRICE INTERNATIONAL FUNDS, INC. AND T. ROWE PRICE INTERNATIONAL, INC.,
in the United States District Court, Southern District of Illinois
(East St. Louis) (Case No. 03-772), filed on November 19, 2003. This
claim alleges: violations of Sections 36(a) and 36(b) of the
Investment Company Act of 1940; common law breach of duty; and common
law negligence and gross negligence. The plaintiff in this case is
seeking: compensatory and punitive damages; interest; and attorneys'
fees and costs. This lawsuit has been transferred to the MDL Court by
order of the United States District Court, Southern District of
Illinois (East St. Louis).
APPENDIX O-3
PENDING LITIGATION ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES
AND DIRECTED-BROKERAGE ARRANGEMENTS
The following civil lawsuits, including purported class action and shareholder derivative suits, involve, depending on the lawsuit, one or more of AIM Management, IFG, AIM, AIS and/or certain of the trustees of the AIM Funds and allege that the defendants improperly used the assets of the AIM Funds to pay brokers to aggressively push the AIM Funds over other mutual funds and that the defendants concealed such payments from investors by disguising them as brokerage commissions. These lawsuits either have been served or have had service of process waived.
By order of the United States District Court for the Southern District of Texas, Houston Division, the claims made in the Beasley, Kehlbeck Trust, Fry, Apu and Bendix lawsuits discussed below were consolidated into the Boyce lawsuit discussed below and these other lawsuits were administratively closed. On September 29, 2006, the Court dismissed with prejudice all claims in the Boyce lawsuit except for the Section 36(b) claim, which Section 36(b) claim was dismissed with leave to amend to plead it properly as a derivative claim. On December 7, 2006, the plaintiffs in the Boyce lawsuit filed an amended complaint. The amended complaint, which was pleaded as a Section 36(b) derivative claim, included new allegations that the defendants charged excessive fees.
JOY D. BEASLEY AND SHEILA MCDAID, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS
GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States
District Court for the District of Colorado (Civil Action No.
04-B-0958), filed on May 10, 2004. The plaintiffs voluntarily
dismissed this case in Colorado and re-filed it on July 2, 2004 in the
United States District Court for the Southern District of Texas,
Houston Division (Civil Action H-04-2589). This claim alleges
violations of Sections 34(b), 36(b) and 48(a) of the Investment
Company Act of 1940 (the "Investment Company Act") and violations of
Sections 206 and 215 of the Investment Advisers Act of 1940 (the
"Advisers Act"). The claim also alleges common law breach of fiduciary
duty. The plaintiffs in this case are seeking: compensatory and
punitive damages; rescission of certain Funds' advisory agreements and
distribution plans and recovery of all fees paid; an accounting of all
fund-related fees, commissions and soft dollar payments; restitution
of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.
RICHARD TIM BOYCE V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP,
INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H.
GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT
R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA
MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR,
AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM
ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND,
AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT
FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC
TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND
FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN
SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE
GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM
GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM
INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE
CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND,
AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID
CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND,
AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER
EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT
TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND,
AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM
TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES
FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND,
INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND,
INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO
MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United States
District Court for the District of Colorado (Civil Action No.
04-N-0989), filed on May 13, 2004. The plaintiff voluntarily dismissed
this case in Colorado and re-filed it on July 1, 2004 in the United
States District Court for the Southern District of Texas, Houston
Division (Civil Action H-04-2587). This claim alleges violations of
Sections 34(b), 36(b) and 48(a) of the Investment Company Act and
violations of Sections 206 and 215 of the Advisers Act. The claim also
alleges common law breach of fiduciary duty. The plaintiff in this
case is seeking: compensatory and punitive damages; rescission of
certain Funds' advisory agreements and distribution plans and recovery
of all fees paid; an accounting of all fund-
related fees, commissions and soft dollar payments; restitution of all unlawfully or discriminatorily obtained fees and charges; and attorneys' and experts' fees.
KEHLBECK TRUST DTD 1-25-93, BILLY B. KEHLBECK AND DONNA J. KEHLBECK, TTEES V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM
INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK
H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN,
EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA
MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR,
AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM
ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND,
AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT
FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC
TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND
FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN
SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE
GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM
GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM HIGH INCOME
MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE
GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM
INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE
CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND,
AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID
CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND,
AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER
EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT
TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND,
AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM
TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES
FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND,
INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND,
INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP
GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH
FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District
Court for the Southern District of Texas, Houston Division (Civil
Action No. H-04-2802), filed on July 9, 2004. This claim alleges
violations of Sections 34(b), 36(b) and 48(a) of the Investment
Company Act and violations of Sections 206 and 215 of the Advisers
Act. The claim also alleges common law breach of fiduciary duty. The
plaintiff in this case is seeking: compensatory and punitive damages;
rescission of certain Funds' advisory agreements and distribution
plans and recovery of all fees paid; an accounting of all fund-related
fees, commissions and soft dollar payments; restitution of all
unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.
JANICE R. FRY, BOB J. FRY, JAMES P. HAYES, VIRGINIA L. MAGBUAL, HENRY W. MEYER AND GEORGE ROBERT PERRY V. AIM MANAGEMENT GROUP INC., INVESCO
FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE
FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER
FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM
DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING
GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY
FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE
FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE
FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME
FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING
GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE
FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY
TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY
FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM
OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III
FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY
FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL
CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND
FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL
COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES
FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY
FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY
FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP
GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH
FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District
Court for the Southern District of Texas, Houston Division (Civil
Action No. H-04-2832), filed on July 12, 2004. This claim alleges
violations of Sections 34(b), 36(b) and 48(a) of the Investment
Company Act and violations of Sections 206 and 215 of the Advisers
Act. The claim also alleges common law breach of fiduciary duty. The
plaintiff in this case is seeking: compensatory and punitive damages;
rescission of certain Funds' advisory agreements and distribution
plans and recovery of all fees paid; an accounting of all fund-related
fees, commissions and soft dollar payments; restitution of all
unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.
ROBERT P. APU, SUZANNE K. APU, MARINA BERTI, KHANH DINH, FRANK KENDRICK, EDWARD A. KREZEL, DAN B. LESIUK, JOHN B. PERKINS, MILDRED E. RUEHLMAN, LOUIS E. SPERRY, J. DORIS WILLSON AND ROBERT W. WOOD V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND,
AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM
LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY
FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM
MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I
FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM
PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM
SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH
FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM
TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES
FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND,
INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND,
INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP
GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH
FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District
Court for the Southern District of Texas, Houston Division (Civil
Action No. H-04-2884), filed on July 15, 2004. This claim alleges
violations of Sections 34(b), 36(b) and 48(a) of the Investment
Company Act and violations of Sections 206 and 215 of the Advisers
Act. The claim also alleges common law breach of fiduciary duty. The
plaintiff in this case is seeking: compensatory and punitive damages;
rescission of certain Funds' advisory agreements and distribution
plans and recovery of all fees paid; an accounting of all fund-related
fees, commissions and soft dollar payments; restitution of all
unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.
HARVEY R. BENDIX, CVETAN GEORGIEV, DAVID M. LUCOFF, MICHAEL E. PARMELEE, TRUSTEE OF THE HERMAN S. AND ESPERANZA A.. DRAYER RESIDUAL TRUST U/A 1/22/83 AND STANLEY S. STEPHENSON, TRUSTEE OF THE STANLEY J. STEPHENSON TRUST V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO
HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH FUND,
INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO UTILITIES FUND,
NOMINAL DEFENDANTS, in the United States District Court for the
Southern District of Texas, Houston Division (Civil Action No.
H-04-3030), filed on July 27, 2004. This claim alleges violations of
Sections 34(b), 36(b) and 48(a) of the Investment Company Act and
violations of Sections 206 and 215 of the Advisers Act. The claim also
alleges common law breach of fiduciary duty. The plaintiff in this
case is seeking: compensatory and punitive damages; rescission of
certain Funds' advisory agreements and distribution plans and recovery
of all fees paid; an accounting of all fund-related fees, commissions
and soft dollar payments; restitution of all unlawfully or
discriminatorily obtained fees and charges; and attorneys' and
experts' fees.
PART C
OTHER INFORMATION
Item 23. Exhibits
a (1) - (a) Amended and Restated Agreement and Declaration of Trust of
Registrant, dated September 14, 2005.(26)
- (b) Amendment No. 1, dated December 21, 2005, effective as of
December 21, 2005, to Amended and Restated Agreement and
Declaration of Trust of Registrant.(26)
- (c) Amendment No. 2, dated December 7, 2005, effective as of July
3, 2006, to Amended and Restated Agreement and Declaration of Trust
of Registrant.(27)
- (d) Amendment No. 3, dated January 9, 2006, effective as of January
9, 2006, to Amended and Restated Agreement and Declaration of Trust
of Registrant. (27)
- (e) Amendment No. 4, dated February 2, 2006, effective as of July
3, 2006, to Amended and Restated Agreement and Declaration of Trust
of Registrant. (27)
- (f) Amendment No. 5, dated May 1, 2006, effective as of May 1,
2006, to Amended and Restated Agreement and Declaration of Trust of
Registrant.(28)
|
- (g) Amendment No. 6, dated May 24, 2006, effective as of May 24, 2006, to Amended and Restated Agreement and Declaration of Trust of Registrant.(28)
- (h) Amendment No. 7, dated June 12, 2006, effective as of June 12, 2006, to Amended and Restated Agreement and Declaration of Trust of Registrant.(28)
- (i) Amendment No. 8, dated July 5, 2006, effective as of July 5, 2006, to Amended and Restated Agreement and Declaration of Trust of Registrant.(28)
- (j) Amendment No. 9, dated November 6, 2006, effective as of November 6, 2006, to Amended and Restated Agreement and Declaration of Trust of Registrant.(28)
- (k) Amendment No. 10, dated December 21, 2006, effective as of December 21, 2006, to Amended and Restated Agreement and Declaration of Trust of Registrant.(28)
- (l) Form of Amendment No. 11, dated May 1, 2007, effective as of May 1, 2007, to Amended and Restated Agreement and Declaration of Trust of Registrant.(28)
b (1) - (a) Amended and Restated By-Laws of Registrant, dated effective
September 14, 2005.(26)
- (b) Amendment, adopted effective August 1, 2006, to Amended and
Restated By-Laws of Registrant, dated effective September 14, 2005.
(28)
|
- (c) Amendment No. 2, adopted effective March 23, 2007, to Amended and Restated By-Laws of Registrant, dated effective September 14, 2005. (28)
c - Instruments Defining Rights of Security Holders - All rights of
security holders are contained in the Registrant's Amended and
Restated Agreement and Declaration of Trust.
d (1) - (a) Master Investment Advisory Agreement, dated May 1, 2000,
between Registrant and A I M Advisors, Inc.(14)
- (b) Amendment No. 1, dated, May 1, 2001 to Master Investment
Advisory Agreement between Registrant and A I M Advisors, Inc.(15)
|
- (c) Amendment No. 2, dated September 7, 2001, to Master Investment Advisory Agreement of Registrant, between Registrant and A I M Advisors, Inc.(18)
- (d) Amendment No. 3, dated May 1, 2002, to Master Investment Advisory Agreement of Registrant, between Registrant and A I M Advisors, Inc.(20)
- (e) Amendment No. 4, dated August 29, 2003, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(22)
- (f) Amendment No. 5, dated April 30, 2004 to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(24)
- (g) Amendment No. 6, dated July 1, 2004, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(24)
- (h) Amendment No. 7, dated October 15, 2004, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(24)
- (i) Amendment No. 8, dated July 1, 2005, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(26)
- (j) Amendment No. 9, dated December 21, 2005, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(26)
- (k) Amendment No. 10, dated May 1, 2006, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(28)
- (l) Amendment No. 11, dated June 12, 2006, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(28)
- (m) Amendment No. 12, dated July 3, 2006, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(28)
- (n) Amendment No. 13, dated November 6, 2006, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(28)
- (o) Amendment No. 14, dated December 21, 2006, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(28)
- (p) Form of Amendment No. 15, dated May 1, 2007, to Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc.(28)
(2) - (a) Master Intergroup Sub-Advisory Contract for Mutual Funds, dated
April 30, 2004, between A I M Advisors, Inc. and INVESCO
Institutional (N.A.), Inc.(24)
|
- (b) Amendment No. 1, dated July 16, 2004, to Master Intergroup Sub-Advisory Contract for Mutual Funds between A I M Advisors, Inc. and INVESCO Institutional (N.A.), Inc.(24)
- (c) Amendment No. 2, dated September 30, 2004, to Master Intergroup Sub-Advisory Contract for Mutual Funds between A I M Advisors, Inc. and INVESCO Institutional (N.A.), Inc.(24)
- (d) Amendment No. 3, dated October 15, 2004, to Master Intergroup Sub-Advisory Contract for Mutual Funds between A I M Advisors, Inc. and INVESCO Institutional (N.A.), Inc.(24)
- (e) Amendment No. 4, dated June 1, 2005, to Master Intergroup Sub-Advisory Contract for Mutual Funds between A I M Advisors, Inc. and INVESCO Institutional (N.A.), Inc.(26)
- (f) Amendment No. 5, dated July 3, 2006, to Master Intergroup Sub-Advisory Contract for Mutual Funds between A I M Advisors, Inc. and INVESCO Institutional (N.A.), Inc.(28)
(3) - Master Intergroup Sub-Advisory Contract for Mutual Funds between
A I M Advisors, Inc. and INVESCO Global Asset Management (N.A.),
Inc.(28)
(4) - (a) Foreign Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9, 1998,
between Registrant and A I M Advisors, Inc.(7)
- (b) Amendment No. 1, dated September 28, 1998, to Foreign Country
Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement between Registrant and A I M Advisors, Inc.(8)
- (c) Amendment No. 2, dated December 14, 1998, to Foreign Country
Selection and Mandatory Securities Depository Responsibilities
Delegation Agreement between Registrant and A I M Advisors, Inc.(8)
e (1) - (a) First Amended and Restated Master Distribution Agreement, dated
July 16, 2001, between Registrant and A I M Distributors, Inc.(17)
- (b) Amendment No. 1, dated September 7, 2001, to First Amended and
Restated Master Distribution Agreement, between Registrant and
A I M Distributors, Inc., dated July 16, 2001.(18)
- (c) Amendment No. 2, dated May 1, 2002, to First Amended and
Restated Master Distribution Agreement between Registrant and A I M
Distributors Inc., dated July 16, 2001.(20)
- (d) Amendment No. 3, dated August 29, 2003, to First Amended and
Restated Master Distribution Agreement, between Registrant and
A I M Distributors, Inc., dated July 16, 2001.(22)
- (e) Amendment No. 4, dated April 30, 2004, to First Amended and
Restated Master Distribution Agreement between Registrant and A I M
Distributors, Inc.(24)
- (f) Amendment No. 5, dated October 15, 2004, to First Amended and
Restated Master Distribution Agreement between Registrant and A I M
Distributors, Inc.(24)
|
- (g) Amendment No. 6, dated July 1, 2005, to First Amended and Restated Master Distribution Agreement between Registrant and A I M Distributors, Inc.(26)
- (h) Amendment No. 7, dated December 21, 2005, to First Amended and Restated Master Distribution Agreement between Registrant and A I M Distributors, Inc.(26)
- (i) Amendment No. 8, dated May 1, 2006, to First Amended and Restated Master Distribution Agreement between Registrant and A I M Distributors, Inc.(28)
- (j) Amendment No. 9, dated June 12, 2006, to First Amended and Restated Master Distribution Agreement between Registrant and A I M Distributors, Inc.(28)
- (k) Amendment No. 10, dated July 3, 2006, to First Amended and Restated Master Distribution Agreement between Registrant and A I M Distributors, Inc.(28)
- (l) Amendment No. 11, dated November 6, 2006, to First Amended and Restated Master Distribution Agreement between Registrant and A I M Distributors, Inc.(28)
- (m) Amendment No. 12, dated December 21, 2006, to First Amended and Restated Master Distribution Agreement between Registrant and A I M Distributors, Inc.(28)
- (n) Form of Amendment No. 13, dated May 1, 2007, to First Amended and Restated master Distribution Agreement between Registrant and A I M Distributors, Inc.(28)
f (1) - Retirement Plan of Registrant's Non-Affiliated Directors, effective
March 8, 1994, as restated September 18, 1995.(4)
(2) - Retirement Plan for Eligible Directors/Trustees effective as of
March 8, 1994, as Restated January 1, 2005.(28)
(3) - Form of Director Deferred Compensation Agreement effective as
Amended March 7, 2000, September 28, 2001 and September 26,
2002.(22)
g (1) - (a) Master Custodian Contract, dated May 1, 2000, between
Registrant and State Street Bank and Trust Company.(15)
- (b) Amendment, dated May 1, 2000, to Master Custodian Contract,
dated May 1, 2000, between Registrant and State Street Bank and
Trust Company.(15)
- (c) Amendment, dated June 29, 2001, to Master Custodian Contract
dated May 1, 2000, between Registrant and State Street Bank and
Trust Company.(20)
- (d) Amendment, dated April 2, 2002, to Master Custodian Contract
dated May 1, 2000, between Registrant and State Street Bank and
Trust Company.(20)
- (e) Amendment, dated September 8, 2004, to Master Custodian
Contract dated May 1, 2000, between Registrant and State Street
Bank and Trust Company.(24)
|
- (f) Amendment, dated February 6, 2006, to Master Custodian Contract dated May 1, 2000, between Registrant and State Street Bank and Trust Company.(28)
- (g) Amendment, dated January 31, 2007, to Master Custodian Contract dated May 1, 2000, between Registrant and State Street Bank and Trust Company.(28)
(2) - (a) Custody Agreement, dated September 19, 2000, between Registrant
and The Bank of New York.(15)
- (b) Amendment No. 1, dated May 31, 2005, to Custody Agreement dated
September 19, 2000, between Registrant and The Bank of New
York.(28)
h (1) - (a) Second Amended and Restated Master Administrative Services
Agreement, dated July 1, 2004, between Registrant and A I M
Advisors, Inc.(24)
- (b) Amendment No. 1, dated October 15, 2004, to Second Amended and
Restated Master Administrative Services Agreement, dated July 1,
2004, between Registrant and A I M Advisors, Inc.(24)
- (c) Amendment No. 2, dated December 2, 2004, to Second Amended and
Restated Master Administrative Services Agreement, dated July 1,
2004, between Registrant and A I M Advisors, Inc.(24)
- (d) Amendment No. 3, dated July 1, 2005 to Second Amended and
Restated Master Administrative Services Agreement, dated July 1,
2004, between Registrant and A I M Advisors, Inc.(26)
- (e) Amendment No. 4, dated December 21, 2005, to Second Amended and
Restated Master Administrative Services Agreement, dated July 1,
2004, between Registrant and A I M Advisors, Inc.(26)
- (f) Amendment No. 5, dated May 1, 2006, to Second Amended and
Restated Master Administrative Services Agreement, dated July 1,
2004, between Registrant and A I M Advisors, Inc.(28)
|
- (g) Amendment No. 6, dated June 12, 2006, to Second Amended and Restated Master Administrative Services Agreement, dated July 1, 2004, between Registrant and A I M Advisors, Inc.(28)
- (h) Third Amended and Restated Master Administrative Services Agreement, dated July 1, 2006, between Registrant and A I M Advisors, Inc.(28)
- (i) Amendment No. 1, dated July 3, 2006, to Third Amended and Restated Master Administrative Services Agreement, dated July 1, 2006, between Registrant and A I M Advisors, Inc.(28)
- (j) Amendment No. 2, dated November 6, 2006, to Third Amended and Restated Master Administrative Services Agreement, dated July 1, 2006, between Registrant and A I M Advisors, Inc.(28)
- (k) Amendment No. 3, dated December 21, 2006, to Third Amended and Restated Master Administrative Services Agreement, dated July 1, 2006, between Registrant and A I M Advisors, Inc.(28)
- (l) Form of Amendment No. 4, dated May 1, 2007, to Third Amended and Restated Master Administrative Services Agreement, dated July 1, 2006, between Registrant and A I M Advisors, Inc.(28)
(2) - (a) Amended and Restated Transfer Agency and Service Agreement,
dated July 1, 2006, between Registrant and AIM Investment Services,
Inc.(28)
(3) - Participation Agreement, dated February 25, 1993, between
Registrant, Connecticut General Life Insurance Company and A I M
Distributors, Inc.(4)
(4) - (a) Participation Agreement, dated February 10, 1995, between
Registrant and Citicorp Life Insurance Company.(4)
- (b) Amendment No. 1, dated February 3, 1997, to the Participation
Agreement dated February 10, 1995, between Registrant and Citicorp
Life Insurance Company.(6)
(5) - (a) Participation Agreement, dated February 10, 1995, between
Registrant and First Citicorp Life Insurance Company.(4)
- (b) Amendment No. 1, dated February 3, 1997, to the Participation
Agreement, dated February 10, 1995, between Registrant and First
Citicorp Life Insurance Company.(6)
(6) - (a) Participation Agreement, dated December 19, 1995, between
Registrant and Glenbrook Life and Annuity Company.(4)
- (a)(i) Side Letter Agreement, dated December 1, 1995, among
Registrant and Glenbrook Life and Annuity Company.(5)
- (b) Amendment No. 1, dated November 7, 1997, to the Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company.(7)
- (c) Amendment No. 2, dated September 2, 1997, to the Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company.(6)
- (d) Amendment No. 3, dated January 26, 1998, to the Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company.(7)
- (e) Amendment No. 4, dated May 1, 1998, to the Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company.(7)
- (f) Amendment No. 5, dated January 12, 1999, to the Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Insurance Company.(8)
- (g) Amendment No. 6, dated September 26, 2001, to the Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company.(20)
|
- (h) Amendment No. 7, dated May 1, 2004, to the Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Insurance Company.(27)
(7) - Participation Agreement, dated March 4, 1996, between Registrant
and IDS Life Insurance Company.(4)
(8) - (a) Participation Agreement, dated October 7, 1996, between
Registrant and IDS Life Insurance Company (supersedes and replaces
Participation Agreement dated March 4, 1996).(5)
- (a)(i) Side Letter Agreement, dated September 27, 1996, between
Registrant, IDS Life Insurance Company and IDS Life Insurance
Company of New York.(6)
- (b) Amendment 1, dated November 11, 1997, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company.(8)
- (c) Amendment No. 2, dated August 13, 2001, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company.(27)
- (d) Amendment No. 3, dated May 1, 2002, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company.(27)
- (e) Amendment, dated January 1, 2003, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company.(27)
- (f) Amendment, dated September 30, 2003, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company.(27)
- (g) Amendment, dated April 30, 2004, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company.(27)
(9) - (a) Participation Agreement, dated October 7, 1996, between
Registrant and IDS Life Insurance Company of New York.(5)
- (b) Amendment No. 1, dated November 11, 1997, to the Participation
Agreement, dated October 7, 1996 between Registrant and IDS Life
Insurance Company of New York.(8)
- (c) Amendment No. 2, dated August 13, 2001, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company of New York.(27)
- (d) Amendment No. 3, dated May 1, 2002, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company of New York.(27)
- (e) Amendment, dated January 1, 2003, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company of New York.(27)
- (f) Amendment, dated August 18, 2003, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company of New York.(27)
|
- (g) Amendment, dated April 30, 2004, to the Participation
Agreement, dated October 7, 1996, between Registrant and IDS Life
Insurance Company of New York.(27)
(10) - (a) Participation Agreement, dated April 8, 1996, between
Registrant and Connecticut General Life Insurance Company.(4)
- (b) Amendment No. 1, dated April 30, 2004, to the Participation
Agreement, dated April 8, 1996, between Registrant and Connecticut
General Life Insurance Company.(27)
(11) - (a) Participation Agreement, dated September 21, 1996, between
Registrant and Pruco Life Insurance Company.(5)
- (b) Amendment No. 1, dated July 1, 1997, to the Participation
Agreement, dated September 21, 1996, between Registrant and Pruco
Life Insurance Company.(6)
- (c) Amendment No. 2, dated August 1, 1998, to the Participation
Agreement, dated September 21, 1996, between Registrant and Pruco
Life Insurance Company.(7)
- (d) Amendment No. 3, dated November 8, 1999, to the Participation
Agreement dated September 21, 1996, between Registrant and Pruco
Life Insurance Company.(14)
- (e) Amendment No. 4, dated April 10, 2000, to the Participation
Agreement dated September 21, 1996, between Registrant and Pruco
Life Insurance Company.(14)
(12) - (a) Participation Agreement, dated October 1, 1996, between
Registrant and Allstate Life Insurance Company of New York.(5)
- (a)(i) Side Letter Agreement, dated October 1, 1996, between
Registrant and Allstate Life Insurance Company of New York.(7)
- (b) Amendment No. 1, dated November 7, 1997, to the Participation
Agreement, dated October 1, 1996, between Registrant and Allstate
Life Insurance Company of New York.(9)
- (c) Amendment No. 2, dated December 18, 2002, to the Participation
Agreement, dated October 1, 1996, between Registrant and Allstate
Life Insurance Company of New York.(27)
- (d) Amendment No. 3, dated May 1, 2003, to the Participation
Agreement, dated October 1, 1996, between Registrant and Allstate
Life Insurance Company of New York.(27)
(13) - (a) Participation Agreement, dated December 18, 1996, between
Registrant and Merrill Lynch Life Insurance Company.(5)
- (a)(i) Side Letter Agreement, dated December 18, 1996, between
Registrant and Merrill, Lynch, Pierce, Fenner & Smith,
Incorporated.(5)
|
- (b) Amendment No. 1, dated May 1, 1997, to the Participation
Agreement, dated December 18, 1996, between Registrant and Merrill
Lynch Life Insurance Company.(6)
- (c) Amendment No. 2, dated April 13, 2000, to the Participation
Agreement, dated December 18, 1996, between Registrant and Merrill
Lynch Life Insurance Company.(14)
- (d) Amendment No. 3, dated February 16, 2001, to the Participation
Agreement, dated December 18, 1996, between Registrant and Merrill
Lynch Life Insurance Company.(18)
- (e) Amendment No. 4, dated May 1, 2001, to the Participation
Agreement, dated December 18, 1996, between Registrant and Merrill
Lynch Life Insurance Company.(18)
- (f) Amendment No. 5, dated October 5, 2001, to the Participation
Agreement, dated December 18, 1996, between Registrant and Merrill
Lynch Life Insurance Company.(18)
- (g) Agreement No. 6, dated September 10, 2002, to the Participation
Agreement, dated December 18, 1996, between Registrant and Merrill
Lynch Life Insurance Company.(20)
- (h) Amendment No. 7, dated March 1, 2005, to the Participation
Agreement, dated December 18, 1996, between Registrant and Merrill
Lynch Life Insurance Company.(27)
- (i) Amendment No. 8, dated May 1, 2006, to the Participation
Agreement, dated December 18, 1996, between Registrant and Merrill
Lynch Life Insurance Company.(27)
(14) - (a) Participation Agreement, dated December 18, 1996, between
Registrant and ML Life Insurance Company of New York.(5)
- (b) Amendment No. 1, dated May 1, 1997, to the Participation
Agreement, dated December 18, 1996, between Registrant and ML Life
Insurance Company of New York.(6)
- (c) Amendment No. 2, dated April 3, 2000, to the Participation
Agreement, dated December 18, 1996, by and between Registrant and
ML Life Insurance Company of New York.(14)
- (d) Amendment No. 3, dated February 16, 2001, to the Participation
Agreement, dated December 18, 1996, between Registrant and ML Life
Insurance Company of New York.(18)
- (e) Amendment No. 4, dated May 1, 2001, to the Participation
Agreement, dated December 18, 1996, between Registrant and ML Life
Insurance Company of New York.(18)
- (f) Amendment No. 5, dated October 5, 2001, to the Participation
Agreement, dated, December 18, 1996, between Registrant and ML Life
Insurance Company of New York.(18)
|
- (g) Amendment No. 6, dated September 10, 2002, to the Participation
Agreement, dated December 18, 1996, between Registrant and ML Life
Insurance Company of New York.(20)
- (h) Amendment No. 7, dated March 1, 2005, to the Participation
Agreement, dated December 18, 1996, between Registrant and ML Life
Insurance Company of New York.(27)
- (i) Amendment No. 8, dated May 1, 2006, to the Participation
Agreement, dated December 18, 1996, between Registrant and ML Life
Insurance Company of New York.(27)
(15) - (a) Participation Agreement, dated February 14, 1997, between
Registrant and Pruco Life Insurance Company of New Jersey.(5)
- (b) Amendment No. 1, dated November 8, 1999, to the Participation
Agreement, dated February 14, 1997, between Registrant and Pruco
Life Insurance Company of New Jersey.(14)
- (c) Amendment No. 2, dated April 10, 2000, to the Participation
Agreement, dated February 14, 1997, between Registrant and Pruco
Life Insurance Company of New Jersey.(14)
- (d) Amendment, dated April 30, 2004, to the Participation
Agreement, dated February 14, 1997, between Registrant and Pruco
Life Insurance Company of New Jersey.(27)
(16) - Participation Agreement, dated April 30, 1997, between Registrant
and Prudential Insurance Company of America.(6)
(17) - Amended and Restated Participation Agreement, dated April 17, 2006,
between Registrant and American Centurion Life Assurance
Company.(28)
(18) - Amended and Restated Participation Agreement, dated April 17, 2006,
between Registrant and American Enterprise Life Insurance
Company.(28)
(19) - (a) Participation Agreement, dated November 20, 1997, between
Registrant and AIG Life Insurance Company.(6)
- (b) Amendment No. 1, dated October 11, 1999, to the Participation
Agreement, dated November 20, 1997, between Registrant and AIG Life
Insurance Company.(27)
(20) - Participation Agreement, dated November 20, 1997, between
Registrant and American International Life Assurance Company of New
York.(6)
(21) - (a) Participation Agreement, dated November 4, 1997, between
Registrant and Nationwide Life Insurance Company.(6)
- (b) Amendment No. 1, dated June 15, 1998, to the Participation
Agreement, dated November 4, 1997, between Registrant and
Nationwide Life Insurance Company.(7)
(22) - (a) Participation Agreement, dated December 3, 1997, between
Registrant and Security Life of Denver.(6)
|
- (b) Amendment No. 1, dated June 23, 1998, to the Participation Agreement, dated December 3, 1997, between Registrant and Security Life of Denver.(7)
- (c) Amendment No. 2, dated May 20, 1999, to the Participation Agreement, dated December 3, 1997, between Registrant and Security Life of Denver Insurance Company.(10)
- (d) Amendment No. 3, dated November 1, 1999, to the Participation
Agreement, dated December 3, 1997, between Registrant and Security
Life of Denver Insurance Company.(12)
- (e) Amendment No. 4, dated March 2, 2000, to the Participation
Agreement, dated December 3, 1997, between Registrant and Security
Life of Denver Insurance Company.(14)
- (f) Amendment No. 5, dated December 28, 2000, to the Participation
Agreement, dated December 3, 1997, between Registrant and Security
Life of Denver Insurance Company.(14)
- (g) Amendment No. 6, dated September 5, 2001, to the Participation
Agreement, dated December 3, 1997, between Registrant and Security
Life of Denver Insurance Company.(18)
(23) - (a) Participation Agreement, dated December 31, 1997, between
Registrant and Cova Financial Services Life Insurance Company.(6)
- (b) Amendment No. 1, dated April 23, 1999, to the Participation
Agreement, dated December 31, 1997, between Registrant and Cova
Financial Services Life Insurance Company.(12)
- (c) Amendment No. 2, dated September 1, 2000, to the Participation
Agreement, dated December 31, 1997, between Registrant and Cova
Financial Services Life Insurance Company.(14)
- (d) Amendment No. 3, dated February 12, 2001, to the Participation
Agreement, dated December 31, 1997, between Registrant and Met Life
Investors Insurance Company (formerly Cova Financial Services Life
Insurance Company).(18)
(24) - (a) Participation Agreement, dated December 31, 1997, between
Registrant and Cova Financial Life Insurance Company.(6)
- (b) Amendment No. 1, dated April 23, 1999, to the Participation
Agreement, dated December 31, 1997, between Registrant and Cova
Financial Life Insurance Company.(10)
- (c) Amendment No. 2, dated February 12, 2001, to the Participation
Agreement, dated April 23, 1999, between Registrant and Met Life
Investors Insurance Company (formerly Cova Financial Life Insurance
Company).(18)
(25) - (a) Participation Agreement, dated February 2, 1998, between
Registrant and The Guardian Insurance & Annuity Company, Inc.(7)
- (b) Amendment No. 1, dated July 1, 1999, to the Participation
Agreement, dated February 2, 1998, between Registrant and The
Guardian Life Insurance & Annuity Company, Inc.(11)
|
- (c) Amendment No. 2, dated May 1, 2000, to the Participation Agreement, dated February 2, 1998, between Registrant and The Guardian Life Insurance & Annuity Company, Inc.(14)
- (d) Amendment No. 3, dated August 1, 2000, to the Participation
Agreement, dated February 2, 1998, between Registrant and The
Guardian Life Insurance & Annuity Company.(14)
- (e) Amendment No. 4, dated December 1, 2000, to the Participation
Agreement, dated February 2, 1998, between Registrant and The
Guardian Life Insurance and Annuity Company, Inc.(18)
- (f) Amendment, dated January 1, 2003, to the Participation
Agreement, dated February 2, 1998, between Registrant and The
Guardian Insurance and Annuity Company, Inc.(27)
- (g) Amendment No. 5, dated May 1, 2004, to the Participation
Agreement, dated February 2, 1998, between Registrant and The
Guardian Insurance and Annuity Company, Inc.(27)
(26) - (a) Participation Agreement, dated February 17, 1998, between
Registrant and Sun Life Assurance Company of Canada (U.S.).(7)
- (b) Amendment No. 1, dated December 11, 1998, to the Participation
Agreement, dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.).(8)
- (c) Amendment No. 2, dated March 15, 1999, to the Participation
Agreement, dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.).(14)
- (d) Amendment No. 3, dated April 17, 2000, to the Participation
Agreement, dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.).(14)
- (e) Amendment No. 4, dated May 1, 2000, to the Participation
Agreement, dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S).(18)
- (f) Amendment No. 5, dated May 1, 2001, to the Participation
Agreement, dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.).(18)
- (g) Amendment No. 6, dated September 1, 2001, to the Participation
Agreement dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.).(18)
- (h) Amendment No. 7, dated April 1, 2002 to the Participation
Agreement dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.).(20)
- (i) Amendment No. 8, dated August 5, 2002, to the Participation
Agreement dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.).(20)
|
- (j) Amendment No. 9, dated August 20, 2003, to the Participation Agreement, dated February 17, 1998, between Registrant and Sun Life Assurance Company of Canada.(27)
- (k) Amendment No. 10, dated December 31, 2003, to the Participation Agreement, dated February 17, 1998, between Registrant and Sun Life Assurance Company of Canada (U.S.).(27)
- (l) Amendment No. 11, dated April 30, 2004, to the Participation Agreement, dated February 17, 1998, between Registrant and Sun Life Assurance Company of Canada (U.S.).(27)
- (m) Amendment No. 12, dated January 29, 2007, to the Participation Agreement, dated February 17, 1998, between Registrant and Sun Life Assurance Company of Canada (U.S.).(28)
(27) - Participation Agreement, dated April 1, 1998, between Registrant
and United Life & Annuity Insurance Company.(7)
(28) - (a) Participation Agreement, dated April 21, 1998, between
Registrant and Keyport Life Insurance Company.(7)
- (b) Amendment No. 1, dated December 28, 1998, to the Participation
Agreement, dated April 21, 1998, between Registrant and Keyport
Life Insurance Company.(8)
- (c) Amendment No. 2, dated March 12, 2001, to the Participation
Agreement, dated April 21, 1998, between Registrant and Keyport
Life Insurance Company.(18)
(29) - (a) Participation Agreement, dated May 1, 1998, between Registrant
and PFL Life Insurance Company.(7)
- (b) Amendment No. 1, dated June 30, 1998, to the Participation
Agreement, dated May 1, 1998, between Registrant and PFL Life
Insurance Company.(7)
- (c) Amendment No. 2, dated November 27, 1998, to the Participation
Agreement, dated May 1, 1998, between Registrant and PFL Life
Insurance Company.(8)
- (d) Amendment No. 3, dated August 1, 1999, to the Participation
Agreement, dated May 1, 1998, between Registrant and PFL Life
Insurance Company.(18)
- (e) Amendment No. 4, dated February 28, 2001, to the Participation
Agreement, dated May 1, 1998, between Registrant and PFL Life
Insurance Company.(18)
- (f) Amendment No. 5, dated July 1, 2001, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(18)
- (g) Amendment No. 6, dated August 15, 2001, to the Participation
Agreement dated May 1, 1998, between Transamerica Life Insurance
Company (formerly PFL Life Insurance Company).(18)
|
- (h) Amendment No. 7, dated May 1, 2002, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(20)
- (i) Amendment No. 8, dated July 15, 2002, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(20)
- (j) Amendment No. 9, dated December 1, 2002, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(20)
- (k) Amendment No. 10, dated May 1, 2003, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(27)
- (l) Amendment No. 11, dated December 1, 2003, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(27)
- (m) Amendment No. 12, dated May 1, 2004, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(27)
- (n) Amendment No. 13, dated September 1, 2005, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(27)
- (o) Amendment No. 14, dated May 1, 2006, to the Participation
Agreement, dated May 1, 1998, between Registrant and Transamerica
Life Insurance Company (formerly PFL Life Insurance Company).(27)
(30) - (a) Participation Agreement, dated May 1, 1998, between Registrant
and Fortis Benefits Insurance Company.(7)
- (b) Amendment No. 1, dated April 30, 2004, to the Participation
Agreement, dated May 1, 1998, between Registrant and Fortis
Benefits Insurance Company (n/k/a Union Security Insurance
Company).(28)
(31) - (a) Participation Agreement, dated June 1, 1998, between Registrant
and American General Life Insurance Company.(7)
- (b) Amendment No. 1, dated January 1, 1999, to the Participation
Agreement, dated June 1, 1998, between Registrant and American
General Life Insurance Company.(9)
- (c) Amendment No. 2, dated September 29, 1999, to the Participation
Agreement, dated June 1, 1998, between Registrant and American
General Life Insurance Company.(14)
- (d) Amendment No. 3, dated February 1, 2000, to the Participation
Agreement, dated June 1, 1998, between Registrant and American
General Life Insurance Company.(14)
|
- (e) Amendment No. 4, dated November 1, 2000, to the Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company.(18)
- (f) Amendment No. 5, dated May 14, 2002, to the Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company.(20)
- (g) Amendment No. 6, dated October 1, 2002, to the Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company.(27)
- (h) Amendment No. 7, dated January 15, 2004, to the Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company.(27)
- (i) Amendment No. 8, dated January 1, 2005, to the Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company.(27)
- (j) Amendment No. 9, dated May 1, 2006, to the Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company.(28)
(32) - (a) Participation Agreement, dated June 16, 1998, between
Registrant and Lincoln National Life Insurance Company.(7)
- (b) Amendment No. 1, dated November 20, 1998, to the Participation
Agreement, dated June 16, 1998, between Registrant and Lincoln
National Life Insurance Company.(8)
- (c) Amendment No. 2, dated May 1, 1999, to the Participation
Agreement, dated June 16, 1998, between Registrant and Lincoln
National Life Insurance Company.(14)
- (d) Amendment No. 3, dated October 14, 1999, to the Participation
Agreement, dated June 16, 1998, between Registrant and Lincoln
National Life Insurance Company.(14)
- (e) Amendment No. 4, dated May 1, 2000, to the Participation
Agreement, dated June 16, 1998, between Registrant and Lincoln
National Life Insurance Company.(14)
- (f) Amendment No. 5, dated July 15, 2000, to the Participation
Agreement, dated June 16, 1998, between Registrant and Lincoln
National Life Insurance Company.(18)
- (g) Amendment No. 6, dated July 15, 2001, to the Participation
Agreement dated June 16, 1998, between Registrant and Lincoln
National Life Insurance Company.(18)
- (h) Amendment No. 7, dated May 1, 2003, to the Participation
Agreement, dated June 16, 1998, between Registrant and Lincoln
National Life Insurance Company.(27)
|
- (i) Amendment No. 8, dated April 30, 2004, to the Participation Agreement, dated June 16, 1998, between Registrant and Lincoln National Life Insurance Company.(27)
- (j) Amendment No. 9, dated May 1, 2006, to the Participation Agreement, dated June 16, 1998, between Registrant and Lincoln National Life Insurance Company.(28)
(33) - (a) Participation Agreement, dated June 30, 1998, between
Registrant and Aetna Life Insurance and Annuity Company.(7)
- (b) Amendment No. 1, dated October 1, 2000, to the Participation
Agreement, dated June 30, 1998, between Registrant and AETNA Life
Insurance and Annuity Company.(18)
- (c) Amendment, dated July 12, 2002, to the Participation Agreement,
dated June 30, 1998, between Registrant and AETNA Life Insurance
and Annuity Company (n/k/a ING Life Insurance and Annuity
Company).(27)
(34) - (a) Participation Agreement, dated July 1, 1998, between Registrant
and The Union Central Life Insurance Company.(8)
- (b) Amendment 2, dated July 1, 2001, to the Participation
Agreement, dated July 1, 1998, between Registrant and The Union
Central Life Insurance Company.(28)
|
- (c) Amendment, dated January 1, 2003, to the Participation Agreement, dated July 1, 1998, between Registrant and The Union Central Life Insurance Company.(20)
- (d) Amendment, dated April 30, 2004, to the Participation Agreement, dated July 1, 1998, between Registrant and The Union Central Life Insurance Company (ING Life Insurance and Annuity Company).(27)
- (e) Amendment 4, dated June 30, 2006, to the Participation Agreement, dated July 1, 1998, between Registrant and The Union Central Life Insurance Company.(28)
(35) - (a) Participation Agreement, dated July 1, 1998, between Registrant
and United Investors Life Insurance Company.(8)
- (b) Amendment No. 1, dated July 1, 2002, to the Participation
Agreement, dated July 1, 1998, between Registrant and United
Investors Life Insurance Company.(27)
(36) - (a) Participation Agreement, dated July 2, 1998, between Registrant
and Hartford Life Insurance Company.(7)
- (b) Amendment No. 1, dated April 29, 2002, to be effective as of
November 1, 2000, to the Participation Agreement, dated July 2,
1998, between Registration and Hartford Life Insurance Company.(20)
- (c) Amendment No. 2, dated September 20, 2001, to the Participation
Agreement, dated July 2, 1998, between Registrant and Hartford Life
Insurance Company.(20)
|
- (d) Amendment No. 3, dated June 1, 2003, to the Participation
Agreement, dated July 2, 1998, between Registrant and Hartford Life
Insurance Company.(27)
- (e) Amendment No. 4, dated November 1, 2003, to the Participation
Agreement, dated July 2, 1998, between Registrant and Hartford Life
Insurance Company.(27)
- (f) Amendment No. 5, dated May 1, 2004, to the Participation
Agreement, dated July 2, 1998, between Registrant and Hartford Life
Insurance Company.(27)
(37) - (a) Participation Agreement, dated July 13, 1998, between
Registrant and Keyport Benefit Life Insurance Company.(7)
- (b) Amendment No. 1, dated December 28, 1998 to the Participation
Agreement, dated July 13, 1998, between Registrant and Keyport
Benefit Life Insurance Company.(8)
- (c) Amendment No. 2, dated March 12, 2001, to the Participation
Agreement, dated July 13, 1998, between Registrant and Keyport
Benefit Life Insurance Company.(27)
(38) - (a) Participation Agreement, dated July 27, 1998, between
Registrant and Allmerica Financial Life Insurance and Annuity
Company.(7)
- (b) Amendment No. 1, dated February 11, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(13)
- (c) Amendment No. 2, dated April 10, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(14)
- (d) Amendment No. 3, dated May 1, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(14)
- (e) Amendment No. 4, dated October 4, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(14)
- (f) Amendment No. 5, dated December 1, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(18)
- (g) Amendment No. 6, dated May 1, 2001, to the Participation
Agreement, dated July 27, 1998, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(18)
- (h) Amendment No. 7, dated May 1, 2002, to the Participation
Agreement, dated July 27, 1998, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(20)
- (i) Amendment, dated January 1, 2003, to the Participation
Agreement, dated July 27, 1998, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(27)
|
(39) - (a) Participation Agreement, dated July 27, 1998, between
Registrant and First Allmerica Financial Life Insurance Company.(7)
- (b) Amendment No. 1, dated February 11, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and First
Allmerica Financial Life Insurance Company.(13)
- (c) Amendment No. 2, dated April 10, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and First
Allmerica Financial Life Insurance Company.(14)
- (d) Amendment No. 3, dated May 1, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and First
Allmerica Financial Life Insurance Company.(14)
- (e) Amendment No. 4, dated October 4, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and First
Allmerica Financial Life Insurance Company.(14)
- (f) Amendment No. 5, dated December 1, 2000, to the Participation
Agreement, dated July 27, 1998, between Registrant and First
Allmerica Financial Life Insurance Company.(18)
- (g) Amendment No. 6, dated May 1, 2001, to the Participation
Agreement, dated July 27, 1998, between Registrant and First
Allmerica Financial Life Insurance Company.(18)
- (h) Amendment No. 7, dated May 1, 2002, to the Participation
Agreement, dated July 27, 1998, between Registrant and First
Allmerica Financial Life Insurance Company.(20)
- (i) Amendment dated January 1, 2003 to the Participation Agreement,
dated July 27, 1998, between Registrant and First Allmerica
Financial Life Insurance Company.(27)
(40) - (a) Participation Agreement, dated October 15, 1998, between
Registrant and Lincoln Life & Annuity Insurance Company of New
York.(9)
- (b) Amendment No. 1, dated February 15, 2000, to the Participation
Agreement, dated October 15, 1998, between Registrant and Lincoln
Life & Annuity Insurance Company of New York.(27)
- (c) Amendment No. 2, dated May 1, 2000, to the Participation
Agreement, dated October 15, 1998, between Registrant and Lincoln
Life & Annuity Insurance Company of New York.(27)
- (d) Amendment No. 3, dated July 15, 2000, to the Participation
Agreement, dated October 15, 1998, between Registrant and Lincoln
Life & Annuity Insurance Company of New York.(27)
- (e) Amendment, dated January 1, 2003, to the Participation
Agreement, dated October 15, 1998, between Registrant and Lincoln
Life & Annuity Insurance Company of New York.(27)
|
- (f) Amendment No. 5, dated April 30, 2004, to the Participation Agreement, dated October 15, 1998, between Registrant and Lincoln Life & Annuity Insurance Company of New York.(27)
- (g) Amendment No. 6, dated October 1, 2006, to the Participation Agreement, dated October 15, 1998, between Registrant and Lincoln Life & Annuity Insurance Company of New York.(28)
(41) - (a) Participation Agreement, dated November 23, 1998, between
Registrant and American General Annuity Insurance Company.(8)
- (b) Amendment No. 1, dated July 1, 1999, to the Participation
Agreement dated November 23, 1998, between Registrant and American
General Annuity Insurance Company.(11)
- (c) Amendment No. 2, dated August 1, 2000, to the Participation
Agreement, dated November 23, 1998, between Registrant and American
General Annuity Insurance Company.(14)
(42) - (a) Participation Agreement, dated December 1, 1998, between
Registrant and the Prudential Insurance Company of America.(8)
- (b) Amendment No. 1, dated March 8, 2000, to the Participation
Agreement, dated April 30, 1997, between Registrant and Prudential
Insurance Company of America.(27)
- (c) Amendment, dated April 30, 2004, to the Participation
Agreement, dated April 30, 1997, between Registrant and Prudential
Insurance Company of America.(27)
- (d) Form of Amendment, dated May 1, 2006, to the Participation
Agreement, dated April 30, 1997, between Registrant and Prudential
Insurance Company of America.(27)
(43) - (a) Participation Agreement, dated February 1, 1999, between
Registrant and Sage Life Assurance of America, Inc.(9)
- (b) Amendment No. 1, dated October 1, 2001, to the Participation
Agreement, dated February 1, 1999, between Registrant and Sage Life
Assurance of America, Inc.(18)
- (c) Amendment No. 2, dated February 1, 2002, to the Participation
Agreement, dated February 1, 1999, between Registrant and Sage Life
Assurance of America, Inc.(27)
- (d) Amendment No. 3, dated May 1, 2003, to the Participation
Agreement, dated February 1, 1999, between Registrant and Sage Life
Assurance of America, Inc.(27)
(44) - (a) Participation Agreement, dated April 1, 1999, between
Registrant and Liberty Life Assurance Company of Boston.(9)
- (b) Amendment No. 1, dated May 1, 2001, to the Participation
Agreement, dated April 1, 1999, between Registrant and Liberty Life
Assurance Company of Boston.(18)
|
- (c) Amendment No. 2, dated April 30, 2004, to the Participation
Agreement, dated April 1, 1999, between Registrant and Liberty Life
Assurance Company of Boston.(27)
(45) - Participation Agreement, dated April 13, 1999, between Registrant
and Western-Southern Life Insurance Company.(10)
(46) - (a) Participation Agreement, dated May 1, 1999, between Registrant
and Columbus Life Insurance Company.(10)
- (b) Amendment, dated April 25, 2003, to the Participation
Agreement, dated May 1, 1999, between Registrant and Columbus Life
Insurance Company.(27)
- (c) Amendment No. 2, dated April 30, 2004, to the Participation
Agreement, dated May 1, 1999, between Registrant and Columbus Life
Insurance Company.(27)
(47) - (a) Participation Agreement, dated April 26, 1999, between
Registrant and First Variable Life Insurance Company.(10)
- (b) Amendment, dated April 30, 2004, to the Participation
Agreement, dated April 26, 1999, between Registrant and Protective
Life Insurance Company (formerly First Variable Life Insurance
Company).(27)
(48) - (a) Participation Agreement, dated August 21, 1999, between
Registrant and Life Investors Insurance Company of America.(11)
|
- (b) Amendment, dated July 12, 2006, to the Participation Agreement, dated August 21, 1999, between Registrant and Life Investors Insurance Company of America.(28)
(49) - Participation Agreement, dated June 8, 1999, between Registrant and
The Principal Life Insurance Company.(10)
(50) - (a) Participation Agreement, dated June 8, 1999, between Registrant
and Principal Life Insurance Company.(11)
- (b) Amendment, dated April 1, 2001, to the Participation Agreement,
dated June 8, 1999, between Registrant and Principal Life Insurance
Company.(27)
- (c) Amendment, dated May 1, 2002, to the Participation Agreement,
dated June 8, 1999, between Registrant and Principal Life Insurance
Company.(20)
- (d) Amendment, dated August 15, 2002, to the Participation
Agreement, dated June 8, 1999, between Registrant and Principal
Life Insurance Company.(20)
- (e) Amendment. dated January 8, 2003, to the Participation
Agreement, dated June 8, 1999, between Registrant and Principal
Life Insurance Company.(27)
- (f) Amendment, dated February 14, 2003, to the Participation
Agreement, dated June 8, 1999, between Registrant and Principal
Life Insurance Company.(27)
- (g) Amendment, dated April 30, 2004, to the Participation
Agreement, dated June 8, 1999, between Registrant and Principal
Life Insurance Company.(27)
|
- (h) Amendment, dated April 29, 2005, to the Participation
Agreement, dated June 8, 1999, between Registrant and Principal
Life Insurance Company.(27)
- (i) Form of Amendment No. 8, dated May 1, 2006, to the
Participation Agreement, dated June 8, 1999, between Registrant and
Principal Life Insurance Company.(27)
(51) - Participation Agreement, dated June 14, 1999, between Registrant
and Security First Life Insurance Company.(11)
(52) - (a) Participation Agreement, dated July 1, 1999, between Registrant
and Allstate Life Insurance Company.(11)
- (b) Amendment No. 1, dated December 20, 2001, to the Participation
Agreement, dated July 1, 1999, between Registrant and Allstate Life
Insurance Company.(18)
- (c) Amendment No. 2, dated May 1, 2003, to the Participation
Agreement, dated July 1, 1999, between Registrant and Allstate Life
Insurance Company.(27)
(53) - (a) Participation Agreement, dated July 27, 1999, between
Registrant and Allianz Life Insurance Company of North America.(11)
- (b) Amendment No. 1, dated May 1, 2005, to the Participation
Agreement, dated July 27, 1999, between Registrant and Allianz Life
Insurance Company of North America.(28)
|
- (c) Amendment No. 2, dated May 1, 2006, to the Participation Agreement, dated July 27, 1999, between Registrant and Allianz Life Insurance Company of North America.(28)
(54) - (a) Participation Agreement, dated July 27, 1999, between
Registrant and Preferred Life Insurance Company of New York.(11)
- (b) Amendment No. 1, dated May 1, 2006, to the Participation
Agreement, dated July 27, 1999, between Registrant and Allianz Life
Insurance Company of New York (formerly preferred Life Insurance
Company of New York).(28)
(55) - Participation Agreement, dated August 31, 1999, between Registrant
and John Hancock Mutual Life Insurance Company.(11)
(56) - (a) Participation Agreement, dated August 31, 1999, between
Registrant and The United States Life Insurance Company in the City
of New York.(11)
- (b) Amendment No. 1, dated October 1, 2001, to the Participation
Agreement, dated August 31, 1999, between Registrant and The United
States Life Insurance Company in the City of New York.(27)
- (c) Amendment No. 2, dated December 31, 2002, to the Participation
Agreement, dated August 31, 1999, between Registrant and The United
States Life Insurance Company in the City of New York.(27)
- (d) Amendment No. 3, dated September 5, 2003, to the Participation
Agreement, dated August 31, 1999, between Registrant and The United
States Life Insurance Company in the City of New York.(27)
|
(57) - (a) Participation Agreement, dated November 1, 1999, between
Registrant and AETNA Insurance Company of America.(12)
- (b) Amendment No. 1, dated November 17, 2000, to the Participation
Agreement dated November 1, 1999, between Registrant and AETNA
Insurance Company of America.(18)
- (c) Amendment, dated July 12, 2002, to the Participation Agreement,
dated November 1, 1999, between Registrant and AETNA Insurance
Company of America.(27)
(58) - Participation Agreement, dated January 28, 2000, between Registrant
and Northbrook Life Insurance Company.(13)
(59) - (a) Participation Agreement, dated March 2, 2000, between
Registrant and GE Life and Annuity Assurance Company.(14)
- (b) Amendment No. 1, dated January 12, 2005, to the Participation
Agreement, dated March 2, 2000, between Registrant and GE Life and
Annuity Assurance Company.(27)
- (c) Amendment No. 2, dated April 29, 2005, to the Participation
Agreement, dated March 2, 2000, between Registrant and GE Life and
Annuity Assurance Company.(27)
(60) - Participation Agreement, dated March 27, 2000, between Registrant
and Reliastar Life Insurance Company of New York.(14)
(61) - Participation Agreement, dated March 27, 2000, between Registrant
and Northern Life Insurance Company.(14)
(62) - Participation Agreement, dated March 27, 2000, between Registrant
and Reliastar Life Insurance Company.(14)
(63) - (a) Participation Agreement, dated April 10, 2000, between
Registrant and Allmerica Financial Life Insurance and Annuity
Company.(14)
- (b) Amendment No. 1, dated December 1, 2000, to the Participation
Agreement, dated April 10, 2000, between Registrant and Allmerica
Financial Life Insurance and Annuity Company.(18)
(64) - (a) Participation Agreement, dated April 14, 2000, between
Registrant and United Investors Life Insurance Company.(14)
- (b) Amendment, dated April 30, 2004, to the Participation
Agreement, dated April 14, 2000, between Registrant and United
Investors Life Insurance Company.(27)
(65) - (a) Participation Agreement, dated April 17, 2000, between
Registrant and Sun Life Insurance and Annuity Company of New
York.(14)
- (b) Amendment No. 1, dated April 27, 2000, to the Participation
Agreement, dated April 17, 2000, between Registrant and Sun Life
Insurance and Annuity Company of New York.(20)
|
- (c) Amendment No. 2, dated September 1, 2001, to the Participation Agreement, dated April 17, 2000, between Registrant and Sun Life Insurance and Annuity Company of New York.(20)
- (d) Amendment No. 3, dated April 1, 2002, to the Participation Agreement, dated April 17, 2000, between Registrant and Sun Life Insurance and Annuity Company of New York.(20)
- (e) Amendment No. 4, dated December 31, 2002, to the Participation Agreement, dated April 17, 2000, between Registrant and Sun Life Insurance and Annuity Company of New York.(20)
- (f) Amendment No. 5, dated August 20, 2003, to the Participation Agreement, dated April 17, 2000, between Registrant and Sun Life Insurance and Annuity Company of New York.(27)
- (g) Amendment No. 6, dated April 30, 2004, to the Participation Agreement, dated April 17, 2000, between Registrant and Sun Life Insurance and Annuity Company of New York.(27)
- (h) Amendment No. 7, dated October 1, 2006, to the Participation Agreement, dated April 17, 2000, between Registrant and Sun Life Insurance and Annuity Company of New York.(28)
(66) - (a) Participation Agreement, dated August 1, 2000, between
Registrant and Kansas City Life Insurance Company.(14)
- (b) Amendment, dated October 31, 2002, to the Participation
Agreement, dated August 1, 2000, between Registrant and Kansas City
Life Insurance Company.(27)
(67) - (a) Participation Agreement, dated September 25, 2000, between
Registrant and Security Life of Denver Insurance Company.(14)
- (b) Amendment No. 1, dated September 5, 2001, to the Private
Placement Participation Agreement, dated September 25, 2000,
between Registrant and Security Life of Denver Insurance
Company.(18)
(68) - (a) Participation Agreement, dated February 26, 1999, between
Registrant and American General Life Insurance Company.(18)
- (b) Amendment No. 1, dated November 1, 2000, to the Participation
Agreement, dated February 26, 1999, between Registrant and American
General Life Insurance Company.(18)
- (c) Amendment No. 2, dated October 1, 2002, to the Participation
Agreement, dated February 26, 1999, between Registrant and American
General Life Insurance Company.(27)
(69) - (a) Participation Agreement, dated April 3, 2000, between
Registrant and First Cova Life Insurance Company.(18)
- (b) Amendment No. 1, dated February 12, 2001, to the Participation
Agreement dated December 31, 1997, between Registrant and First Met
Life Investors Insurance Company (formerly, First Cova Life
Insurance Company).(18)
|
(70) - (a) Participation Agreement, dated February 1, 2001, between
Registrant and Peoples Benefit Life Insurance Company.(18)
- (b) Amendment, dated April 6, 2004, to the Participation Agreement
between Registrant and Peoples Benefit Life Insurance Company.(27)
(71) - (a) Participation Agreement, dated March 28, 2001, between
Registrant and Security Benefit Life Insurance Company.(18)
- (b) Amendment No. 1, dated May 1, 2003, to the Participation
Agreement, dated March 28, 2001, between Registrant and Security
Benefit Life Insurance Company.(27)
- (c) Amendment No. 2, dated September 29, 2005, to the Participation
Agreement, dated March 28, 2001, between Registrant and Security
Benefit Life Insurance Company.(27)
|
- (d) Amendment No. 3, dated November 15, 2006, to the Participation Agreement, dated March 28, 2001, between Registrant and Security Benefit Life Insurance Company.(28)
(72) - Participation Agreement, dated March 29, 2001, between Registrant
and Phoenix Home Life Mutual Insurance Company.(18)
(73) - Participation Agreement, dated March 29, 2001, between Registrant
and Phoenix Life and Annuity Company.(18)
(74) - Participation Agreement, dated March 29, 2001, between Registrant
and PHL Variable Insurance Company.(18)
(75) - (a) Participation Agreement, dated April 4, 2001, between
Registrant and Annuity Investors Life Insurance Company.(18)
- (b) Amendment No. 1, dated July 1, 2002, to the Participation
Agreement, dated April 4, 2001, between Registrant and Annuity
Investors Life Insurance Company.(27)
- (c) Amended, dated April 30, 2004, to the Participation Agreement,
dated April 4, 2001, between Registrant and Annuity Investors Life
Insurance Company.(27)
(76) - Participation Agreement, dated April 17, 2001, between Registrant
and Sun Life Insurance and Annuity Company of New York.(18)
(77) - (a) Participation Agreement, dated April 30, 2001, between
Registrant and Western Reserve Life Assurance Co. of Ohio.(18)
- (b) Amendment, dated April 30, 2001, to the Participation
Agreement, dated April 30, 2001, between Registrant and Western
Reserve Life Assurance Co. of Ohio. (27)
- (c) Amendment, dated July 12, 2006, to the Participation Agreement,
dated April 30, 2001, between Registrant and Western Reserve Life
Assurance Co. of Ohio.(28)
|
(78) - (a) Participation Agreement, dated July 13, 2001, between
Registrant and Golden American Life Insurance Company.(18)
- (b) Amendment, dated April 30, 2004, to the Participation
Agreement, dated July 13, 2001, between Registrant and Golden
American Life Insurance Company.(27)
(79) - (a) Participation Agreement, dated July 24, 2001, between
Registrant and Lincoln Benefit Life Company.(18)
- (b) Amendment No. 1, dated December 18, 2002, to the Participation
Agreement, dated July 24, 2001, between Registrant and Lincoln
Benefit Life Company.(20)
(80) - (a) Participation Agreement, dated October 1, 2000, between
Registrant and The Travelers Life and Annuity Company.(18)
- (b) Amendment, dated May 1, 2003, to the Participation Agreement,
dated October 1, 2000, between Registrant and The Travelers Life
and Annuity Company.(27)
- (c) Amendment, dated March 31, 2005, to the Participation
Agreement, dated October 1, 2000, between Registrant and The
Travelers Life and Annuity Company.(27)
(81) - (a) Participation Agreement, dated November 1, 2001, between
Registrant and The American Life Insurance Company of New York.(18)
(82) - (a) Participation Agreement, dated May 1, 2002, between the
Registrant and Hartford Life and Annuity Insurance Company.(27)
- (b) Amendment No. 1, dated April 30, 2004, to the Participation
Agreement, dated May 1, 2002, to the Participation Agreement dated
May 1, 2002, between the Registrant and Hartford Life and Annuity
Insurance Company.(27)
(83) - (a) Participation Agreement, dated March 4, 2002, between
Registrant and Minnesota Life Insurance Company.(19)
- (b) Amendment No. 1, dated April 30, 2004, to the Participation
Agreement, dated March 4, 2002, between Registrant and Minnesota
Life Insurance Company, Inc.(27)
- (c) Amendment No. 2, dated April 1, 2005, to the Participation
Agreement, dated March 4, 2002, between Registrant and Minnesota
Life Insurance Company, Inc.(27)
- (d) Amendment No. 3, dated October 1, 2006, to the Participation
Agreement, dated March 4, 2002, between Registrant and Minnesota
Life Insurance Company, Inc.(28)
(84) - (a) Participation Agreement, dated May 1, 2002, between Registrant
and AUSA Life Insurance Company, Inc.(20)
- (b) Amendment No. 1, dated May 1, 2004, to the Participation
Agreement, dated May 1, 2002, between Registrant and AUSA Life
Insurance Company, Inc.(27)
|
- (c) Amendment, dated July 12, 2006, to the Participation Agreement, dated May 1, 2002, between Registrant and Transamerica Financial Life Insurance Company (formerly, AUSA Life Insurance Company, Inc.).(28)
(85) - Participation Agreement, dated October 1, 2002, between Registrant
and CUNA Mutual Life Insurance Company.(20)
(86) - (a) Participation Agreement, dated May 1, 2000, between Registrant
and SAFECO Life Insurance Company.(27)
- (b) Amendment, dated May 1, 2003, to the Participation Agreement,
dated May 1, 2000, between Registrant and SAFECO Life Insurance
Company.(27)
- (c) Amendment, dated April 30, 2004, to the Participation
Agreement, dated May 1, 2000, between Registrant and SAFECO Life
Insurance Company.(27)
- (d) Amendment, dated July 15, 2005, to the Participation Agreement,
dated May 1, 2000, between Registrant and SAFECO Life Insurance
Company (n/k/a Symetra Life Insurance Company.(27)
(87) - (a) Participation Agreement, dated May 22, 2002, between Registrant
and The Penn Mutual Life Insurance Company. (27)
- (b) Amendment No. 1, dated May 1, 2004, to the Participation
Agreement, dated May 22, 2002, between Registrant and the Penn
Mutual Life Insurance Company. (27)
(88) - (a) Participation Agreement, dated June 21, 2002, between
Registrant and First Security Benefit Life Insurance and Annuity
Company.(27)
- (b) Amendment No. 1, dated May 1, 2003, to the Participation
Agreement, dated June 21, 2002, between Registrant and First
Security Benefit Life Insurance and Annuity Company.(27)
- (c) Amendment No. 2, dated September 29, 2005, to the Participation
Agreement, dated June 21, 2002, between Registrant and First
Security Benefit Life Insurance and Annuity Company.(27)
- (d) Amendment No. 3, dated November 15, 2006, to the Participation
Agreement, dated June 21, 2002, between Registrant and First
Security Benefit Life Insurance and Annuity Company.(28)
(89) - Participation Agreement, dated April 30, 2003, between Registrant
and MONY Life Insurance Company.(27)
(90) - Participation Agreement, dated April 30, 2003, between Registrant
and MONY Life Insurance Company of America.(27)
(91) - Participation Agreement, dated September 1, 2005, between
Registrant and American National Insurance Company.(27)
(92) - (a) Participation Agreement, dated October 12, 1999, between
Registrant and Security Equity Life Insurance Company.(27)
|
- (b) Amendment No. 1, dated October 31, 2003, to the Participation
Agreement, dated October 12, 1999, between Registrant and Security
Equity Life Insurance Company.(27)
(93) - (a) Participation Agreement, dated October 12, 1999, between
Registrant and General American Life Insurance Company.(27)
- (b) Amendment, dated September 2, 2002, to the Participation
Agreement, dated October 12, 1999, between Registrant and General
American Life Insurance Company.(27)
(94) - (a) Participation Agreement, dated May 1, 2003, between Registrant
and Jefferson National Life Insurance Company.(27)
- (b) Amendment, dated April 30, 2004, to the Participation
Agreement, dated May May 1, 2003, between Registrant and Jefferson
National Life Insurance Company.(27)
- (c) Amendment, dated May 1, 2006, to the Participation Agreement,
dated May May 1, 2003, between Registrant and Jefferson National
Life Insurance Company.(27)
(95) - Participation Agreement, dated April 30, 2004, between Registrant
and Midland National Life Insurance Company.(27)
(96) - Participation Agreement, dated April 30, 2004, between Registrant
and National Life Insurance Company.(27)
(97) - Participation Agreement, dated April 30, 2004, between Registrant
and Metropolitan Life Insurance Company.(27)
(98) - (a) Participation Agreement, dated April 30, 2004, between
Registrant and Ameritas Variable Life Insurance Company.(27)
- (b) Amendment No. 1, dated July 31, 2006, to the Participation
Agreement, dated April 30, 2004, between Registrant and Ameritas
Variable Life Insurance Company.(28)
(99) - (a) Participation Agreement, dated April 30, 2004, between
Registrant and Ameritas Life Insurance Company.(27)
- (b) Novation to Participation Agreement, dated February 26, 2007,
to the Participation Agreement, dated April 30, 2004, between
Registrant and Ameritas Life Insurance Company. (28)
(100) - Participation Agreement, dated April 30, 2004, between Registrant
and Business Men's Assurance Company of America.(27)
(101) - Participation Agreement, dated April 30, 2004, between Registrant
and American Skandia Life Assurance Corp. (27)
(102) - Participation Agreement, dated April 30, 2004, between Registrant
and Great- West Life Annuity Insurance Company.(27)
(103) - Participation Agreement, dated April 30, 2004, between Registrant
and American United Life Insurance Company.(27)
|
(104) - (a) Participation Agreement, dated March 2, 2003, between
Registrant and GE Capital Life Assurance Company of New York.(27)
- (b) Amendment No. 1, dated April 29, 2005, to the Participation
Agreement, dated March 2, 2003, between Registrant and GE Capital
Life Assurance Company of New York.(27)
(105) - Participation Agreement, dated April 30, 2004, between Registrant
and American Partners Life Insurance Company.(27)
(106) - Participation Agreement, dated April 30, 2004, between Registrant
and Massachusetts Mutual Life Insurance Company.(27)
(107) - Participation Agreement, dated April 30, 2004, between Registrant
and C.M. Life Insurance Company.(27)
(108) - Participation Agreement, dated July 1, 2005, between Registrant and
AXA Equitable Life Insurance Company.(27)
(109) - (a) Participation Agreement, dated September 14, 2005, between
Registrant and New York Life Insurance and Annuity Corp.(27)
- (b) Addendum, dated March 17, 2006, to the Participation Agreement,
dated September 14, 2005, between Registrant and New York Life
Insurance and Annuity Corp.(27)
(110) - Participation Agreement, dated April 30, 2004, between Registrant
and Chase Insurance Life and Annuity Company.(27)
(111) - Participation Agreement, dated April 30, 2004, between Registrant
and Kemper Investors Life Insurance Company.(27)
(112) - (a) Participation Agreement, dated January 6, 2003, between
Registrant and Nationwide Life Insurance Company.(27)
- (b) Amendment No. 1, dated April 30, 2004, to the Participation
Agreement, dated January 6, 2003, between Registrant and Nationwide
Life Insurance Company.(27)
- (c) Amendment No. 2, dated July 1, 2005, to the Participation
Agreement, dated January 6, 2003, between Registrant and Nationwide
Life Insurance Company.(27)
(113) - (a) Participation Agreement, dated April 30, 2004, between
Registrant, A I M Distributors, Inc. and First Great-West Life &
Annuity Insurance Company.(28)
|
- (b) Amendment No. 1, dated April 30, 2004, to the Participation Agreement, dated April 30, 2004, between Registrant, A I M Distributors, Inc. and First Great-West Life & Annuity Insurance Company.(28)
- (c) Amendment No. 2, dated August 1, 2006, to the Participation Agreement, dated April 30, 2004, between Registrant, A I M Distributors, Inc. and First Great-West Life & Annuity Insurance Company.(28)
(114) - Participation Agreement, dated April 30, 2004, between Registrant
and The Manufacturers Life Insurance Company of New York (effective
January 1, 2005, John Hancock Life Insurance Company of New
York).(28)
(115) - Participation Agreement, dated April 30, 2004, between Registrant
and The Manufacturers Life Insurance Company (U.S.A.) (effective
January 1, 2005, John Hancock Life Insurance Company (U.S.A.).(28)
(116) - Accounting Services Agreement, dated March 31, 1993, between the
Registrant and State Street Bank and Trust Company.(4)
(117) - Agreement and Plan of Reorganization, dated December 7, 1999,
between Registrant and AIM Variable Insurance Funds.(12)
|
(118) - Third Amended and Restated Interfund Loan Agreement, dated December 30, 2005, between Registrant and A I M Advisors, Inc.(28)
(119) - Second Amended and Restated Memorandum of Agreement, dated as of
March 9, 2007, between Registrant, on behalf of all funds, and A I
M Advisors, Inc., regarding securities lending.(28)
(120) - Memorandum of Agreement, dated as of July 1, 2006, between
Registrant, on behalf of certain funds, and A I M Advisors, Inc.,
regarding advisory fee waivers.(28)
(121) - (a) Memorandum of Agreement, dated as of April 1, 2007, between
Registrant, on behalf of all funds, and A I M Advisors, Inc.,
regarding expense limitations. (28)
i (1) - (a) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding the AIM V.I. Capital Appreciation Fund, the AIM V.I.
Diversified Income Fund, the AIM V.I. Government Securities Fund,
the AIM V.I. Growth Fund, the AIM V.I. International Equity Fund,
the AIM V.I. Money Market Fund and the AIM V.I. Value Fund.(1)
- (b) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding the AIM V.I. Growth and Income Fund and the AIM V.I.
Utilities Fund (presently the AIM V.I. Global Utilities Fund).(2)
- (c) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding the AIM V.I. Global Utilities Fund name change.(3)
- (d) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding AIM V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund,
AIM V.I. Capital Development Fund and AIM V.I. High Yield Fund.(6)
- (e) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding AIM V.I. Global Growth and Income Fund and AIM V.I.
Telecommunications Fund.(7)
- (f) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding AIM V.I. Blue Chip Fund.(10)
- (g) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding AIM V.I. Dent Demographic Trends Fund.(11)
|
- (h) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds regarding the redomestication of the Registrant.(13)
- (i) Opinion and Consent of Messrs. Foley & Lardner regarding the addition of a Series II share class.(16)
- (j) Opinion and Consent of Messrs. Foley & Lardner regarding the addition of AIM V.I. Basic Value Fund and AIM V.I. Mid Cap Equity Fund.(17)
- (k) Opinion and Consent of Messrs. Foley & Lardner regarding the addition of AIM V.I. Large Cap Growth Fund and AIM V.I. Small Cap Equity Fund.(21)
- (l) Opinion and Consent of Messrs. Foley & Lardner, LLP regarding
the addition of AIM V.I. Real Estate Fund, INVESCO VIF - Core
Equity Fund, INVESCO VIF - Dynamics Fund, INVESCO VIF - Financial
Services Fund, INVESCO VIF - Health Sciences Fund, INVESCO VIF -
Leisure Fund, INVESCO VIF - Small Company Growth Fund, INVESCO VIF
- Technology Fund, INVESCO VIF - Total Return Fund and INVESCO VIF
- Utilities Fund.(23)
- (m) Tax Opinion of Messrs. Foley & Lardner, LLP regarding the merger of Phoenix AIM Mid-Cap Equity Series into AIM V.I. Mid Cap Core Equity Fund.(24)
j (1) - Consent of Ballard, Spahr, Andrews & Ingersoll, LLP.(28)
(2) - Consent of PricewaterhouseCoopers LLP. (28)
k - Financial Statements for the period ended December 31, 2006 are
incorporated by reference to the Funds' annual reports to
shareholders contained in the Registrant's Form N-CSR filed on
February 23, 2007.
l (1) - (a) Agreements Concerning Initial Capitalization of the AIM V.I.
Capital Appreciation Fund, the AIM V.I. Diversified Income Fund,
the AIM V.I. Government Securities Fund, the AIM V.I. Growth Fund,
the AIM V.I. International Equity Fund, the AIM V.I. Money Market
Fund, and the AIM V.I. Value Fund.(4)
- (b) Agreements Concerning Initial Capitalization of the AIM V.I.
Growth and Income Fund and the AIM V.I. Utilities Fund.(4)
- (c) Agreement Concerning Initial Capitalization of the AIM V.I.
Aggressive Growth Fund, the AIM V.I. Balanced Fund, the AIM V.I.
Capital Development Fund and the AIM V.I. High Yield Fund.(7)
- (d) Agreement Concerning Initial Capitalization of the AIM V.I.
Blue Chip Fund.(11)
- (e) Agreement Concerning Initial Capitalization of the AIM V.I.
Dent Demographic Trends Fund.(11)
- (f) Agreement Concerning Initial Capitalization of the AIM V.I.
Basic Value Fund and the AIM V.I. Mid Cap Equity Fund, dated
September 7, 2001.(18)
- (g) Form of Agreement Concerning Initial Capitalization of the AIM
V.I. Large Cap Growth Fund and AIM V.I. Small Cap Equity Fund.(21)
|
m (1) - (a) Registrant's Master Distribution Plan pursuant to Rule 12b-1
for Series II shares.(17)
- (b) Amendment No. 1 to the Registrant's Master Distribution Plan,
dated September 7, 2001.(18)
- (c) Amendment No. 2 to the Registrant's Master Distribution Plan,
dated May 1, 2002.(20)
- (d) Amendment No. 3 to the Registrant's Master Distribution Plan,
dated August 29, 2003.(22)
- (e) Amendment No. 4 to the Registrant's Master Distribution Plan,
dated April 30, 2004.(24)
- (f) Amendment No. 5 to the Registrant's Master Distribution Plan,
dated October 15, 2004.(24)
- (g) Amendment No. 6 to the Registrant's Master Distribution Plan,
dated July 1, 2005.(26)
- (h) Amendment No. 7 to the Registrant's Master Distribution Plan,
dated December 21, 2005.(26)
- (i) Amendment No. 8 to the Registrant's Master Distribution Plan,
dated May 1, 2006.(28)
|
- (j) Amendment No. 9, to the Registrant's Master Distribution Plan, dated June 12, 2006.(28)
- (k) Amendment No. 10, to the Registrant's Master Distribution Plan, July 3, 2006.(28)
- (l) Amendment No. 11, to the Registrant's Master Distribution Plan, dated November 6, 2006.(28)
- (m) Amendment No. 12, to the Registrant's Master Distribution Plan, dated December 21, 2006.(28)
- (n) Form of Amendment 13, to the Registrant's Mater Distribution Plan, dated May 1, 2007.(28)
n - Registrant's Amended and Restated Multiple Class Plan, effective
July 16, 2001, as amended and restated August 18, 2003.(22)
o - Reserved
p (1) - AIM Funds and A I M Management Group, Inc. Code of Ethics,
originally adopted May 1, 1981, amended effective as of February
16, 2006. (28)
|
(2) - INVESCO Institutional (N.A.), Inc., Code of Ethics adopted May 19, 2006. (28)
q - Powers of Attorney for Baker, Bayley, Bunch, Crockett, Dowden,
Fields, Flanagan, Frischling, Graham, Mathai-Davis, Pennock,
Quigley, Soll, Stickel, Taylor and Zerr. (28)
|
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1, filed on April 19, 1993.
(2) Incorporated herein by reference to Post-Effective Amendment No. 4, filed on November 3, 1994.
(3) Incorporated herein by reference to Post-Effective Amendment No. 6, filed on April 26, 1995.
(4) Incorporated herein by reference to Post-Effective Amendment No. 7, filed electronically on April 29, 1996.
(5) Incorporated herein by reference to Post-Effective Amendment No. 8, filed electronically on April 23, 1997.
(6) Incorporated herein by reference to Post-Effective Amendment No. 9, filed electronically on February 13, 1998.
(7) Incorporated herein by reference to Post-Effective Amendment No. 10, filed electronically on October 2, 1998.
(8) Incorporated herein by reference to Post-Effective Amendment No. 11, filed electronically on February 18, 1999.
(9) Incorporated herein by reference to Post-Effective Amendment No. 12, filed electronically on April 29, 1999.
(10) Incorporated herein by reference to Post-Effective Amendment No. 13, filed electronically on July 13, 1999.
(11) Incorporated herein by reference to Post-Effective Amendment No. 14, filed electronically on September 28, 1999.
(12) Incorporated herein by reference to Post-Effective Amendment No. 15, filed electronically on February 16, 2000.
(13) Incorporated herein by reference to Post-Effective Amendment No. 16, filed electronically on February 17, 2000.
(14) Incorporated herein by reference to Post-Effective Amendment No. 18, filed electronically on February 16, 2001.
(15) Incorporated herein by reference to Post-Effective Amendment No. 19, filed electronically on April 12, 2001.
(16) Incorporated herein by reference to Post Effective Amendment No. 20, filed electronically on May 29, 2001.
(17) Incorporated herein by reference to Post Effective Amendment No. 21, filed electronically on July 18, 2001.
(18) Incorporated herein by reference to Post Effective Amendment No. 22, filed electronically on February 12, 2002.
(19) Incorporated herein by reference to Post Effective Amendment No. 24, filed electronically on April 30, 2002.
(20) Incorporated herein by reference to Post Effective Amendment No. 25, filed electronically on April 29, 2003.
(21) Incorporated herein by reference to Post Effective Amendment No. 26, filed electronically on June 18, 2003.
(22) Incorporated herein by reference to Post Effective Amendment No. 27, filed electronically on February 13, 2004.
(23) Incorporated herein by reference to Post Effective Amendment No. 28, filed electronically on April 13, 2004.
(24) Incorporated herein by reference to Post Effective Amendment No. 29, filed electronically on February 28, 2005.
(25) Incorporated herein by reference to Post Effective Amendment No. 30, filed electronically on April 29, 2005.
(26) Incorporated herein by reference to Post Effective Amendment No. 31, filed electronically on February 14, 2006.
(27) Incorporated herein by reference to Post Effective Amendment No. 32, filed electronically on April 27, 2006.
(28) Filed herewith electronically.
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
Item 25. Indemnification
Indemnification provisions for officers, trustees, and employees of the Registrant are set forth in Article VIII of the Registrant's Amended and Restated Agreement and Declaration of Trust and Article VIII of its Amended and Restated Bylaws, and are hereby incorporated by reference. See Items 23(a) and (b) above. Under the Amended and Restated Agreement and Declaration of Trust, amended and restated effective as of September 14, 2005, as amended (i) Trustees or officers, when acting in such capacity, shall not be personally liable for any act, omission or obligation of the Registrant or any Trustee or officer except by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office with the Trust; (ii) every Trustee, officer, employee or agent of the Registrant shall be indemnified to the fullest extent permitted under the Delaware Statutory Trust act, the Registrant's Bylaws and other applicable law; (iii) in case any shareholder or former shareholder of the Registrant shall be held to be personally liable solely by reason of his being or having been a shareholder of the Registrant or any portfolio or class and not because of his acts or omissions or for some other reason, the shareholder or former shareholder (or his heirs, executors, administrators or other legal representatives, or, in the case of a corporation or other entity, its corporate or general successor) shall be entitled, out of the assets belonging to the applicable portfolio (or allocable to the applicable class), to be held harmless from and indemnified against all loss and expense arising from such liability in accordance with the Bylaws and applicable law. The Registrant, on behalf of the affected portfolio (or class), shall upon request by the shareholder, assume the defense of any such claim made against the shareholder for any act or obligation of that portfolio (or class).
The Registrant and other investment companies and their respective officers and trustees are insured under a joint Mutual Fund Directors & Officers Liability Policy, issued by ICI Mutual Insurance Company and certain other domestic insurers, with limits up to a $60,000,000 (plus an additional $20,000,000 limit that applies to independent directors/trustees only).
Section 16 of the Master Investment Advisory Agreement between the Registrant and AIM provides that in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of AIM or any of its officers, directors or employees, that AIM shall not be subject to liability to the Registrant or to any series of the Registrant, or to any shareholder of any series of the Registrant 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 AIM to any series of the Registrant shall not automatically impart liability on the part of AIM to any other series of the Registrant. No series of the Registrant shall be liable for the obligations of any other series of the Registrant.
Section 7 of the Master Intergroup Sub-Advisory Contract for Mutual Funds (the "Sub-Advisory Contract") between AIM and INVESCO Institutional (N.A.), Inc. provides that the Sub-advisor shall not be liable for any costs or liabilities arising from any error of judgment or mistake of law or any loss suffered by any series of the Registrant or the Registrant in connection with the matters to which the Sub-Advisory Contract relates except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Sub-advisor in the performance by the Sub-advisor of its duties or from reckless disregard by the Sub-advisor of its obligations and duties under the Sub-Advisory Contract.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such trustee, officer or controlling person in connection with the securities being registered hereby, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Act and will be governed by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Advisor
The only employment of a substantial nature of the Advisor's directors and officers is with the Advisor and its affiliated companies. Reference is also made to the caption "Fund Management--The Advisor" of the Prospectus which comprises Part A of this Registration Statement, and to the discussion under the caption "Management of the Trust" of the Statement of Additional Information which comprises Part B of this Registration Statement, and to Item 27(b) of this Part C of the Registration Statement.
Item 27. Principal Underwriters
(a) A I M Distributors, Inc. the Registrant's principal underwriter, also acts as a principal underwriter to the following investment companies:
AIM Core Allocation Portfolio Series
AIM Counselor Series Trust
AIM Equity Funds
AIM Funds Group
AIM Growth Series
AIM International Mutual Funds
AIM Investment Funds
AIM Investment Securities Funds
AIM Sector Funds
AIM Special Opportunities Funds
AIM Stock Funds
AIM Summit Fund
AIM Tax-Exempt Funds
AIM Treasurer's Series Trust (with respect to its Investor Class Shares)
PowerShares Exchange Traded Fund Trust
(b) The following table sets forth information with respect to each director, officer or partner of A I M Distributors, Inc.
Name and Principal Position and Offices Positions and Offices
Business Address* with Underwriter with Registrant
---------------------- ------------------------ -----------------------
Gene L. Needles Chairman, Director, None
President & Chief
Executive Officer
Philip A. Taylor Director Trustee & Executive
Vice President
John S. Cooper Executive Vice President None
James E. Stueve Executive Vice President None
Michael A. Bredlau Senior Vice President None
Lawrence E. Manierre Senior Vice President None
Ivy B. McLemore Senior Vice President None
David J. Nardecchia Senior Vice President None
Margaret A. Vinson Senior Vice President None
Gary K. Wendler Senior Vice President, None
Director Marketing
Research & Analysis
Scott B. Widder Senior Vice President None
John M. Zerr Senior Vice President & Senior Vice President,
Secretary Secretary & Chief Legal
Officer
David A. Hartley Treasurer & Chief None
Financial Officer
Rebecca Starling-Klatt Chief Compliance Officer None
& Assistant Vice
President
|
Name and Principal Position and Offices Positions and Offices
Business Address* with Underwriter with Registrant
---------------------- ------------------------ -----------------------
Lance A. Rejsek Anti-Money Laundering Anti-Money Laundering
Compliance Officer Compliance Officer
|
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173
(c) Not applicable
Item 28. Location of Accounts and Records
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, will maintain physical possession of each such account, book or other document of the Registrant at its principal executive offices, except for those maintained at the offices of INVESCO Institutional (N.A.), Inc., 400 West Market Street, Suite 300, Louisville, KY 40202, and except for those relating to certain transactions in portfolio securities that are maintained by the Registrant's Custodian, State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110, and the Registrant's Transfer Agent and Dividend Paying Agent, AIM Investment Services, Inc., P.O. Box 4739, Houston, Texas 77210-4739.
Item 29. Management Services
None.
Item 30. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Houston, Texas on the 27th day of April, 2007.
REGISTRANT: AIM VARIABLE INSURANCE FUNDS
By: /s/ Philip A. Taylor
Philip A. Taylor, President
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE
----------------------------------- ----------------------------- --------------
/s/ Philip A. Taylor Trustee & President April 27, 2007
------------------------------- (Principal Executive Officer)
(Philip A. Taylor)
/s/ Bob R. Baker* Trustee April 27, 2007
-------------------------------
(Bob R. Baker)
/s/ Frank S. Bayley* Trustee April 27, 2007
-------------------------------
(Frank S. Bayley)
/s/ James T. Bunch* Trustee April 27, 2007
-------------------------------
(James T. Bunch)
/s/ Bruce L. Crockett* Chair & Trustee April 27, 2007
-------------------------------
(Bruce L. Crockett)
/s/ Albert R. Dowden* Trustee April 27, 2007
-------------------------------
(Albert R. Dowden)
/s/ Martin L. Flanagan* Trustee April 27, 2007
-------------------------------
(Martin L. Flanagan)
/s/ Jack M. Fields* Trustee April 27, 2007
-------------------------------
(Jack M. Fields)
/s/ Carl Frischling* Trustee April 27, 2007
-------------------------------
(Carl Frischling)
/s/ Robert H. Graham* Trustee April 27, 2007
-------------------------------
(Robert H. Graham)
/s/ Prema Mathai-Davis* Trustee April 27, 2007
-------------------------------
(Prema Mathai-Davis)
/s/ Lewis F. Pennock* Trustee April 27, 2007
-------------------------------
(Lewis F. Pennock)
|
/s/ Ruth H. Quigley* Trustee April 27, 2007
-------------------------------
(Ruth H. Quigley)
/s/ Larry Soll* Trustee April 27, 2007
-------------------------------
(Larry Soll)
/s/ Raymond Stickel, Jr.* Trustee April 27, 2007
-------------------------------
(Raymond Stickel, Jr.)
/s/ Sidney M. Dilgren Vice President & Treasurer April 27, 2007
------------------------------- (Principal Financial and
(Sidney M. Dilgren) Accounting Officer)
*By /s/ Philip A. Taylor
-------------------------------
Philip A. Taylor
Attorney-in-Fact
|
*Philip A. Taylor, pursuant to powers of attorney dated April 23, 2007, filed herewith.
INDEX
Exhibit
Number Description
------- -----------
a(1)(f) Amendment No. 5, dated May 1, 2006, effective as of May 1, 2006, to
Amended and Restated Agreement and Declaration of Trust of
Registrant
a(1)(g) Amendment No. 6, dated May 24, 2006, effective as of May 24, 2006,
to Amended and Restated Agreement and Declaration of Trust of
Registrant
a(1)(h) Amendment No. 7, dated June 12, 2006, effective as of June 12, 2006,
to Amended and Restated Agreement and Declaration of Trust of
Registrant
a(1)(i) Amendment No. 8, dated July 5, 2006, effective as of July 5, 2006,
to Amended and Restated Agreement and Declaration of Trust of
Registrant
a(1)(j) Amendment No. 9, dated November 6, 2006, effective as of November 6,
2006, to Amended and Restated Agreement and Declaration of Trust of
Registrant
a(1)(k) Amendment No. 10, dated December 21, 2006, effective as of December
21, 2006, to Amended and Restated Agreement and Declaration of Trust
of Registrant
a(1)(l) Form of Amendment No. 11, dated May 1, 2007, effective as of May 1,
2007, to Amended and Restated Agreement and Declaration of Trust of
Registrant
b(1)(b) Amendment, adopted effective August 1, 2006, to Amended and Restated
Bylaws of Registrant, dated effective September 14, 2005
b(1)(c) Amendment No. 2, adopted effective March 23, 2007, to Amended and
Restated By-Laws of Registrant, dated effective September 14, 2005
d(1)(k) Amendment No. 10, dated May 1, 2006, to Master Investment Advisory
Agreement between Registrant and A I M Advisors, Inc.
d(1)(l) Amendment No. 11, dated June 12, 2006, to Master Investment Advisory
Agreement between Registrant and A I M Advisors, Inc.
d(1)(m) Amendment No. 12, dated July 3, 2006, to Master Investment Advisory
Agreement between Registrant and A I M Advisors, Inc.
d(1)(n) Amendment No. 13, dated November 6, 2006, to Master Investment
Advisory Agreement between Registrant and A I M Advisors, Inc.
d(1)(o) Amendment No. 14, dated December 21, 2006, to Master Investment
Advisory Agreement between Registrant and A I M Advisors, Inc.
d(1)(p) Form of Amendment No. 15, dated May 1, 2007, to Master Investment
Advisory Agreement between Registrant and A I M Advisors, Inc.
d(2)(f) Amendment No. 5, dated July 3, 2006, to Master Intergroup
Sub-Advisory Contract for Mutual Funds between A I M Advisors, Inc.
and INVESCO Institutional (N.A.), Inc.
d(3) Master Intergroup Sub-Advisory Contract for Mutual Funds between A I
M Advisors, Inc. and INVESCO Global Asset Management (N.A.), Inc.
|
e(1)(i) Amendment No. 8, dated May 1, 2006, to First Amended and Restated
Master Distribution Agreement between Registrant and A I M
Distributors, Inc.
e(1)(j) Amendment No. 9, dated June 12, 2006, to First Amended and Restated
Master Distribution Agreement between Registrant and A I M
Distributors, Inc.
e(1)(k) Amendment No. 10, dated July 3, 2006, to First Amended and Restated
Master Distribution Agreement between Registrant and A I M
Distributors, Inc.
e(1)(l) Amendment No. 11, dated November 6, 2006, to First Amended and
Restated Master Distribution Agreement between Registrant and A I M
Distributors, Inc.
e(1)(m) Amendment No. 12, dated December 21, 2006, to First Amended and
Restated Master Distribution Agreement between Registrant and A I M
Distributors, Inc.
e(1)(n) Form of Amendment No. 13, dated May 1, 2007, to First Amended and
Restated Master Distribution Agreement between Registrant and A I M
Distributors, Inc.
f(2) Retirement Plan for Eligible Directors/Trustees effective as of
March 8, 1994, as Restated January 1, 2005
g(1)(f) Amendment, dated February 6, 2006, to Master Custodian Contract
dated May 1, 2000, between Registrant and State Street Bank and
Trust Company
g(1)(g) Amendment, dated January 31, 2007, to Master Custodian Contract
dated May 1, 2000, between Registrant and State Street Bank and
Trust Company
g(2)(b) Amendment No. 1, dated May 31, 2005, to Custody Agreement dated
September 19, 2000, between Registrant and The Bank of New York
h(1)(f) Amendment No. 5, dated May 1, 2006, to Second Amended and Restated
Master Administrative Services Agreement, dated July 1, 2004,
between Registrant and A I M Advisors, Inc.
h(1)(g) Amendment No. 6, dated June 12, 2006, to Second Amended and Restated
Master Administrative Services Agreement, dated July 1, 2004,
between Registrant and A I M Advisors, Inc.
h(1)(h) Third Amended and Restated Master Administrative Services Agreement,
dated July 1, 2006, between Registrant and A I M Advisors, Inc.
h(1)(i) Amendment No. 1, dated July 3, 2006, to Third Amended and Restated
Master Administrative Services Agreement, dated July 1, 2006,
between Registrant and A I M Advisors, Inc.
h(1)(j) Amendment No. 2, dated November 6, 2006, to Third Amended and
Restated Master Administrative Services Agreement, dated July 1,
2006, between Registrant and A I M Advisors, Inc.
h(1)(k) Amendment No. 3, dated December 21, 2006, to Third Amended and
Restated Master Administrative Services Agreement, dated July 1,
2006, between Registrant and A I M Advisors, Inc.
h(1)(l) Form of Amendment No. 4, dated May 1, 2007, to Third Amended and
Restated Master Administrative Services Agreement, dated July 1,
2006, between Registrant
|
and A I M Advisors, Inc.
h(2)(a) Amended and Restated Transfer Agency and Service Agreement, dated
July 1, 2006, between Registrant and AIM Investment Services, Inc.
h(17) Amended and Restated Participation Agreement, dated April 17, 2006,
between Registrant and American Centurion Life Assurance Company
h(18) Amended and Restated Participation Agreement, dated April 17, 2006,
between Registrant and American Enterprise Life Insurance Company
h(26)(m) Amendment No. 12, dated January 29, 2007, to the Participation
Agreement, dated February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.)
h(30)(b) Amendment No. 1, dated April 30, 2004, to the Participation
Agreement, dated May 1, 1998, between Registrant and Fortis Benefits
Insurance Company (n/k/a Union Security Insurance Company)
h(31)(j) Amendment No. 9, dated May 1, 2006, to the Participation Agreement,
dated June 1, 1998, between Registrant and American General Life
Insurance Company
h(32)(j) Amendment No. 9, dated May 1, 2006, to the Participation Agreement,
dated June 16, 1998, between Registrant and Lincoln National Life
Insurance Company
h(34)(b) Amendment 2, dated July 1, 2001, to the Participation Agreement,
dated July 1, 1998, between Registrant and The Union Central Life
Insurance Company
h(34)(e) Amendment 4, dated June 30, 2006, to the Participation Agreement,
dated July 1, 1998, between Registrant and The Union Central Life
Insurance Company
h(40)(g) Amendment No. 6, dated October 1, 2006, to the Participation
Agreement, dated October 15, 1998, between Registrant and Lincoln
Life & Annuity Insurance Company of New York
h(48)(b) Amendment, dated July 12, 2006, to the Participation Agreement,
dated August 21, 1999, between Registrant and Life Investors
Insurance Company of America
h(53)(b) Amendment No. 1, dated May 1, 2005, to the Participation Agreement,
dated July 27, 1999, between Registrant and Allianz Life Insurance
Company of North America
h(53)(c) Amendment No. 2, dated May 1, 2006, to the Participation Agreement,
dated July 27, 1999, between Registrant and Allianz Life Insurance
Company of North America
h(54)(b) Amendment No. 1, dated May 1, 2006, to the Participation Agreement,
dated July 27, 1999, between Registrant and Allianz Life Insurance
Company of New York (formerly preferred Life Insurance Company of
New York)
h(65)(h) Amendment No. 7, dated October 1, 2006, to the Participation
Agreement, dated April 17, 2000, between Registrant and Sun Life
Insurance and Annuity Company of New York
h(71)(d) Amendment No. 3, dated November 15, 2006, to the Participation
Agreement, dated
|
March 28, 2001, between Registrant and Security Benefit Life
Insurance Company
h(77)(c) Amendment, dated July 12, 2006, to the Participation Agreement,
dated April 30, 2001, between Registrant and Western Reserve Life
Assurance Co. of Ohio
h(83)(d) Amendment No. 3, dated October 1, 2006, to the Participation
Agreement, dated March 4, 2002, between Registrant and Minnesota
Life Insurance Company, Inc.
h(84)(c) Amendment, dated July 12, 2006, to the Participation Agreement dated
May 1, 2002, between Registrant and Transamerica Financial Life
Insurance Company (formerly, AUSA Life Insurance Company, Inc.)
h(88)(d) Amendment No. 3, dated November 15, 2006, to the Participation
Agreement, dated June 21, 2002, between Registrant and First
Security Benefit Life Insurance and Annuity Company
h(98)(b) Amendment No. 1, dated July 31, 2006, to the Participation
Agreement, dated April 30, 2004, between Registrant and Ameritas
Variable Life Insurance Company
h(99)(b) Novation to Participation Agreement, dated February 26, 2007, to the
Participation Agreement, dated April 30, 2004, between Registrant
and Ameritas Life Insurance Company
h(113)(a) Participation Agreement, dated April 30, 2004, between Registrant, A
I M Distributors, Inc. and First Great-West Life & Annuity Insurance
Company
h(113)(b) Amendment No. 1, dated April 30, 2004, to the Participation
Agreement, dated April 30, 2004, between Registrant, A I M
Distributors, Inc. and First Great-West Life & Annuity Insurance
Company
h(113)(c) Amendment No. 2, dated August 1, 2006, to the Participation
Agreement, dated April 30, 2004, between Registrant, A I M
Distributors, Inc. and First Great-West Life & Annuity Insurance
Company
h(114) Participation Agreement, dated April 30, 2004, between Registrant
and The Manufacturers Life Insurance Company of New York (effective
January 1, 2005, John Hancock Life Insurance Company of New York)
h(115) Participation Agreement, dated April 30, 2004, between Registrant
and The Manufacturers Life Insurance Company (U.S.A.) (effective
January 1, 2005, John Hancock Life Insurance Company (U.S.A.)
h(118) Third Amended and Restated Interfund Loan Agreement, dated December
30, 2005, between Registrant and A I M Advisors, Inc.
h(119) Second Amended and Restated Memorandum of Agreement, dated as of
March 9, 2007, between Registrant, on behalf of all funds, and A I M
Advisors, Inc., regarding securities lending
h(120) Memorandum of Agreement, dated as of July 1, 2006, between
Registrant, on behalf of certain funds, and A I M Advisors, Inc.,
regarding advisory fee waivers
h(121) Memorandum of Agreement, dated as of April 1, 2007, between
Registrant, on behalf of all funds, and A I M Advisors, Inc.,
regarding expense limitations
j(1) Consent of Ballard, Spahr, Andrews & Ingersoll, LLP
|
j(2) Consent of PricewaterhouseCoopers LLP
m(1)(i) Amendment No. 8, to the Registrant's Master Distribution Plan, dated
May 1, 2006
m(1)(j) Amendment No. 9, to the Registrant's Master Distribution Plan, dated
June 12, 2006
m(1)(k) Amendment No. 10, to the Registrant's Master Distribution Plan,
dated July 3, 2006
m(1)(l) Amendment No. 11, to the Registrant's Master Distribution Plan,
dated November 6, 2006
m(1)(m) Amendment No. 12, to the Registrant's Master Distribution Plan,
dated December 21, 2006
m(1)(n) Form of Amendment 13, to the Registrant's Mater Distribution Plan,
dated May 1, 2007
p(1) AIM Funds, A I M Management Group Inc. Code of Ethics adopted May 1,
1981 as last amended effective February 16, 2006
p(2) INVESCO Institutional (N.A.), Inc., Code of Ethics adopted May 19,
2006
q Powers of Attorney for Baker, Bayley, Bunch, Crockett, Dowden,
Fields, Flanagan, Frischling, Graham, Mathai-Davis, Pennock,
Quigley, Soll, Stickel, Taylor and Zerr
|
AMENDMENT NO. 5
TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
OF
AIM VARIABLE INSURANCE FUNDS
This Amendment No. 5 to the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds (this "Amendment") amends, effective as of May 1, 2006, the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds dated as of September 14, 2005, as amended (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Aggressive Growth Fund, AIM V.I. Core Stock Fund, AIM V.I. Growth Fund and AIM V.I. Premier Equity; and
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM V.I. Basic Balanced Fund Series I shares
Series II shares
AIM V.I. Basic Value Fund Series I shares
Series II shares
AIM V.I. Blue Chip Fund Series I shares
Series II shares
AIM V.I. Capital Appreciation Fund Series I shares
Series II shares
AIM V.I. Capital Development Fund Series I shares
Series II shares
AIM V.I. Core Equity Fund Series I shares
Series II shares
AIM V.I. Demographic Trends Fund Series I shares
Series II shares
AIM V.I. Diversified Dividend Fund Series I shares
Series II shares
AIM V.I. Diversified Income Fund Series I shares
Series II shares
|
AIM V.I. Dynamics Fund Series I shares
Series II shares
AIM V.I. Financial Services Fund Series I shares
Series II shares
AIM V.I. Global Equity Fund Series I shares
Series II shares
AIM V.I. Global Health Care Fund Series I shares
Series II shares
AIM V.I. Global Real Estate Fund Series I shares
Series II shares
AIM V.I. Government Securities Fund Series I shares
Series II shares
AIM V.I. High Yield Fund Series I shares
Series II shares
AIM V.I. International Core Equity Fund Series I shares
Series II shares
AIM V.I. International Growth Fund Series I shares
Series II shares
AIM V.I. Large Cap Growth Fund Series I shares
Series II shares
AIM V.I. Leisure Fund Series I shares
Series II shares
AIM V.I. Mid Cap Core Equity Fund Series I shares
Series II shares
AIM V.I. Money Market Fund Series I shares
Series II shares
AIM V.I. Small Cap Equity Fund Series I shares
Series II shares
AIM V.I. Small Cap Growth Fund Series I shares
Series II shares
AIM V.I. Technology Fund Series I shares
Series II shares
AIM V.I. Utilities Fund Series I shares
Series II shares"
|
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of May 1, 2006.
By: /s/ Robert H. Graham
------------------------------------
Name: Robert H. Graham
Title: Vice Chairman and President
|
AMENDMENT NO. 6
TO THE
AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST
OF
AIM VARIABLE INSURANCE FUNDS
This Amendment No. 6 ("Amendment") to the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds amends, effective as of May 24, 2006, the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds (the "Trust") dated as of September 14, 2005 (the "Agreement").
Under Section 9.7 of the Agreement, a duly authorized officer of the Trust may execute this Amendment.
WHEREAS, the Trust desires to amend the Agreement to provide more flexibility in (i) the timing of automatically converting Class B Shares to Class A Shares; and (ii) redeeming shares at the option of the Trust;
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Section 2.6(a) of the Agreement is amended and restated to read as follows:
Subject to the provisions of paragraph (c) below, all Class B Shares other than those purchased through the reinvestment of dividends and distributions shall automatically convert to Class A Shares on or about the end of the month which is no less than 96 months and no more than 97 months after the date on which a Shareholder's order to purchase such shares was accepted.
2. Section 7.3 of the Agreement is amended and restated to read as follows:
7.3 Redemptions at the Option of the Trust. The Trust shall have the right, at its option, upon no less than 30 days notice to the affected Shareholder at any time to redeem Shares of any Shareholder at the net asset value of such Shares: (A) if at such time such Shareholder owns Shares of any Portfolio having an aggregate net asset value of less than an amount determined from time to time by the Trustees; or (B) to the extent that such Shareholder owns Shares equal to or in excess of a percentage of the outstanding Shares of the Trust or of any Portfolio, as such percentage may be determined from time to time, in each case subject to such terms and conditions as are set forth in the registration statement of the Trust in effect from time to time.
3. Section 7.4 of the Agreement is deleted in its entirety.
4. All capitalized terms are used herein as defined in the Agreement unless otherwise defined herein. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
5. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of May 24, 2006.
By: /s/ Robert H. Graham
------------------------------------
Name: Robert H. Graham
Title: President
|
AMENDMENT NO. 7
TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
OF
AIM VARIABLE INSURANCE FUNDS
This Amendment No. 7 to the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds (this "Amendment") amends, effective as of June 12, 2006, the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds dated as of September 14, 2005, as amended (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Blue Chip Fund; and
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM V.I. Basic Balanced Fund Series I shares
Series II shares
AIM V.I. Basic Value Fund Series I shares
Series II shares
AIM V.I. Capital Appreciation Fund Series I shares
Series II shares
AIM V.I. Capital Development Fund Series I shares
Series II shares
AIM V.I. Core Equity Fund Series I shares
Series II shares
AIM V.I. Demographic Trends Fund Series I shares
Series II shares
AIM V.I. Diversified Dividend Fund Series I shares
Series II shares
AIM V.I. Diversified Income Fund Series I shares
Series II shares
AIM V.I. Dynamics Fund Series I shares
Series II shares
|
AIM V.I. Financial Services Fund Series I shares
Series II shares
AIM V.I. Global Equity Fund Series I shares
Series II shares
AIM V.I. Global Health Care Fund Series I shares
Series II shares
AIM V.I. Global Real Estate Fund Series I shares
Series II shares
AIM V.I. Government Securities Fund Series I shares
Series II shares
AIM V.I. High Yield Fund Series I shares
Series II shares
AIM V.I. International Core Equity Fund Series I shares
Series II shares
AIM V.I. International Growth Fund Series I shares
Series II shares
AIM V.I. Large Cap Growth Fund Series I shares
Series II shares
AIM V.I. Leisure Fund Series I shares
Series II shares
AIM V.I. Mid Cap Core Equity Fund Series I shares
Series II shares
AIM V.I. Money Market Fund Series I shares
Series II shares
AIM V.I. Small Cap Equity Fund Series I shares
Series II shares
AIM V.I. Small Cap Growth Fund Series I shares
Series II shares
AIM V.I. Technology Fund Series I shares
Series II shares
AIM V.I. Utilities Fund Series I shares
Series II shares"
|
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of June 12, 2006.
By: /s/ Robert H. Graham
------------------------------------
Name: Robert H. Graham
Title: Vice Chairman and President
|
AMENDMENT NO. 8 TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST OF
AIM VARIABLE INSURANCE FUNDS
This Amendment No. 8 (the "Amendment") to the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds (the "Trust") amends, effective as of July 5, 2006, the Amended and Restated Agreement and Declaration of Trust of the Trust dated as of September 14, 2005, as amended (the "Agreement").
By consent dated as of July 5, 2006, the Board of Trustees of the Trust, in accordance with Section 9.7 of the Agreement, approved the amendments to the Agreement.
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. A new Section 2.6A of the Agreement is added after Section 2.6 of the Agreement as set forth below:
"Section 2.6A. Additional Conversion Rights and Preferences of Certain Class B Shares. In addition to the relative rights and preferences set forth in Section 2.5 and Section 2.6 and all other provisions of this Agreement relating to Shares of the Trust generally, any Class of any Portfolio designated as Class B Shares that were acquired by (i) exchange offer from closed-end AIM Floating Rate Fund, or (ii) exchange offer from a Portfolio or any other series portfolio in the AIM fund complex if such shares were previously acquired by exchange offer from closedend AIM Floating Rate Fund (the "Legacy Class B Shares") shall have the following rights and preferences:
(a) Conversion of Legacy Class B Shares. At the Legacy Class B Share Conversion Effective Time described in Section 2.6A(d) below, all of the issued and outstanding Legacy Class B Shares of any Portfolio of the Trust offering Legacy Class B Shares shall convert to Class A Shares of the applicable Portfolio based upon their respective net asset values, and thereafter shall have the attributes of Class A Shares of the applicable Portfolio. All issued and outstanding Legacy Class B Shares shall thereafter be deemed to be cancelled. The stock transfer books for Legacy Class B Shares of a Portfolio will be closed at the Legacy Class B Share Conversion Effective Time and only requests for redemption of Legacy Class B Shares of a Portfolio received in proper form prior to the close of trading on the New York Stock Exchange on the date of the Legacy Class B Share Conversion Effective Time shall be accepted. Thereafter, redemption requests received by a Portfolio for Legacy Class B Shares shall be deemed to be a redemption requests for Class A Shares into which Legacy Class B Shares were converted.
(b) Attribution of Assets and Liabilities. At the Legacy Class B Share Conversion Effective Time described in Section 2.6A(d) below, the proportionate undivided interest in the net assets of a Portfolio attributable to Legacy Class B Shares shall become a part of the proportionate
undivided interest in the net assets of the Portfolio attributable to its Class A Shares, and the expenses, costs, charges and reserves allocated to the Legacy Class B Shares of a Portfolio immediately prior to the Legacy Class B Share Conversion Effective Time shall become expenses, costs, charges and reserves of Class A Shares of such Portfolio. The Portfolio shall instruct its transfer agent to reflect in the transfer agent's records the attribution of the Legacy Class B Shares in the manner described above.
(c) Shareholder Accounts. At the Legacy Class B Share Conversion Effective Time described in Section 2.6A(d) below, each shareholder of record of Legacy Class B Shares of a Portfolio will receive that number of Class A Shares of such Portfolio having an aggregate net asset value equal to the net asset value of the Legacy Class B Shares of such Portfolio held by such shareholder immediately prior to the Legacy Class B Share Conversion Effective Time. Each Portfolio will establish an open account on its records in the name of each Legacy Class B Shareholder to which will be credited the respective number of Class A Shares of such Portfolio due to such shareholder. Fractional Legacy Class B Shares will be carried to the third decimal place. Certificates representing Class A Shares will not be issued. The net asset value of the Class A Shares and Legacy Class B Shares will be determined at the Legacy Class B Share Conversion Effective Time in accordance with the policies and procedures of the applicable Portfolio as set forth in its registration statement.
(d) The conversion of Legacy Class B Shares into Class A Shares shall occur July 27, 2006 at 5:00 p.m. Eastern time or such later date and time as the officers of the Trust shall determine (the "Legacy Class B Share Conversion Effective Time").
(e) If, prior to the Legacy Class B Share Conversion Effective Time,
(1) the Class A Shareholders of a Portfolio approve any increase
in expenses allocated to the Class A Shares of that Portfolio in
connection with (A) a Plan of Distribution adopted pursuant to
Rule 12b-1 under the 1940 Act, (B) a non-Rule 12b-1 shareholder
services plan or (C) any other plan or arrangement whereby
Classes of that Portfolio pay a different share of other
expenses, not including advisory or custodial fees or other
expenses related to the management of the Trust's assets, then
(2) the Legacy Class B Shares of that Portfolio will not convert
to the Class A Shares unless the Legacy Class B Shareholders of
that Portfolio, voting separately, approve the increase in
expenses. The Trustees shall have sole discretion in determining
whether such increase in expenses is submitted to a vote of the
Legacy Class B Shareholders. Should such increase in expenses not
be submitted to a vote of the Legacy Class B Shareholders or, if
submitted, should the Legacy Class B Shareholders fail to approve
such increase in expenses, the Trustees shall take such action as
is necessary to: (1) create a new class of that Portfolio (the
"New Legacy Class A Shares") which shall be identical in all
material respects to the Class A Shares of that Portfolio as they
existed prior to the implementation of the increase in expenses;
and (2) ensure that the existing Legacy Class B Shares of that
Portfolio will be exchanged or
converted into New Legacy Class A Shares no later than the Legacy Class B Share Conversion Effective Time. If deemed advisable by the Trustees to implement the foregoing, and at the sole discretion of the Trustees, such action may include the exchange of all Legacy Class B Shares of that Portfolio for a new class of that Portfolio (the "New Legacy Class B Shares"), identical in all material respects to the Legacy Class B Shares of that Portfolio except that the New Legacy Class B Shares will convert into the New Legacy Class A Shares at the Legacy Class B Share Conversion Effective Time. Such exchanges or conversions shall be effected in a manner that the Trustees reasonably believe will not be subject to federal taxation."
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of July 5, 2006.
By: /s/ Robert H. Graham
------------------------------------
Name: Robert H. Graham
Title: President
|
AMENDMENT NO. 9
TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
OF
AIM VARIABLE INSURANCE FUNDS
This Amendment No. 9 to the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds (this "Amendment") amends, effective as of November 6, 2006, the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds dated as of September 14, 2005, as amended (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Demographic Trends Fund; and
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM V.I. Basic Balanced Fund Series I shares
Series II shares
AIM V.I. Basic Value Fund Series I shares
Series II shares
AIM V.I. Capital Appreciation Fund Series I shares
Series II shares
AIM V.I. Capital Development Fund Series I shares
Series II shares
AIM V.I. Core Equity Fund Series I shares
Series II shares
AIM V.I. Diversified Dividend Fund Series I shares
Series II shares
AIM V.I. Diversified Income Fund Series I shares
Series II shares
AIM V.I. Dynamics Fund Series I shares
Series II shares
AIM V.I. Financial Services Fund Series I shares
Series II shares
|
AIM V.I. Global Equity Fund Series I shares
Series II shares
AIM V.I. Global Health Care Fund Series I shares
Series II shares
AIM V.I. Global Real Estate Fund Series I shares
Series II shares
AIM V.I. Government Securities Fund Series I shares
Series II shares
AIM V.I. High Yield Fund Series I shares
Series II shares
AIM V.I. International Core Equity Fund Series I shares
Series II shares
AIM V.I. International Growth Fund Series I shares
Series II shares
AIM V.I. Large Cap Growth Fund Series I shares
Series II shares
AIM V.I. Leisure Fund Series I shares
Series II shares
AIM V.I. Mid Cap Core Equity Fund Series I shares
Series II shares
AIM V.I. Money Market Fund Series I shares
Series II shares
AIM V.I. Small Cap Equity Fund Series I shares
Series II shares
AIM V.I. Small Cap Growth Fund Series I shares
Series II shares
AIM V.I. Technology Fund Series I shares
Series II shares
AIM V.I. Utilities Fund Series I shares
Series II shares"
|
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of November 6, 2006.
By: /s/ Philip A. Taylor
----------------------------------
Name: Philip A. Taylor
Title: President
|
AMENDMENT NO. 10
TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
OF
AIM VARIABLE INSURANCE FUNDS
This Amendment No. 10 to the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds (this "Amendment") amends, effective as of December 21, 2006, the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds dated as of September 14, 2005, as amended (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund; and
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM V.I. Basic Balanced Fund Series I shares
Series II shares
AIM V.I. Basic Value Fund Series I shares
Series II shares
AIM V.I. Capital Appreciation Fund Series I shares
Series II shares
AIM V.I. Capital Development Fund Series I shares
Series II shares
AIM V.I. Core Equity Fund Series I shares
Series II shares
AIM V.I. Diversified Income Fund Series I shares
Series II shares
AIM V.I. Dynamics Fund Series I shares
Series II shares
AIM V.I. Financial Services Fund Series I shares
Series II shares
AIM V.I. Global Health Care Fund Series I shares
Series II shares
|
AIM V.I. Global Real Estate Fund Series I shares
Series II shares
AIM V.I. Government Securities Fund Series I shares
Series II shares
AIM V.I. High Yield Fund Series I shares
Series II shares
AIM V.I. International Growth Fund Series I shares
Series II shares
AIM V.I. Large Cap Growth Fund Series I shares
Series II shares
AIM V.I. Leisure Fund Series I shares
Series II shares
AIM V.I. Mid Cap Core Equity Fund Series I shares
Series II shares
AIM V.I. Money Market Fund Series I shares
Series II shares
AIM V.I. Small Cap Equity Fund Series I shares
Series II shares
AIM V.I. Small Cap Growth Fund Series I shares
Series II shares
AIM V.I. Technology Fund Series I shares
Series II shares
AIM V.I. Utilities Fund Series I shares
Series II shares"
|
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of December 21, 2006.
By: /s/ Philip A. Taylor
------------------------------------
Name: Philip A. Taylor
Title: President
|
AMENDMENT NO. 11
TO
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
OF
AIM VARIABLE INSURANCE FUNDS
This Amendment No. 11 to the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds (this "Amendment") amends, effective as of May 1, 2007, the Amended and Restated Agreement and Declaration of Trust of AIM Variable Insurance Funds dated as of September 14, 2005, as amended (the "Agreement").
Under Section 9.7 of the Agreement, this Amendment may be executed by a duly authorized officer of the Trust.
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Small Cap Growth Fund; and
NOW, THEREFORE, the Agreement is hereby amended as follows:
1. Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS AND CLASSES THEREOF
PORTFOLIO CLASSES OF EACH PORTFOLIO
--------- -------------------------
AIM V.I. Basic Balanced Fund Series I shares
Series II shares
AIM V.I. Basic Value Fund Series I shares
Series II shares
AIM V.I. Capital Appreciation Fund Series I shares
Series II shares
AIM V.I. Capital Development Fund Series I shares
Series II shares
AIM V.I. Core Equity Fund Series I shares
Series II shares
AIM V.I. Diversified Income Fund Series I shares
Series II shares
AIM V.I. Dynamics Fund Series I shares
Series II shares
AIM V.I. Financial Services Fund Series I shares
Series II shares
AIM V.I. Global Health Care Fund Series I shares
Series II shares
|
AIM V.I. Global Real Estate Fund Series I shares
Series II shares
AIM V.I. Government Securities Fund Series I shares
Series II shares
AIM V.I. High Yield Fund Series I shares
Series II shares
AIM V.I. International Growth Fund Series I shares
Series II shares
AIM V.I. Large Cap Growth Fund Series I shares
Series II shares
AIM V.I. Leisure Fund Series I shares
Series II shares
AIM V.I. Mid Cap Core Equity Fund Series I shares
Series II shares
AIM V.I. Money Market Fund Series I shares
Series II shares
AIM V.I. Small Cap Equity Fund Series I shares
Series II shares
AIM V.I. Technology Fund Series I shares
Series II shares
AIM V.I. Utilities Fund Series I shares
Series II shares"
|
2. All references in the Agreement to "this Agreement" shall mean the Agreement as amended by this Amendment.
3. Except as specifically amended by this Amendment, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the undersigned, a duly authorized officer of the Trust, has executed this Amendment as of May 1, 2007.
AMENDMENT TO
AMENDED AND RESTATED BYLAWS
OF AIM VARIABLE INSURANCE FUNDS
Adopted effective August 1, 2006
The Amended and Restated Bylaws of AIM Variable Insurance Funds (the "Trust"), adopted effective September 14, 2005, (the "Bylaws"), are hereby amended as follows:
1. Article III is hereby amended and restated to read in its entirety as follows:
"ARTICLE III
OFFICERS
Section 1. Executive Officers. The executive officers shall include a Principal Executive Officer, a President, one or more Vice Presidents, which may include one or more Executive Vice Presidents and/or Senior Vice Presidents (the number thereof to be determined by the Board of Trustees), a Principal Financial Officer, a Chief Legal Officer, a Chief Compliance Officer, a Senior Officer, a Treasurer, a Secretary and an Anti-Money Laundering Compliance Officer. The Board of Trustees may also in its discretion appoint Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers, and other officers, agents and employees, who shall have such authority and perform such duties as the Board may determine. The Board of Trustees may fill any vacancy which may occur in any office. Any two offices, except for those of President and Vice President, may be held by the same person, but no officer shall execute, acknowledge or verify any instrument on behalf of the Trust in more than one capacity, if such instrument is required by law or by these Bylaws to be executed, acknowledged or verified by two or more officers.
Section 2. Term of Office. Unless otherwise specifically determined by the Board of Trustees, the officers shall serve at the pleasure of the Board of Trustees. If the Board of Trustees in its judgment finds that the best interests of the Trust will be served, the Board of Trustees may remove any officer of the Trust at any time with or without cause. The Trustees may delegate this power to the President (without supervision by the Trustees) with respect to any other officer. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer may resign from office at any time by delivering a written resignation to the Trustees or the President. Unless otherwise specified therein, such resignation shall take effect upon delivery.
Section 3. Principal Executive Officer. The Principal Executive Officer shall be the chief executive officer of the Trust and shall generally manage the business and affairs of the Trust. The Principal Executive Officer shall be responsible for making the certifications required of the Trust's principal executive officer by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder by the Securities and Exchange Commission.
Section 4. President; Vice Presidents. The President and one or more Vice Presidents, which may include one or more Executive Vice Presidents and/or Senior Vice Presidents, shall have and exercise such powers and duties of the Principal Executive Officer in the absence or inability to act of the Principal Executive Officer, as may be assigned to them,
respectively, by the Board of Trustees or, to the extent not so assigned, by the Principal Executive Officer. In the absence or inability to act of the Principal Executive Officer, the powers and duties of the Principal Executive Officer not otherwise assigned by the Board of Trustees or the Principal Executive Officer shall devolve first upon the President, then upon the Executive Vice Presidents, then upon the Senior Vice Presidents, and finally upon the Vice Presidents, all in the order of their election. If both the Chair and the Vice Chair are absent, or if the Chair is absent and there is no Vice Chair, the President shall, if present, preside at all meetings of the Shareholders and the Board of Trustees.
Section 5. Principal Financial Officer. The Principal Financial Officer, who shall also have a title of at least Vice President, shall be the chief financial officer of the Trust and shall generally manage the financial affairs of the Trust. The Principal Financial Officer shall be responsible for making the certifications required of the Trust's principal financial officer by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.
Section 6. Chief Legal Officer. The Chief Legal Officer, who shall also have a title of at least Senior Vice President, shall generally manage the legal affairs of the Trust. The Chief Legal Officer shall be responsible for receiving up-the-ladder reports within the Trust of any evidence of material violations of securities laws or breaches of fiduciary duty or similar violations by the Trust, as required by Section 307 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder.
Section 7. Chief Compliance Officer. The Chief Compliance Officer, who shall also have a title of at least Senior Vice President, shall be responsible for administering the Trust's policies and procedures adopted pursuant to Rule 38a-1(a)(1) under the 1940 Act.
Section 8. Senior Officer. The Senior Officer, who shall also have a title of at least Senior Vice President, shall be employed by or on behalf of the Trust and shall have such powers and duties as are set forth in such Senior Officer's Executive Employment Agreement.
Section 9. Treasurer. The Treasurer shall have the care and custody of the funds and securities of the Trust and shall deposit the same in the name of the Trust in such bank or banks or other depositories, subject to withdrawal in such manner as these Bylaws or the Board of Trustees may determine. The Treasurer shall, if required by the Board of Trustees, give such bond for the faithful discharge of duties in such form as the Board of Trustees may require.
Section 10. Secretary. The Secretary shall (a) have custody of the seal of the Trust; (b) if requested, attend meetings of the Shareholders, the Board of Trustees, and any committees or sub-committees of Trustees; (c) keep or cause to be kept the minutes of all meetings of Shareholders, the Board of Trustees and any committees or sub-committees thereof, and (d) issue all notices of the Trust. The Secretary shall have charge of the Shareholder records and such other books and papers as the Board may direct, and shall perform such other duties as may be incidental to the office or which are assigned by the Board of Trustees.
Section 11. Anti-Money Laundering Compliance Officer. The Anti-Money Laundering Compliance Officer shall have such powers and duties as are set forth in the Anti-Money Laundering Program adopted by the Trust pursuant to the USA PATRIOT Act of 2001 and the rules promulgated thereunder, as such Program may be amended from time to time.
Section 12. Assistant Officers. Assistant officers, which may include one or more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers, shall perform such
functions and have such responsibilities as the Board of Trustees may assign to them or, to the extent not so assigned, by the Vice President(s), Secretary or Treasurer, as applicable.
Section 13. Surety Bond. The Trustees may require any officer or agent of the Trust to execute a bond (including, without limitation, any bond required by the 1940 Act and the rules and regulations of the Securities and Exchange Commission (the "Commission") to the Trust in such sum and with such surety or sureties as the Trustees may determine, conditioned upon the faithful performance of his or her duties to the Trust, including responsibility for negligence and for the accounting of any of the Trust's property, funds, or securities that may come into his or her hands.
Section 14. Authorized Signatories. Unless a specific officer is otherwise designated in these Bylaws or in a resolution adopted by the Board of Trustees, the proper officers of the Trust for executing agreements, documents and instruments other than Internal Revenue Service forms shall be the Principal Executive Officer, the President, any Vice President, the Principal Financial Officer, the Chief Legal Officer, the Chief Compliance Officer, the Senior Officer, the Treasurer, the Secretary, the Anti-Money Laundering Compliance Officer or any Assistant Secretary. Unless a specific officer is otherwise designated in these Bylaws or in a resolution adopted by the Board of Trustees, the proper officers of the Trust for executing any and all Internal Revenue Service forms shall be the Principal Executive Officer, the President, any Vice President, the Principal Financial Officer, the Treasurer, the Secretary or any Assistant Secretary."
AMENDMENT NO. 2 TO
AMENDED AND RESTATED BYLAWS
OF AIM VARIABLE INSURANCE FUNDS
Adopted effective March 23, 2007
The Amended and Restated Bylaws of AIM Variable Insurance Funds (the "Trust"), adopted effective September 14, 2005, (the "Bylaws"), are hereby amended as follows:
1. Article III, Section 14 is hereby amended and restated to read in its entirety as follows:
"Section 14. Authorized Signatories. Unless a specific officer is otherwise designated in these Bylaws or in a resolution adopted by the Board of Trustees, the proper officers of the Trust for executing agreements, documents and instruments other than Internal Revenue Service forms shall be the Principal Executive Officer, the President, any Vice President, the Principal Financial Officer, the Chief Legal Officer, the Chief Compliance Officer, the Senior Officer, the Treasurer, the Secretary, the Anti-Money Laundering Compliance Officer, any Assistant Vice President, any Assistant Treasurer or any Assistant Secretary. Unless a specific officer is otherwise designated in these Bylaws or in a resolution adopted by the Board of Trustees, the proper officers of the Trust for executing any and all Internal Revenue Service forms shall be the Principal Executive Officer, the President, any Vice President, the Principal Financial Officer, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary."
AMENDMENT NO. 10
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This amendment dated as of May 1, 2006, amends the Master Investment Advisory Agreement (the "Agreement"), dated May 1, 2000, between AIM Variable Insurance Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to add AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund; and to remove AIM V.I. Aggressive Growth Fund, AIM V.I. Core Stock Fund, AIM V.I. Growth Fund and AIM V.I. Premier Equity Fund.
NOW, THEREFORE, the parties agree as follows:
1. Appendix A and Appendix B to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
------------ ------------------
AIM V.I. Basic 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. Demographic Trends Fund May 1, 2000
AIM V.I. Diversified Dividend Fund May 1, 2006
AIM V.I. Diversified Income Fund May 1, 2000
AIM V.I. Dynamics Fund April 30, 2004
AIM V.I. Financial Services Fund April 30, 2004
AIM V.I. Global Equity Fund May 1, 2006
AIM V.I. Global Health Care Fund April 30, 2004
AIM V.I. Government Securities Fund May 1, 2000
AIM V.I. High Yield Fund May 1, 2000
AIM V.I. International Core Equity Fund May 1, 2006
AIM V.I. International Growth Fund May 1, 2000
AIM V.I. Large Cap Growth Fund September 1, 2003
AIM V.I. Leisure Fund April 30, 2004
AIM V.I. Mid Cap Core Equity Fund September 10, 2001
AIM V.I. Money Market Fund May 1, 2000
AIM V.I. Real Estate Fund April 30, 2004
AIM V.I. Small Cap Equity Fund September 1, 2003
AIM V.I. Small Company Growth Fund April 30, 2004
AIM V.I. Technology Fund April 30, 2004
AIM V.I. Utilities Fund April 30, 2004
|
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. BASIC 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% |
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. CAPITAL APPRECIATION FUND
AIM V.I. CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million..................... 0.65% Over $250 million...................... 0.60% |
AIM V.I. DYNAMICS FUND
AIM V.I. FINANCIAL SERVICES FUND
AIM V.I. GLOBAL HEALTH CARE FUND
AIM V.I. LEISURE FUND
AIM V.I. SMALL COMPANY GROWTH FUND
AIM V.I. TECHNOLOGY FUND
ANNUAL RATE
-----------
All Assets............................. 0.75%
|
AIM V.I. DEMOGRAPHIC TRENDS FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $2 billion....................... 0.77% Over $2 billion........................ 0.72% |
AIM V.I. DIVERSIFIED DIVIDEND FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million..................... 0.695% Next $250 million...................... 0.67% Next $500 million...................... 0.645% Next $1.5 billion...................... 0.62% Next $2.5 billion...................... 0.595% Next $2.5 billion...................... 0.57% Next $2.5 billion...................... 0.545% Over $10 billion....................... 0.52% |
AIM V.I. DIVERSIFIED INCOME FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million..................... 0.60% Over $250 million...................... 0.55% |
AIM V.I. GLOBAL EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million..................... 0.80% Next $250 million...................... 0.78% Next $500 million...................... 0.76% Next $1.5 billion...................... 0.74% Next $2.5 billion...................... 0.72% Next $2.5 billion...................... 0.70% Next $2.5 billion...................... 0.68% Over $10 billion....................... 0.66% |
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% |
AIM V.I. INTERNATIONAL CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million..................... 0.935% Next $250 million...................... 0.91% Next $500 million...................... 0.885% Next $1.5 billion...................... 0.86% Next $2.5 billion...................... 0.835% Next $2.5 billion...................... 0.81% Next $2.5 billion...................... 0.785% Over $10 billion....................... 0.76% |
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. REAL ESTATE FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets............................. 0.90% |
AIM V.I. SMALL CAP EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets............................. 0.85% |
AIM V.I. UTILITIES FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets............................. 0.60%" |
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers on the date first written above.
Date: May 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ J. Philip Ferguson
----------------------------- ------------------------------------
Assistant Secretary J. Philip Ferguson
Senior Vice President
|
(SEAL)
AMENDMENT NO. 11
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This amendment dated as of June 12, 2006, amends the Master Investment Advisory Agreement (the "Agreement"), dated May 1, 2000, between AIM Variable Insurance Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Blue Chip Fund.
WHEREAS, the parties desire to amend the Agreement to permanently reduce the advisory fee payable by AIM V.I. Large Cap Growth Fund effective June 12, 2006.
NOW, THEREFORE, the parties agree as follows:
1. Appendix A and Appendix B to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
------------ ------------------
AIM V.I. Basic Balanced Fund May 1, 2000
AIM V.I. Basic Value Fund September 10, 2001
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. Demographic Trends Fund May 1, 2000
AIM V.I. Diversified Dividend Fund May 1, 2006
AIM V.I. Diversified Income Fund May 1, 2000
AIM V.I. Dynamics Fund April 30, 2004
AIM V.I. Financial Services Fund April 30, 2004
AIM V.I. Global Equity Fund May 1, 2006
AIM V.I. Global Health Care Fund April 30, 2004
AIM V.I. Government Securities Fund May 1, 2000
AIM V.I. High Yield Fund May 1, 2000
AIM V.I. International Core Equity Fund May 1, 2006
AIM V.I. International Growth Fund May 1, 2000
AIM V.I. Large Cap Growth Fund September 1, 2003
AIM V.I. Leisure Fund April 30, 2004
AIM V.I. Mid Cap Core Equity Fund September 10, 2001
AIM V.I. Money Market Fund May 1, 2000
AIM V.I. Real Estate Fund April 30, 2004
AIM V.I. Small Cap Equity Fund September 1, 2003
AIM V.I. Small Company Growth Fund April 30, 2004
AIM V.I. Technology Fund April 30, 2004
AIM V.I. Utilities Fund April 30, 2004
|
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. BASIC 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% |
AIM V.I. CAPITAL DEVELOPMENT FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $350 million........ 0.75% Over $350 million......... 0.625% |
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million........ 0.65% Over $250 million......... 0.60% |
AIM V.I. DYNAMICS FUND
AIM V.I. FINANCIAL SERVICES FUND
AIM V.I. GLOBAL HEALTH CARE FUND
AIM V.I. LEISURE FUND
AIM V.I. SMALL COMPANY GROWTH FUND
AIM V.I. TECHNOLOGY FUND
ANNUAL RATE
-----------
All Assets................ 0.75%
|
AIM V.I. DEMOGRAPHIC TRENDS FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $2 billion.......... 0.77% Over $2 billion........... 0.72% |
AIM V.I. DIVERSIFIED DIVIDEND FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million........ 0.695% Next $250 million......... 0.67% Next $500 million......... 0.645% Next $1.5 billion......... 0.62% Next $2.5 billion......... 0.595% Next $2.5 billion......... 0.57% Next $2.5 billion......... 0.545% Over $10 billion.......... 0.52% |
AIM V.I. DIVERSIFIED INCOME FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million........ 0.60% Over $250 million......... 0.55% |
AIM V.I. GLOBAL EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million........ 0.80% Next $250 million......... 0.78% Next $500 million......... 0.76% Next $1.5 billion......... 0.74% Next $2.5 billion......... 0.72% Next $2.5 billion......... 0.70% Next $2.5 billion......... 0.68% Over $10 billion.......... 0.66% |
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% |
AIM V.I. INTERNATIONAL CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million........ 0.935% Next $250 million......... 0.91% Next $500 million......... 0.885% Next $1.5 billion......... 0.86% Next $2.5 billion......... 0.835% Next $2.5 billion......... 0.81% Next $2.5 billion......... 0.785% Over $10 billion.......... 0.76% |
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 $350 million........ 0.75% Over $350 million......... 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. REAL ESTATE FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets................ 0.90% |
AIM V.I. SMALL CAP EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets................ 0.85% |
AIM V.I. UTILITIES FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets................ 0.60%" |
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers on the date first written above.
Date: July 3, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ J. Philip Ferguson
----------------------------- ------------------------------------
Assistant Secretary J. Philip Ferguson
Senior Vice President
|
(SEAL)
AMENDMENT NO. 12
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This amendment dated as of July 3, 2006, amends the Master Investment Advisory Agreement (the "Agreement"), dated May 1, 2000, between AIM Variable Insurance Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to change the name of AIM V.I. Real Estate Fund to AIM V.I. Global Real Estate Fund and AIM V.I. Small Company Growth Fund to AIM V.I. Small Cap Growth Fund.
NOW, THEREFORE, the parties agree as follows:
1. Appendix A and Appendix B to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
------------ ------------------
AIM V.I. Basic Balanced Fund May 1, 2000
AIM V.I. Basic Value Fund September 10, 2001
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. Demographic Trends Fund May 1, 2000
AIM V.I. Diversified Dividend Fund May 1, 2006
AIM V.I. Diversified Income Fund May 1, 2000
AIM V.I. Dynamics Fund April 30, 2004
AIM V.I. Financial Services Fund April 30, 2004
AIM V.I. Global Equity Fund May 1, 2006
AIM V.I. Global Health Care Fund April 30, 2004
AIM V.I. Global Real Estate Fund April 30, 2004
AIM V.I. Government Securities Fund May 1, 2000
AIM V.I. High Yield Fund May 1, 2000
AIM V.I. International Core Equity Fund May 1, 2006
AIM V.I. International Growth Fund May 1, 2000
AIM V.I. Large Cap Growth Fund September 1, 2003
AIM V.I. Leisure Fund April 30, 2004
AIM V.I. Mid Cap Core Equity Fund September 10, 2001
AIM V.I. Money Market Fund May 1, 2000
AIM V.I. Small Cap Equity Fund September 1, 2003
AIM V.I. Small Cap Growth Fund April 30, 2004
AIM V.I. Technology Fund April 30, 2004
AIM V.I. Utilities Fund April 30, 2004
|
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. BASIC 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% |
AIM V.I. CAPITAL DEVELOPMENT FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $350 million............ 0.75% Over $350 million............. 0.625% |
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.65% Over $250 million............. 0.60% |
AIM V.I. DYNAMICS FUND
AIM V.I. FINANCIAL SERVICES FUND
AIM V.I. GLOBAL HEALTH CARE FUND
AIM V.I. LEISURE FUND
AIM V.I. SMALL CAP GROWTH FUND
AIM V.I. TECHNOLOGY FUND
ANNUAL RATE
-----------
All Assets.................... 0.75%
|
AIM V.I. DEMOGRAPHIC TRENDS FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $2 billion.............. 0.77% Over $2 billion............... 0.72% |
AIM V.I. DIVERSIFIED DIVIDEND FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.695% Next $250 million............. 0.67% Next $500 million............. 0.645% Next $1.5 billion............. 0.62% Next $2.5 billion............. 0.595% Next $2.5 billion............. 0.57% Next $2.5 billion............. 0.545% Over $10 billion.............. 0.52% |
AIM V.I. DIVERSIFIED INCOME FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.60% Over $250 million............. 0.55% |
AIM V.I. GLOBAL EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.80% Next $250 million............. 0.78% Next $500 million............. 0.76% Next $1.5 billion............. 0.74% Next $2.5 billion............. 0.72% Next $2.5 billion............. 0.70% Next $2.5 billion............. 0.68% Over $10 billion.............. 0.66% |
AIM V.I. GLOBAL REAL ESTATE FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets.................... 0.90% |
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% |
AIM V.I. INTERNATIONAL CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.935% Next $250 million............. 0.91% Next $500 million............. 0.885% Next $1.5 billion............. 0.86% Next $2.5 billion............. 0.835% Next $2.5 billion............. 0.81% Next $2.5 billion............. 0.785% Over $10 billion.............. 0.76% |
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 $350 million............ 0.75% Over $350 million............. 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% |
AIM V.I. UTILITIES FUND
ANNUAL RATE
-----------
All Assets.................... 0.60%"
|
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers on the date first written above.
Date: July 3, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ J. Philip Ferguson
----------------------------- ------------------------------------
Assistant Secretary J. Philip Ferguson
President
|
(SEAL)
AMENDMENT NO. 13
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This amendment dated as of November 6, 2006, amends the Master Investment Advisory Agreement (the "Agreement"), dated May 1, 2000, between AIM Variable Insurance Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Demographic Trends Fund; and
NOW, THEREFORE, the parties agree as follows:
1. Appendix A and Appendix B to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
------------ ------------------
AIM V.I. Basic Balanced Fund May 1, 2000
AIM V.I. Basic Value Fund September 10, 2001
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. Diversified Dividend Fund May 1, 2006
AIM V.I. Diversified Income Fund May 1, 2000
AIM V.I. Dynamics Fund April 30, 2004
AIM V.I. Financial Services Fund April 30, 2004
AIM V.I. Global Equity Fund May 1, 2006
AIM V.I. Global Health Care Fund April 30, 2004
AIM V.I. Global Real Estate Fund April 30, 2004
AIM V.I. Government Securities Fund May 1, 2000
AIM V.I. High Yield Fund May 1, 2000
AIM V.I. International Core Equity Fund May 1, 2006
AIM V.I. International Growth Fund May 1, 2000
AIM V.I. Large Cap Growth Fund September 1, 2003
AIM V.I. Leisure Fund April 30, 2004
AIM V.I. Mid Cap Core Equity Fund September 10, 2001
AIM V.I. Money Market Fund May 1, 2000
AIM V.I. Small Cap Equity Fund September 1, 2003
AIM V.I. Small Cap Growth Fund April 30, 2004
AIM V.I. Technology Fund April 30, 2004
AIM V.I. Utilities Fund April 30, 2004
|
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. BASIC 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% |
AIM V.I. CAPITAL DEVELOPMENT FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $350 million............ 0.75% Over $350 million............. 0.625% |
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.65% Over $250 million............. 0.60% |
AIM V.I. DYNAMICS FUND
AIM V.I. FINANCIAL SERVICES FUND
AIM V.I. GLOBAL HEALTH CARE FUND
AIM V.I. LEISURE FUND
AIM V.I. SMALL CAP GROWTH FUND
AIM V.I. TECHNOLOGY FUND
ANNUAL RATE
-----------
All Assets.................... 0.75%
|
AIM V.I. DIVERSIFIED DIVIDEND FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.695% Next $250 million............. 0.67% Next $500 million............. 0.645% Next $1.5 billion............. 0.62% Next $2.5 billion............. 0.595% Next $2.5 billion............. 0.57% Next $2.5 billion............. 0.545% Over $10 billion.............. 0.52% |
AIM V.I. DIVERSIFIED INCOME FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.60% Over $250 million............. 0.55% |
AIM V.I. GLOBAL EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.80% Next $250 million............. 0.78% Next $500 million............. 0.76% Next $1.5 billion............. 0.74% Next $2.5 billion............. 0.72% Next $2.5 billion............. 0.70% Next $2.5 billion............. 0.68% Over $10 billion.............. 0.66% |
AIM V.I. GLOBAL REAL ESTATE FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets.................... 0.90% |
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% |
AIM V.I. INTERNATIONAL CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.935% Next $250 million............. 0.91% Next $500 million............. 0.885% Next $1.5 billion............. 0.86% Next $2.5 billion............. 0.835% Next $2.5 billion............. 0.81% Next $2.5 billion............. 0.785% Over $10 billion.............. 0.76% |
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 $350 million............ 0.75% Over $350 million............. 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% |
AIM V.I. UTILITIES FUND
ANNUAL RATE
-----------
All Assets.................... 0.60%"
|
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers on the date first written above.
Date: November 6, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
AMENDMENT NO. 14
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This amendment dated as of December 21, 2006, amends the Master Investment Advisory Agreement (the "Agreement"), dated May 1, 2000, between AIM Variable Insurance Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund; and
NOW, THEREFORE, the parties agree as follows:
1. Appendix A and Appendix B to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
------------ ------------------
AIM V.I. Basic Balanced Fund May 1, 2000
AIM V.I. Basic Value Fund September 10, 2001
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. Diversified Income Fund May 1, 2000
AIM V.I. Dynamics Fund April 30, 2004
AIM V.I. Financial Services Fund April 30, 2004
AIM V.I. Global Health Care Fund April 30, 2004
AIM V.I. Global Real Estate Fund April 30, 2004
AIM V.I. Government Securities 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. Leisure Fund April 30, 2004
AIM V.I. Mid Cap Core Equity Fund September 10, 2001
AIM V.I. Money Market Fund May 1, 2000
AIM V.I. Small Cap Equity Fund September 1, 2003
AIM V.I. Small Cap Growth Fund April 30, 2004
AIM V.I. Technology Fund April 30, 2004
AIM V.I. Utilities Fund April 30, 2004
|
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. BASIC 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% |
AIM V.I. CAPITAL DEVELOPMENT FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $350 million............ 0.75% Over $350 million............. 0.625% |
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.65% Over $250 million............. 0.60% |
AIM V.I. DYNAMICS FUND
AIM V.I. FINANCIAL SERVICES FUND
AIM V.I. GLOBAL HEALTH CARE FUND
AIM V.I. LEISURE FUND
AIM V.I. SMALL CAP GROWTH FUND
AIM V.I. TECHNOLOGY FUND
ANNUAL RATE
-----------
All Assets.................... 0.75%
|
AIM V.I. DIVERSIFIED INCOME FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million............ 0.60% Over $250 million............. 0.55% |
AIM V.I. GLOBAL REAL ESTATE FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets.................... 0.90% |
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% |
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 $350 million............ 0.75% Over $350 million............. 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% |
AIM V.I. UTILITIES FUND
ANNUAL RATE
-----------
All Assets.................... 0.60%"
|
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers on the date first written above.
Date: December 21, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Stephen R. Rimes By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ Stephen R. Rimes By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
AMENDMENT NO. 15
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This amendment dated as of May 1, 2007, amends the Master Investment Advisory Agreement (the "Agreement"), dated May 1, 2000, between AIM Variable Insurance Funds, a Delaware statutory trust, and A I M Advisors, Inc., a Delaware corporation.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Small Cap Growth Fund; and
NOW, THEREFORE, the parties agree as follows:
1. Appendix A and Appendix B to the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
FUNDS AND EFFECTIVE DATES
EFFECTIVE DATE OF
NAME OF FUND ADVISORY AGREEMENT
------------ ------------------
AIM V.I. Basic Balanced Fund May 1, 2000
AIM V.I. Basic Value Fund September 10, 2001
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. Diversified Income Fund May 1, 2000
AIM V.I. Dynamics Fund April 30, 2004
AIM V.I. Financial Services Fund April 30, 2004
AIM V.I. Global Health Care Fund April 30, 2004
AIM V.I. Global Real Estate Fund April 30, 2004
AIM V.I. Government Securities 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. Leisure Fund April 30, 2004
AIM V.I. Mid Cap Core Equity Fund September 10, 2001
AIM V.I. Money Market Fund May 1, 2000
AIM V.I. Small Cap Equity Fund September 1, 2003
AIM V.I. Technology Fund April 30, 2004
AIM V.I. Utilities Fund April 30, 2004
|
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. BASIC 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% |
AIM V.I. CAPITAL DEVELOPMENT FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $350 million................................................... 0.75% Over $350 million.................................................... 0.625% |
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CORE EQUITY FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million................................................ 0.65% Over $250 million................................................. 0.60% |
AIM V.I. DYNAMICS FUND
AIM V.I. FINANCIAL SERVICES FUND
AIM V.I. GLOBAL HEALTH CARE FUND
AIM V.I. LEISURE FUND
AIM V.I. TECHNOLOGY FUND
ANNUAL RATE
-----------
All Assets........................................................ 0.75%
|
AIM V.I. DIVERSIFIED INCOME FUND
NET ASSETS ANNUAL RATE ---------- ----------- First $250 million................................................ 0.60% Over $250 million................................................. 0.55% |
AIM V.I. GLOBAL REAL ESTATE FUND
NET ASSETS ANNUAL RATE ---------- ----------- All Assets........................................................ 0.90% |
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% |
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 $350 million................................................ 0.75% Over $350 million................................................. 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% |
AIM V.I. UTILITIES FUND
ANNUAL RATE
-----------
All Assets........................................................ 0.60%"
|
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers on the date first written above.
Date: May 1, 2007
AIM VARIABLE INSURANCE FUNDS
Attest: By:
----------------------------- ------------------------------------
Assistant Secretary John M. Zerr
Senior Vice President
|
(SEAL)
AIM ADVISORS, INC.
Attest: By:
----------------------------- ------------------------------------
Assistant Secretary John M. Zerr
Senior Vice President
|
(SEAL)
AMENDMENT NO. 5
TO
MASTER INTERGROUP SUB-ADVISORY CONTRACT FOR MUTUAL FUNDS
This Amendment dated as of July 3, 2006, amends the Master Intergroup Sub-Advisory Contract for Mutual Funds (the "Agreement"), dated April 30, 2004, between A I M Advisors, Inc. and INVESCO Institutional (N.A.), Inc.
WITNESSETH:
WHEREAS, the parties desire to amend the Agreement to change the name of AIM V.I. Real Estate Fund to AIM V.I. Global Real Estate Fund;
NOW, THEREFORE, the parties agree as follows;
1. Exhibit A to the Agreement is hereby deleted in its entirety and replaced with the following:
"EXHIBIT A
TO
MASTER INTERGROUP SUB-ADVISORY CONTRACT FOR MUTUAL FUNDS
AIM VARIABLE INSURANCE FUNDS
AIM V.I. Global Real Estate Fund
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers on the date first written above.
A I M ADVISORS, INC. INVESCO INSTITUTIONAL (N.A.), INC.
By: /s/ Philip A. Taylor By: /s/ Jeff Kupor
--------------------------------- ------------------------------------
Philip A. Taylor Name: Jeff Kupor
President Title: Secretary and General Counsel
|
MASTER INTERGROUP SUB-ADVISORY CONTRACT FOR MUTUAL FUNDS
This contract is made as of May 1, 2006, between A I M Advisors, Inc. (hereinafter "Adviser") 11 Greenway Plaza, Suite 100, Houston, Texas 77046, and INVESCO Global Asset Management (N.A.), Inc. (hereinafter "Sub-Adviser") One Midtown Plaza, 1360 Peachtree Street, N.E., Atlanta, Georgia 30309.
WHEREAS:
A) Adviser has entered into an investment advisory agreement with AIM Variable Insurance Funds (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 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 hereby 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.
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, 2007. 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 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 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Until further notice to the other party, it is agreed that the address of the Sub-Adviser shall be One Midtown Plaza, 1360 Peachtree Street, N.E., Atlanta, Georgia 30309.
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.
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 GLOBAL ASSET MANAGEMENT
(N.A.), INC.
Adviser Sub-Adviser
By: /s/ Philip A. Taylor By: /s/ Kirk F. Holland
--------------------------------- ------------------------------------
Name: Philip A. Taylor Name: Kirk F. Holland
Title: President Title: President & CEO
|
EXHIBIT A
TO
MASTER INTERGROUP SUB-ADVISORY CONTRACT FOR MUTUAL FUNDS
FUND
AIM VARIABLE INSURANCE FUNDS
AIM V.I. International Core Equity Fund
AMENDMENT NO. 8
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated as of July 16, 2001, by and between AIM Variable Insurance Funds, a Delaware statutory trust and A I M Distributors, Inc., a Delaware corporation, is hereby amended to add AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund; and to remove AIM V.I. Aggressive Growth Fund, AIM V.I. Core Stock Fund, AIM V.I. Growth Fund, and AIM V.I. Premier Equity Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
SERIES I SHARES
AIM V.I. Basic 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. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Government Securities Fund
AIM V.I. Global Health Care Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Real Estate Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Company Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SERIES II SHARES
AIM V.I. Basic 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. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Government Securities Fund
AIM V.I. Global Health Care Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Real Estate Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Company Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: May 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary President
A I M DISTRIBUTORS, INC.
Attest: /s/ Jim Coppedge By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Assistant Secretary President
|
AMENDMENT NO. 9
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated as of July 16, 2001, by and between AIM Variable Insurance Funds, a Delaware statutory trust and A I M Distributors, Inc., a Delaware corporation, is hereby amended to remove AIM V.I. Blue Chip Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
SERIES I SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Government Securities Fund
AIM V.I. Global Health Care Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Real Estate Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Company Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SERIES II SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Government Securities Fund
AIM V.I. Global Health Care Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: June 12, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Assistant Secretary President
|
AMENDMENT NO. 10
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated as of July 16, 2001, by and between AIM Variable Insurance Funds, a Delaware statutory trust and A I M Distributors, Inc., a Delaware corporation, is hereby amended to change the name of AIM V.I. Real Estate Fund to AIM V.I. Global Real Estate Fund and AIM V.I. Small Company Growth Fund to AIM V.I. Small Cap Growth Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
SERIES I SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SERIES II SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: July 3, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Assistant Secretary President
|
AMENDMENT NO. 11
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated as of July 16, 2001, by and between AIM Variable Insurance Funds, a Delaware statutory trust and A I M Distributors, Inc., a Delaware corporation, is hereby amended to remove AIM V.I. Demographic Trends Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
SERIES I SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SERIES II SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: November 6, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
A I M DISTRIBUTORS, INC.
Attest: /s/ Jim Coppedge By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Assistant Secretary Gene L. Needles
President
|
AMENDMENT NO. 12
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated as of July 16, 2001, by and between AIM Variable Insurance Funds, a Delaware statutory trust and A I M Distributors, Inc., a Delaware corporation, is hereby amended to remove AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
SERIES I SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SERIES II SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: December 21, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Stephen R. Rimes By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
A I M DISTRIBUTORS, INC.
Attest: /s/ Stephen R. Rimes By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Assistant Secretary Gene L. Needles
President
|
AMENDMENT NO. 13
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
The First Amended and Restated Master Distribution Agreement (the "Agreement"), dated as of July 16, 2001, by and between AIM Variable Insurance Funds, a Delaware statutory trust and A I M Distributors, Inc., a Delaware corporation, is hereby amended to remove AIM V.I. Small Cap Growth Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
FIRST AMENDED AND RESTATED
MASTER DISTRIBUTION AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
SERIES I SHARES SERIES II SHARES --------------- ---------------- AIM V.I. Basic Balanced Fund AIM V.I. Basic Balanced Fund AIM V.I. Basic Value Fund AIM V.I. Basic Value Fund AIM V.I. Capital Appreciation Fund AIM V.I. Capital Appreciation Fund AIM V.I. Capital Development Fund AIM V.I. Capital Development Fund AIM V.I. Core Equity Fund AIM V.I. Core Equity Fund AIM V.I. Diversified Income Fund AIM V.I. Diversified Income Fund AIM V.I. Dynamics Fund AIM V.I. Dynamics Fund AIM V.I. Financial Services Fund AIM V.I. Financial Services Fund AIM V.I. Global Health Care Fund AIM V.I. Global Health Care Fund AIM V.I. Global Real Estate Fund AIM V.I. Global Real Estate Fund AIM V.I. Government Securities Fund AIM V.I. Government Securities Fund AIM V.I. High Yield Fund AIM V.I. High Yield Fund AIM V.I. International Growth Fund AIM V.I. International Growth Fund AIM V.I. Large Cap Growth Fund AIM V.I. Large Cap Growth Fund AIM V.I. Leisure Fund AIM V.I. Leisure Fund AIM V.I. Mid Cap Core Equity Fund AIM V.I. Mid Cap Core Equity Fund AIM V.I. Money Market Fund AIM V.I. Money Market Fund AIM V.I. Small Cap Equity Fund AIM V.I. Small Cap Equity Fund AIM V.I. Technology Fund AIM V.I. Technology Fund AIM V.I. Utilities Fund AIM V.I. Utilities Fund" |
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: May 1, 2007
AIM VARIABLE INSURANCE FUNDS
Attest: By:
----------------------------- ------------------------------------
Assistant Secretary John M. Zerr
Senior Vice President
|
AIM DISTRIBUTORS, INC.
Attest: By:
----------------------------- ------------------------------------
Assistant Secretary Gene L. Needles
President
|
AIM FUNDS
RETIREMENT PLAN FOR ELIGIBLE
DIRECTORS/TRUSTEES
Effective as of March 8, 1994
As Restated as of January 1, 2005
.
.
.
TABLE OF CONTENTS
RETIREMENT PLAN FOR ELIGIBLE............................................... i
ARTICLE I - DEFINITION OF TERMS AND CONSTRUCTION........................... 1
1.1 Definitions........................................................ 1
1.2 Plurals and Gender................................................. 2
1.3 Directors/Trustees................................................. 3
1.4 Headings........................................................... 3
1.5 Severability....................................................... 3
ARTICLE II - PARTICIPATION................................................. 3
2.1 Commencement of Participation...................................... 3
2.2 Termination of Participation....................................... 3
ARTICLE III - RETIREMENT BENEFITS.......................................... 3
3.1 Amount and Terms................................................... 3
3.2 Forfeiture......................................................... 3
3.3 Payment After Participant's Death.................................. 4
3.4 Benefits Calculated in the Aggregate for all of the AIM Funds...... 4
ARTICLE IV - SUSPENSION OF BENEFITS, ETC................................... 4
4.1 No Suspension of Benefits For Continued Service or Upon Resumption
of Service......................................................... 4
4.2 Payments Due Missing Persons....................................... 4
ARTICLE V - ADMINISTRATOR.................................................. 4
5.1 Appointment of Administrator....................................... 4
5.2 Powers and Duties of Administrator................................. 5
5.3 Action by Administrator............................................ 5
5.4 Participation by Administrator..................................... 6
5.5 Agents and Expenses................................................ 6
5.6 Allocation of Duties............................................... 6
5.7 Delegation of Duties............................................... 6
5.8 Administrator's Action Conclusive.................................. 6
5.9 Records and Reports................................................ 6
5.10 Information from the AIM Funds..................................... 6
5.11 Reservation of Rights by Boards of Directors....................... 7
5.12 Liability and Indemnification...................................... 7
ARTICLE VI - AMENDMENTS AND TERMINATION.................................... 7
6.1 Amendments......................................................... 7
6.2 Termination........................................................ 8
ARTICLE VII - MISCELLANEOUS................................................ 8
7.1 Rights of Creditors................................................ 8
7.2 Liability Limited.................................................. 8
7.3 Incapacity......................................................... 8
7.4 Cooperation of Parties............................................. 8
7.5 Governing Law...................................................... 9
7.6 Nonguarantee of Director........................................... 9
7.7 Counsel............................................................ 9
7.8 Spendthrift Provision.............................................. 9
7.9 Forfeiture for Cause............................................... 9
ARTICLE VIII - CLAIMS PROCEDURE............................................ 10
|
8.1 Notice of Denial................................................... 10 8.2 Right to Reconsideration........................................... 10 8.3 Review of Documents................................................ 10 8.4 Decision by Administrator.......................................... 10 8.5 Notice by Administrator............................................ 10 Appendix A - Eligible Funds................................................ 11 Appendix B - Amount of Benefit - Post January 1, 2006...................... 12 Appendix C - Amount of Benefit - pre January 1, 2006....................... 14 |
PREAMBLE
Effective as of March 8, 1994, the regulated investment companies managed, advised, administered and/or distributed by A I M Advisors, Inc. or its affiliates (the "AIM Funds") have adopted THE AIM FUNDS RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES (the "Plan") for the benefit of each of the directors and trustees of each of the AIM Funds who is not an employee of any of the AIM Funds, A I M Management Group Inc. or any of their affiliates. As this Plan does not benefit any employees of the AIM Funds, it is not intended to be classified as an employee benefit plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Effective January 1, 2005 this Plan became subject to the provisions of section 409A of the Internal Revenue Code of 1986, as amended ("Code"), and has been amended and restated herein to comply with section 409A and to make certain design changes approved by the Board of Directors in December, 2005, applicable to payments made to Participants who terminate board service on or after January 1, 2006.
ARTICLE I - DEFINITION OF TERMS AND CONSTRUCTION
1.1 Definitions.
Unless a different meaning is plainly implied by the context, the following terms as used in this Plan shall have the following meanings:
(a) "Accrued Benefit" shall mean, as of any date prior to a Director's Retirement date, his Retirement Benefit commencing on such Retirement date, but based upon his Compensation and Years of Service computed as of such date of determination.
(b) "Administrator" shall mean the administrative committee provided for in Article VI.
(c) "AIM Funds" shall mean those regulated investment companies managed, advised, administered or distributed by A I M Advisors, Inc. or its affiliates, set forth on Appendix A hereto, as such Appendix may be amended from time to time.
(d) "Board of Directors" shall mean the Board of Directors or Board of Trustees of each of the AIM Funds.
(e) "Compensation" shall mean, for any Director, the amount of the retainer paid or accrued by the AIM Funds for such Director during the twelve month period immediately preceding the Director's termination of his Service, including retainer amounts deferred under a separate agreement between the AIM Funds and the Director. Compensation shall not include amounts paid as Board meeting fees or additional compensation paid for service as Chair of the Board or as Chair or Vice Chair of certain committees. The amount of such retainer Compensation shall be as determined by the Administrator.
(f) "Director" shall mean an individual who is a director or trustee of one or more of the AIM Funds which have adopted this Plan but who is not an employee of any of the AIM Funds, A I M Management Group Inc. or any of their affiliates.
(g) "Disability" shall have the meaning ascribed to such term under section 409A of the Code and applicable regulations thereunder.
(h) "Effective Date" shall mean January 1, 2005.
(i) "Fund" shall mean an AIM Fund which has adopted this Plan.
(j) "Participant" shall mean a Director who is included in this Plan as provided in Article II hereof.
(k) "Plan" shall mean the "AIM Funds Retirement Plan for Eligible Directors/Trustees" as described herein or as hereafter amended from time to time.
(l) "Plan Year" shall mean the calendar year.
(m) "Removal for Cause" shall mean the removal of a Director by the Directors of the AIM Funds or by shareholders due to such Director's willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Director.
(n) "Retirement Benefit" shall mean the benefit described under
Section 3.1 hereof.
(o) "Service" shall mean an individual's serving as a Director of one or more of the AIM Funds. Furthermore, any unbroken service provided by a Participant (i) to an AIM Fund immediately prior to its being managed or administered by A I M Advisors, Inc. (or any of its affiliates) or (ii) to a predecessor of an AIM Fund immediately prior to its being merged into such AIM Fund, will be taken into account in determining such Participant's Years of Service, subject to all restrictions and other forfeiture provisions contained herein. If a Participant whose Service terminates thereafter again becomes a Director, his different periods of Service shall be aggregated for purposes of calculating his Retirement Benefit, except that if a Participant's Service terminates prior to his being credited with 5 Years of Service, he shall forfeit all Years of Service completed prior to such termination unless the number of Years of Service he accumulated prior to such termination exceeds the number of years in which he did not serve as a Director.
(p) "Year of Service" shall mean a twelve consecutive month period of Service.
1.2 Plurals and Gender.
Where appearing in this Plan, the masculine gender shall include the feminine and neuter genders, and the singular shall include the plural, and vice versa, unless the context clearly indicates a different meaning.
1.3 Directors/Trustees.
Where appropriate, the term "director" shall refer to "trustee", "directorship" shall refer to "trusteeship" and "Board of Directors" shall refer to "Board of Trustees."
1.4 Headings.
The headings and sub-headings in this Plan are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof.
1.5 Severability.
In case any provision of this Plan shall be held illegal or void, such illegality or invalidity shall not affect the remaining provisions of this Plan, but shall be fully severable, and this Plan shall be construed and enforced as if said illegal or invalid provisions had never been inserted herein.
ARTICLE II - PARTICIPATION
2.1 Commencement of Participation.
Each Director shall become a Participant hereunder on the date his directorship of one or more of the AIM Funds commences.
2.2 Termination of Participation.
A Director shall remain a Participant until his entire vested Retirement Benefit has been paid to him or on his behalf.
ARTICLE III - RETIREMENT BENEFITS
3.1 Amount and Terms.
Participants terminating service on or after January 1, 2006 shall receive a benefit as described in Appendix B. Participants terminating service on or before December 31, 2005 shall receive a benefit as described in Appendix C.
3.2 Forfeiture.
(a) If a Participant's Service terminates on account of Removal for Cause, no Retirement Benefit shall be paid to him or on his behalf, even if such termination occurs after he has completed 5 Years of Service.
(b) If a Participant's Service terminates for any reason without his having been credited with at least 5 Years of Service, neither he nor anyone else on his behalf shall be entitled to a Retirement Benefit.
3.3 Payment After Participant's Death.
No benefits will be paid under this Plan with respect to a Participant after his death other than as provided in Appendix B or Appendix C, as applicable.
3.4 Benefits Calculated in the Aggregate for all of the AIM Funds.
With respect to each Participant, the benefits payable hereunder shall be based on the aggregate Compensation paid by all of the AIM Funds. Each Fund's share of the obligation to provide such benefits shall be determined by use of accounting methods adopted by the Administrator.
ARTICLE IV - SUSPENSION OF BENEFITS, ETC.
4.1 No Suspension of Benefits For Continued Service or Upon Resumption of Service.
If a Participant who has begun receiving Retirement Benefits in accordance with the provisions of Article III continues to serve as a Director or resumes Service, his Retirement Benefit shall continue to be paid during the new period of Service, with the following adjustments: (i) the amount of the quarterly payment shall be increased, as appropriate, beginning with the first quarter of each subsequent calendar year to reflect any increase in the Participant' Compensation during the prior year (initially as compared with his Compensation when he originally terminated Service), and (ii) the length of the payment period shall be lengthened, but not beyond a total of 16 years, to reflect any additional Years of Service earned after reemployment as a Director.
4.2 Payments Due Missing Persons.
The Administrator shall make a reasonable effort to locate all persons entitled to benefits under this Plan; however, notwithstanding any provisions of this Plan to the contrary, if, after a period of 5 years from the date any of such benefits first become due, any such persons entitled to benefits have not been located, their rights under this Plan shall stand suspended. Before this provision becomes operative, the Administrator shall send a certified letter to all such persons (if any) at their last known address advising them that their benefits under this Plan shall be suspended. Any such suspended amounts shall be held by the AIM Funds for a period of 3 additional years (or a total of 8 years from the time the benefits first became payable) and thereafter such amounts shall be forfeited.
ARTICLE V - ADMINISTRATOR
5.1 Appointment of Administrator.
This Plan shall be administered by the Governance Committees of the Boards of Directors of the AIM Funds. The members of such committees are not "interested persons" (within the meaning of Section 2(a)(19) of the Investment Company Act of 1940) of any of the AIM Funds. The term "Administrator" as used in this Plan shall refer to the members of such Committees, either individually or collectively, as appropriate.
5.2 Powers and Duties of Administrator.
Except as provided below, the Administrator shall have the following duties and responsibilities in connection with the administration of this Plan:
(a) to promulgate and enforce such rules, regulations and procedures as shall be proper for the efficient administration of this Plan;
(b) to determine all questions arising in the administration, interpretation and application of this Plan, including questions of eligibility and of the status and rights of Participants and any other persons hereunder;
(c) to decide any dispute arising hereunder; provided, however, that no Administrator shall participate in any matter involving any questions relating solely to his own participation or benefits under this Plan;
(d) to advise the Boards of Directors of the AIM Funds regarding the known future need for funds to be available for distribution;
(e) to correct defects, supply omissions and reconcile inconsistencies to the extent necessary to effectuate this Plan;
(f) to compute the amount of benefits and other payments which shall be payable to any Participant, surviving spouse or designated beneficiary in accordance with the provisions of this Plan and to determine the person or persons to whom such benefits shall be paid;
(g) to make recommendations to the Boards of Directors of the AIM Funds with respect to proposed amendments to this Plan;
(h) to file all reports with government agencies, Participants and other parties as may be required by law, whether such reports are initially the obligation of the AIM Funds, or this Plan; and
(i) to have all such other powers as may be necessary to discharge its duties hereunder.
5.3 Action by Administrator.
A majority of the members of the Administrator then serving shall constitute a quorum for the transacting of business related to this Plan. All resolutions or other action taken by the Administrator in connection with this Plan shall be by vote of a majority of those present at such meeting and entitled to vote. Resolutions may be adopted or other action taken without a meeting upon written consent signed by at least a majority of the members. All documents, instruments, orders, requests, directions, instructions and other papers shall be executed on behalf of the Administrator by either the Chairman or any Vice-Chairman of the Administrator, or by any member or agent of the Administrator duly authorized to act on the Administrator's behalf.
5.4 Participation by Administrator.
No Administrator shall be precluded from becoming a Participant in this Plan if he would be otherwise eligible, but he shall not be entitled to vote or act upon matters or to sign any documents relating specifically to his own participation under this Plan, except when such matters or documents relate to benefits generally. If this disqualification results in the lack of a quorum, then the Boards of Directors, by majority vote of the members of a majority of such Boards of Directors (a "Majority Vote"), shall appoint a sufficient number of temporary Administrators, who shall serve for the sole purpose of determining such a question.
5.5 Agents and Expenses.
The Administrator may employ agents and provide for such clerical, legal, actuarial, accounting, medical, advisory or other services as it deems necessary to perform its duties under this Plan. The cost of such services and all other expenses incurred by the Administrator in connection with the administration of this Plan shall be allocated to each Fund pursuant to the method utilized under Section 3.4 hereof with respect to costs related to benefit accruals.
5.6 Allocation of Duties.
The duties, powers and responsibilities reserved to the Administrator may be allocated among its members so long as such allocation is pursuant to written procedures adopted by the Administrator, in which case no Administrator shall have any liability, with respect to any duties, powers or responsibilities not allocated to him, for the acts or omissions of any other Administrator.
5.7 Delegation of Duties.
The Administrator may delegate any of its duties to employees of A I M Advisors, Inc. or any of its affiliates or to any other person or firm, provided that the Administrator shall prudently choose such agents and rely in good faith on their actions.
5.8 Administrator's Action Conclusive.
Any action on matters within the discretion of the Administrator shall be final and conclusive.
5.9 Records and Reports.
The Administrator shall maintain adequate records of its actions and proceedings in administering this Plan and shall file all reports and take all other actions as it deems appropriate in order to comply with any federal or state law.
5.10 Information from the AIM Funds.
The AIM Funds shall promptly furnish all necessary information to the Administrator to permit it to perform its duties under this Plan. The Administrator shall be
entitled to rely upon the accuracy and completeness of all information furnished to it by the AIM Funds, unless it knows or should have known that such information is erroneous.
5.11 Reservation of Rights by Boards of Directors.
When rights are reserved in this Plan to the Boards of Directors, such rights shall be exercised only by Majority Vote of the Boards of Directors, except where the Boards of Directors, by unanimous written resolution, delegate any such rights to one or more persons or to the Administrator. Subject to the rights reserved to the Boards of Directors as set forth in this Plan, no member of the Boards of Directors shall have any duties or responsibilities under this Plan, except to the extent he shall be acting in the capacity of an Administrator.
5.12 Liability and Indemnification.
(a) The Administrator shall perform all duties required of it under this Plan in a prudent manner. The Administrator shall not be responsible in any way for any action or omission of the AIM Funds or their employees in the performance of their duties and obligations as set forth in this Plan. The Administrator also shall not be responsible for any act or omission of any of its agents provided that such agents were prudently chosen by the Administrator and that the Administrator relied in good faith upon the action of such agents.
(b) Except for its own gross negligence, willful misconduct or willful breach of the terms of this Plan, the Administrator shall be indemnified and held harmless by the AIM Funds against any and all liability, loss, damages, cost and expense which may arise, occur by reason of, or be based upon, any matter connected with or related to this Plan or its administration (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending any litigation, commenced or threatened, or in settlement of any such claim).
ARTICLE VI - AMENDMENTS AND TERMINATION
6.1 Amendments.
The Boards of Directors reserve the right at any time and from time to time, and retroactively if deemed necessary or appropriate by them, to amend in whole or in part by Majority Vote any or all of the provisions of this Plan, provided that:
(a) No amendment shall make it possible for any part of a Participant's or former Participant's Retirement Benefit to be used for, or diverted to, purposes other than for the exclusive benefit of such Participant, except to the extent otherwise provided in this Plan;
(b) No amendment may reduce any Participant's or former Participant's Retirement Benefit as of the effective date of the amendment;
Amendments may be made in the form of Board of Directors' resolutions or separate written document.
6.2 Termination.
Except as provided below, the Boards of Directors reserve the right to terminate this Plan at any time by Majority Vote by giving to the Administrator notice in writing of such desire to terminate. The Plan shall terminate upon the date of receipt of such notice and all Participants shall be paid their Retirement Benefits (determined as of the date this Plan is terminated) as set forth herein, or to the extent permitted by section 409A of the Code, in an actuarially equivalent lump sum as soon as possible after the effective date of such termination, as determined by the Administrator.
ARTICLE VII - MISCELLANEOUS.
7.1 Rights of Creditors.
(a) The Plan is unfunded. Neither the Participants nor any other persons shall have any interest in any Fund or in any specific asset or assets of any of the AIM Funds by reason of any Retirement Benefit hereunder, nor any rights to receive distribution of any Retirement Benefit except and as to the extent expressly provided hereunder.
(b) The Retirement Benefits of each Participant are unsecured and shall be subject to the claims of the general creditors of the AIM Funds.
7.2 Liability Limited.
Neither the AIM Funds, the Administrator, nor any agents, employees, officers, directors or shareholders of any of them, nor any other person shall have any liability or responsibility with respect to this Plan, except as expressly provided herein.
7.3 Incapacity.
If the Administrator shall receive evidence satisfactory to it that a Participant, surviving spouse or designated beneficiary entitled to receive any benefit under this Plan is, at the time when such benefit becomes payable, physically or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of such Participant, surviving spouse, or designated beneficiary and that no guardian, committee or other representative of the estate of such Participant, surviving spouse, or designated beneficiary shall have been duly appointed, the Administrator may make payment of such benefit otherwise payable to such Participant, surviving spouse, or designated beneficiary to such other person or institution, and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit.
7.4 Cooperation of Parties.
All parties to this Plan and any person claiming any interest hereunder agree to perform any and all acts and execute any and all documents and papers which are necessary or desirable for carrying out this Plan or any of its provisions.
7.5 Governing Law.
All rights under this Plan shall be governed by and construed in accordance with rules of Federal law applicable to such plans and, to the extent not preempted, by the laws of the State of Texas without regard to principles of conflicts of law. No action shall be brought by or on behalf of any Participant for or with respect to benefits due under this Plan unless the person bringing such action has timely exhausted this Plan's claim review procedure. Any such action must be commenced within three years. This three-year period shall be computed from the earlier of (a) the date a final determination denying such benefit, in whole or in part, is issued under this Plan's claim review procedure or (b) the date such individual's cause of action first accrued. Any dispute, controversy or claim arising out of or in connection with this Plan (including the applicability of this arbitration provision) and not resolved pursuant to the Plan's claim review procedure shall be determined and settled by arbitration conducted by the American Arbitration Association ("AAA") in the County and State of the Funds' principal place of business and in accordance with the then existing rules, regulations, practices and procedures of the AAA. Any award in such arbitration shall be final, conclusive and binding upon the parties to the arbitration and may be enforced by either party in any court of competent jurisdiction. Each party to the arbitration will bear its own costs and fees (including attorney's fees).
7.6 Nonguarantee of Director
Nothing contained in this Plan shall be construed as a guaranty or right of any Participant to be continued as a Director of one or more of the AIM Funds (or of a right of a Director to any specific level of Compensation) or as a limitation of the right of the AIM Funds to remove any of its directors.
7.7 Counsel.
The Administrator may consult with legal counsel, who may be counsel for one or more of the Boards of Directors of the AIM Funds and for the Administrator, with respect to the meaning or construction of this Plan, its obligations or duties hereunder or with respect to any action or proceeding or any question of law, and they shall be fully protected with respect to any action taken or omitted by them in good faith pursuant to the advice of legal counsel.
7.8 Spendthrift Provision.
A Participant's interest in his Accrued Benefit or Retirement Benefit may not be transferred, alienated, assigned nor become subject to execution, garnishment or attachment, and any attempt to do so will render benefits hereunder immediately forfeitable.
7.9 Forfeiture for Cause.
Notwithstanding any other provision of this Plan to the contrary, any benefits to which a Participant (or his surviving spouse or designated beneficiary) may otherwise be entitled hereunder will be forfeited in the event the Director has been Removed for Cause.
ARTICLE VIII - CLAIMS PROCEDURE
8.1 Notice of Denial.
If a Participant is denied any Retirement Benefit (or a surviving spouse or designated beneficiary is denied a survivor's benefit) under this Plan, either in total or in an amount less than the full Retirement Benefit to which he would normally be entitled, the Administrator shall advise the Participant (or surviving spouse or designated beneficiary) in writing of the amount of his Retirement Benefit (or survivor's benefit), if any, and the specific reasons for the denial. The Administrator shall also furnish the Participant (or surviving spouse or designated beneficiary) at that time with a written notice containing:
(a) A specific reference to pertinent Plan provisions.
(b) A description of any additional material or information necessary for the Participant (or surviving spouse or designated beneficiary) to perfect his claim, if possible, and an explanation of why such material or information is needed.
(c) An explanation of this Plan's claim review procedure.
8.2 Right to Reconsideration.
Within 60 days of receipt of the information stated in Section 8.1 above, the Participant (or surviving spouse or designated beneficiary) shall, if he desires further review, file a written request for reconsideration with the Administrator.
8.3 Review of Documents.
So long as the Participant's (or surviving spouse's or designated beneficiary's) request for review is pending (including the 60 day period in 8.2 above), the Participant (or surviving spouse or designated beneficiary) or his duly authorized representative may review pertinent Plan documents and may submit issues and comments in writing to the Administrator.
8.4 Decision by Administrator.
A final and binding decision shall be made by the Administrator within 60 days of the filing by the Participant (or surviving spouse or designated beneficiary) of his request for reconsideration, provided, however, that if the Administrator, in its discretion, feels that a hearing with the Participant (or surviving spouse or designated beneficiary) or his representative present is necessary or desirable, this period shall be extended an additional 60 days.
8.5 Notice by Administrator.
The Administrator's decision shall be conveyed to the Participant (or surviving spouse or designated beneficiary) in writing and shall include specific reasons for the provisions on which the decision is based.
APPENDIX A - ELIGIBLE FUNDS
For the purposes of the Retirement Plan for Eligible Directors/Trustees, "AIM Funds" shall mean each of the regulated investment companies constituting classes or series of shares of the following entities, and any future regulated investment companies that are within the same "fund complex" as defined in Form N-1A adopted under the Investment Company Act of 1940:
AIM CORE ALLOCATION PORTFOLIO SERIES ("CAPS")
AIM COUNSELOR SERIES TRUST ("ACST")
AIM EQUITY FUNDS ("AEF")
AIM FLOATING RATE FUND ("AFRF")
AIM FUNDS GROUP ("AFG")
AIM GROWTH SERIES ("AGS")
AIM INTERNATIONAL MUTUAL FUNDS ("AIMF")
AIM INVESTMENT FUNDS ("AIF")
AIM INVESTMENT SECURITIES FUNDS ("AIS")
AIM SECTOR FUNDS ("ASEF")
AIM SELECT REAL ESTATE INCOME FUND ("ASREIF")
AIM SPECIAL OPPORTUNITIES FUNDS ("ASOF")
AIM STOCK FUNDS ("ASTF")
AIM SUMMIT FUND ("ASF")
AIM TAX-EXEMPT FUNDS ("ATEF")
AIM TREASURER'S SERIES TRUST ("ATST")
AIM VARIABLE INSURANCE FUNDS ("AVIF")
SHORT-TERM INVESTMENTS TRUST ("STIT")
TAX-FREE INVESTMENTS TRUST ("TFIT")
APPENDIX B - AMOUNT OF BENEFIT - POST JANUARY 1, 2006
Amount of Retirement Benefit - Directors who cease service on or after January 1, 2006.
Section 1. Amount of Benefit.
(a) Subject to the following provisions of this Appendix B and Article III, a Participant who ceases to be a Director after completing at least 5 Years of Service shall be entitled to receive an annual retirement benefit from the AIM Funds equal to seventy-five percent (75%) of the Participant's Compensation, payable in quarterly installments for a period of years equal to his Years of Service (up to a maximum of 16 Years of Service).
(b) Except as provided in paragraphs (c) and (d) of this Appendix B,
Section 1, such Retirement Benefit shall commence on the first day of the
first quarter following the later of (i) the Participant's termination of
Service or (ii) the Participant's attainment of age 72.
(c) A Participant may make an irrevocable election (in a form and manner prescribed by the Administrator) to commence payment of his Retirement Benefit on the first day of the first quarter following the later of (i) his termination of Service or (ii) his attainment of age 65 (or such other age between 65 and 72 as the Participant specifies) in the event the Participant terminates Service prior to age 72. Such election shall normally be made within the first 30 days after a Director first becomes a Participant, provided that pursuant to Treasury Notice 2005-1, a Director who is already a Participant on the Effective Date may make a one-time election under this paragraph (c) no later than December 31, 2005. Any Retirement Benefit payable in accordance with this paragraph (c) shall be actuarially reduced to reflect its early commencement in accordance with the following table:
AGE % --- --- 65 71% 66 75% 67 78% 68 82% 69 86% 70 91% 71 95% 72 100% |
(d) Notwithstanding the foregoing, if a Participant terminates Service on account of Disability, his Retirement Benefit shall commence on the first day of the first quarter
following the later of (i) his termination of Service or (ii) his attainment of age 60, and such Retirement Benefit shall not be reduced to reflect commencement prior to age 72.
Section 2. Death of a Participant.
(a) Death Prior to Commencement of Benefits. If a Participant who has completed at least 5 Years of Service dies before commencement of his Retirement Benefit, such Retirement Benefit shall be paid to his designated beneficiary commencing at the same time, for the same period and in the same amount as would have been paid to the Participant had the Participant become Disabled on the Participant's date of death.
(b) Death Subsequent to Commencement of Benefits. If a Participant dies after commencement, but prior to complete payment of his Retirement Benefit under Article III, the remainder of such Retirement Benefit shall be paid to his designated beneficiary at the same time, for the same remaining period and in the same amount as the Participant would have been paid had the Participant become Disabled on the Participant's date of death.
(c) Designated Beneficiary.
(i) A Participant may designate one or more persons (including a trust) as his beneficiary; if multiple beneficiaries are designated, the Participant must indicate (in whole percentages) each person's share of the Retirement Benefit payable on his death. To the extent permitted by the Administrator, a Participant may also designate one or more contingent beneficiaries in the event a primary beneficiary predeceases him. A Participant may change any beneficiary designation at any time, without the consent of any previously designated beneficiary, provided a written instruction setting forth the desired change is received by the Administrator prior to the Participant's death.
(ii) If payments are being made to one or more designated beneficiaries, and a beneficiary dies before the entire amount due such beneficiary can be paid, an actuarially-equivalent lump sum payment of the remaining amount due such beneficiary shall be made to the estate of the beneficiary on the first day of the second quarter following such beneficiary's death.
APPENDIX C - AMOUNT OF BENEFIT - PRE JANUARY 1, 2006
Amount of Retirement Benefits - Directors who cease service before January 1, 2006
Section 1. Amount of Benefit.
(a) In order to receive Retirement Benefits under this Plan, a Director (i)
must have reached the age of 65 (55 in the event of death or Disability),
(ii) must qualify as a Participant under this Plan, and (iii) must have
completed at least five years of continuous and non-forfeited Years of
Service, as well as at least 30 months of service with one or more of the
AIM Funds.
(b) Upon Retirement, a Participant shall be entitled to receive an annual benefit from the AIM Funds commencing on the first day of the calendar quarter coincident with or next following his date of Retirement. The benefit shall be payable in quarterly installments for a number of years equal to the lesser of (i) ten years, or (ii) the number of the Participant's Years of Service. The annual benefit shall equal seventy-five percent (75%) of the Participant's Compensation.
Section 2. Death, Disability or Termination.
(a) If a Director's Service terminates prior to his Normal Retirement Date because of his death, Disability or Removal for Cause, he shall not be entitled to any benefits under this Plan, except as set forth below.
(i) If a Director's Service is involuntarily terminated for any reason other than those specified in 1(a) above, and as of the date of termination the Director has accumulated at least five continuous and non-forfeited Years of Service, he shall be entitled to receive his Accrued Benefit, which benefit shall be determined as of the date of such termination. The AIM Funds shall pay such benefit in quarterly installments for a number of years equal to the lesser of (i) ten years, or (ii) the number of the Director's Years of Service. The AIM Funds shall commence paying such benefit on the date of such involuntary termination.
(b) Death.
(i) Death Prior to Commencement of Benefits. If a Participant dies
subsequent to his Normal Retirement Date, but prior to the
commencement of his Retirement Benefits under this Appendix C, the
surviving spouse (if any) of such Participant shall be entitled to
receive a quarterly survivor's benefit for a period of no more than
ten (10) years (or, if less, the number of the Participant's Years of
Service) beginning on the first day of the calendar quarter next
following the date of the Participant's death equal to fifty percent
(50%) of the amount of the quarterly installments of Retirement
Benefits that would have been paid to the Participant under 1(a) or
(b) or 2(a) hereof had his Retirement occurred on his date of death.
(ii) Death Subsequent to Commencement of Benefits. If a Participant dies after the commencement of his Retirement Benefit under this Appendix C, but prior to the cessation of the payment of such Retirement Benefits, the surviving spouse (if any) of such Participant shall be entitled to receive survivor's benefits equal to fifty percent (50%) of the amount of the annual Retirement Benefit
payable to the Participant under this Appendix C, paid at such times, and for such period, as such Retirement Benefit would have continued to have been paid to the Participant had he not died.
(iii) Death of Spouse. If a Participant is not survived by a spouse, no benefits will be paid hereunder upon the Participant's death. If a deceased Participant's surviving spouse dies while receiving survivor's benefits hereunder, any installments not paid at the time of the surviving spouse's death shall be forfeited.
AIM FUNDS
RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
ELECTION PURSUANT TO APPENDIX B
Pursuant to Appendix B, Section 1(c) of the AIM Funds Retirement Plan for Eligible Directors/Trustees, as restated as of January 1, 2005, I hereby elect to commence payments of my Retirement Benefit on the first day of the first quarter following the later of:
(i) my termination of Service or
(ii) my attainment of age ___ [specify an age between 65 and 72] if I terminate Service prior to age 72.
I understand that this election is irrevocable.
Dated: , 20
---------- -- -- ----------------------------------------
Signature
Name of Director:
----------------------
|
AIM FUNDS
RETIREMENT PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES
BENEFICIARY DESIGNATION FORM PURSUANT TO SECTION 3.3 AND APPENDIX B
With respect to the AIM Funds Retirement Plan for Eligible Directors/Trustees (as amended as of January 1, 2005) (the "Retirement Plan"):
I hereby revoke any prior designation of Beneficiary under the Retirement Plan, and designate the following as my Primary and/or Contingent Beneficiary or Beneficiaries under the Retirement Plan.
I hereby make the following beneficiary designations:
I. Primary Beneficiary*
I hereby appoint the following as my Primary Beneficiary(ies) to receive at my death the amounts payable with respect to my service in accordance with Appendix B of the Retirement Plan.. If I am survived by more than one Primary Beneficiary, the Primary Beneficiaries shall share in such payments as follows (in percentages, the sum of which must equal 100%):
Name & Address Relationship Percentage Share -------------- ------------ ---------------- |
II. Secondary Beneficiary
If no Primary Beneficiaries survive me at the date of my death, I hereby appoint the following as Contingent Beneficiary(ies) to receive payments under the Retirement Plan. If I am survived by more than one Contingent Beneficiary, such Contingent Beneficiaries shall share in such payments as follows:
Name & Address Relationship Percentage Share -------------- ------------ ---------------- |
III. I understand that:
1. I may revoke or amend the above designations at any time without the consent of any beneficiary;
2. if I am not survived by a Primary or Contingent Beneficiary, any amounts payable under the Retirement Plan shall be paid in accordance with applicable inheritance laws; and
3. If payments are being made to one or more designated beneficiaries, and a beneficiary dies before the entire amount due such beneficiary can be paid, an actuarially-equivalent lump sum payment of the remaining amount due such beneficiary shall be made to the estate of the beneficiary..
This designation shall be effective when received by the Retirement Plan Administrator and will remain effective until replaced by a properly filed new designation.
Dated: , 20
---------- -- -- ----------------------------------------
Signature
Name of Director:
----------------------
|
AIM Funds
AMENDMENT TO CUSTODIAN AGREEMENT
Amendment dated February _8_, 2006, to the Master Custodian Contract, dated May 1, 2000, as amended, by and between State Street Bank and Trust Company (the "Custodian") and each AIM entity set forth in Appendix A thereto (each, a "Fund") (the "Agreement"). Unless defined herein, capitalized terms used herein have the definitions provided in the Agreement.
WHEREAS, each Fund and the Custodian wish to amend certain provisions of the
Agreement to (a) allow for delivery out of margin in connection with trading in
futures and options on futures contracts entered into by each Fund on behalf of
itself or its Portfolios, (b) amend the provisions for Proper Instructions, and
(c) reflect updates due to revised Rule 17f-4 under the Investment Company Act
of 1940, as amended (the "1940 Act").
In consideration of the promises and covenants contained herein, the Custodian and each Fund hereby agree to amend the Agreement as follows:
I. New Section 2.2(15) is hereby added and existing Section 2.2(15) is hereby amended and renumbered as 2.2(16) as set forth below:
SECTION 2.2 DELIVERY OF SECURITIES
(15) For delivery of initial or variation margin in connection with trading in futures and options on futures contracts entered into by the Fund on behalf of a Portfolio;
(16) For any other purpose, but only upon receipt of Proper Instructions from the Fund, on behalf of the applicable Portfolio, specifying the securities of the Portfolio to be delivered and naming the person or persons to whom delivery of such securities shall be made.
II. New Section 2.7(7) is hereby added and existing Section 2.7(7) is hereby amended and renumbered as 2.7(8) as set forth below:
SECTION 2.7 PAYMENT OF FUND MONIES
(7) For the payment of initial or variation margin in connection with trading in futures and options on futures contracts entered into by the Fund on behalf of a Portfolio;
(8) For any other purpose, but only upon receipt of Proper Instructions from the Fund, on behalf of the applicable Portfolio, specifying the amount of such payment and naming the person or persons to whom such payment is to be made.
III. Section 5 is amended and replaced as follows:
SECTION 5. PROPER INSTRUCTIONS
"Proper Instructions", which may also be standing instructions, as used throughout the Contract shall mean instructions received by the Custodian from the Fund, the Fund's investment manager or subadvisor, as duly authorized by the Fund. Such instructions may be in writing signed by the authorized person or persons or may be in a tested communication or in a communication utilizing access codes effected between electro-mechanical or electronic devices or may be by such other means and utilizing such intermediary systems and utilities as may be agreed to from time to time by the Custodian and a person authorized to give Proper Instructions, provided that the Fund has followed any security procedures agreed to from time to time by the Fund and the Custodian, including, but not limited to, the security procedures selected by the Fund in the Funds Transfer Addendum to the Contract. Oral instructions will be considered Proper Instructions if the Custodian reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed promptly in writing. For purposes of this Section, Proper Instructions shall include instructions received by the Custodian pursuant to any multi-party agreement, which requires a segregated asset account in accordance with Section 2.12 of the Contract. The Fund or the Fund's investment manager shall cause its duly authorized officer to certify to the Custodian in writing the names and specimen signatures of persons authorized to give Proper Instructions. The Custodian shall be entitled to rely upon the identity and authority of such persons until it receives notice from the Fund to the contrary.
IV. Section 2.10 is amended and replaced as follows:
SECTION 2.10. DEPOSIT OF FUND ASSETS IN U.S. SECURITIES SYSTEMS.
The Custodian may deposit and/or maintain securities owned by the Fund in a U.S. Securities System in compliance with the conditions of Rule 17f-4 of the 1940 Act, as amended from time to time.
Anything to the contrary in this Agreement notwithstanding, the Custodian shall be liable to the Fund for the benefit of the Portfolio for any loss or damage to the Portfolio resulting from use of the U.S. Securities System by reason of any negligence, misfeasance or misconduct of the Custodian or any of its agents or of any of its or their employees or from failure of the Custodian or any such agent to enforce effectively such rights as it may have against the U.S. Securities System; at the election of the Fund, it shall be entitled to be subrogated to the rights of the Custodian with respect to any claim against the U.S. Securities System or any other person which the Custodian may have as a consequence of any such loss or damage if and to the extent that the Portfolio has not been made whole for any such loss or damage.
V. Except as specifically superseded or modified herein, the terms and provisions of the Agreement shall continue to apply with full force and effect. In the event of any conflict between the terms of the Agreement prior to this amendment and this amendment, the terms of this amendment shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative as of the date written above.
AIM Core Allocation Portfolio Series,
AIM Equity Funds,
AIM Floating Rate Fund,
AIM Funds Group,
AIM Growth Series,
AIM International Mutual Funds,
AIM Investment Funds,
AIM Investment Securities Funds,
AIM Select Real Estate Income Fund,
AIM Special Opportunities Funds,
AIM Summit Fund, and
AIM Variable Insurance Funds,
Each on behalf of itself or its portfolios listed on Appendix A
By: /s/ Robert H. Graham
---------------------------------
Robert H. Graham
President
|
STATE STREET BANK AND TRUST COMPANY
By: /s/ Joseph L. Hooley
---------------------------------
Joseph L. Hooley
Executive Vice President
|
APPENDIX A
AIM CORE ALLOCATION PORTFOLIO SERIES AIM INVESTMENT FUNDS
o Series C o AIM Developing Markets Fund
o Series M o AIM Global Health Care Fund
o AIM Trimark Fund
AIM EQUITY FUNDS o AIM Trimark Endeavor Fund
o AIM Aggressive Growth Fund o AIM Trimark Small Companies Fund
o AIM Blue Chip Fund
o AIM Capital Development Fund AIM INVESTMENT SECURITIES FUNDS
o AIM Charter Fund o AIM Global Real Estate Fund
o AIM Constellation Fund o AIM High Yield Fund
o AIM Diversified Dividend Fund o AIM Income Fund
o AIM Large Cap Basic Value Fund o AIM Intermediate Government Fund
o AIM Large Cap Growth Fund o AIM Real Estate Fund
o AIM Mid Cap Growth Fund o AIM Short Term Bond Fund
o AIM Select Basic Value Fund o AIM Total Return Bond Fund
o AIM Weingarten Fund
AIM SELECT REAL ESTATE INCOME FUND
AIM FLOATING RATE FUND
AIM SPECIAL OPPORTUNITIES FUNDS
AIM FUNDS GROUP o AIM Opportunities I Fund
o AIM Basic Balanced Fund o AIM Opportunities II Fund
o AIM European Small Company Fund o AIM Opportunities III Fund
o AIM Global Value Fund
o AIM International Small Company Fund AIM SUMMIT FUND
o AIM Mid Cap Basic Value Fund
o AIM Premier Equity Fund AIM VARIABLE INSURANCE FUNDS
o AIM Select Equity Fund o AIM V.I. Aggressive Growth Fund
o AIM Small Cap Equity Fund o AIM V.I. Basic Balanced Fund
o AIM V.I. Basic Value Fund
AIM GROWTH SERIES o AIM V.I. Blue Chip Fund
o AIM Basic Value Fund o AIM V.I. Capital Appreciation Fund
o AIM Conservative Allocation Fund o AIM V.I. Capital Development Fund
o AIM Global Equity Fund o AIM V.I. Core Equity Fund
o AIM Growth Allocation Fund o AIM V.I. Core Stock Fund
o AIM Income Allocation Fund o AIM V.I. Demographic Trends Fund
o AIM International Allocation Fund o AIM V.I. Diversified Income Fund
o AIM Mid Cap Core Equity Fund o AIM V.I. Dynamics Fund
o AIM Moderate Allocation Fund o AIM V.I. Financial Services Fund
o AIM Moderate Growth Allocation Fund o AIM V.I. Global Health Care Fund
o AIM Moderately Conservative Allocation Fund o AIM V.I. Government Securities Fund
o AIM Small Cap Growth Fund o AIM V.I. Growth Fund
o AIM V.I. High Yield Fund
AIM INTERNATIONAL MUTUAL FUNDS o AIM V.I. International Growth Fund
o AIM Asia Pacific Growth Fund o AIM V.I. Large Cap Growth Fund
o AIM European Growth Fund o AIM V.I. Leisure Fund
o AIM Global Aggressive Growth Fund o AIM V.I. Mid Cap Core Equity Fund
o AIM Global Growth Fund o AIM V.I. Premier Equity Fund
o AIM International Core Equity Fund o AIM V.I. Real Estate Fund
o AIM International Growth Fund o AIM V.I. Small Cap Equity Fund
o AIM V.I. Small Company Growth Fund
o AIM V.I. Technology Fund
o AIM V.I. Utilities Fund
|
AMENDMENT TO MASTER CUSTODIAN CONTRACT
Amendment dated January 31, 2007, to the Master Custodian Contract dated May 1, 2000, as amended (the "Contract"), by and between State Street Bank and Trust Company (the "Custodian") and each AIM entity set forth in Appendix A thereto (each, a "Fund") on behalf of itself or its portfolio(s) (each, a "Portfolio").
WHEREAS, the Fund and the Custodian wish to amend a provision of the Contract to authorize the Custodian to establish and maintain segregated accounts upon Proper Instruction by a Fund.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the Custodian and each Fund hereby amend the Contract, pursuant to the terms thereof, as follows:
I. Section 2.12 is amended and replaced as follows:
SECTION 2.12 SEGREGATED ACCOUNT
The Custodian shall upon receipt of Proper Instructions on behalf of each
applicable Portfolio establish and maintain a segregated account or
accounts for and on behalf of each such Portfolio, into which account or
accounts may be transferred cash and/or securities, including securities
maintained in an account by the Custodian pursuant to Section 2.10 hereof,
(i) in accordance with the provisions of any agreement among the Fund on
behalf of the Portfolio, the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 and a member of The National
Association of Securities Dealers, Inc. (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance with
the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Portfolio, (ii) for purposes of segregating cash or
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased or
sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release
No. 10666, or any subsequent release of the U.S. Securities and Exchange
Commission, or interpretative opinion of the staff thereof, relating to the
maintenance of segregated accounts by registered investment companies, and
(iv) for any other purpose upon receipt of Proper Instructions.
II. Except as specifically superseded or modified herein, the terms and provisions of the Contract shall continue to apply with full force and effect. In the event of any conflict between the terms of the Contract prior to this Amendment and this Amendment, the terms of this Amendment shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed in its name and on its behalf by its duly authorized representative under seal as of the date first above written.
EACH AIM ENTITY SET FORTH IN APPENDIX A
ATTACHED HERETO
By: /s/ Philip A. Taylor
------------------------------------
Name: Philip A. Taylor
Title: President
|
STATE STREET BANK AND TRUST COMPANY
By: /s/ Joseph L. Hooley
------------------------------------
Joseph L. Hooley
Executive Vice President
|
APPENDIX A
TO
AIM MASTER CUSTODIAN CONTRACT
DATED: MAY 1, 2000
(as revised November 8, 2006)
AIM CORE ALLOCATION PORTFOLIO SERIES
- Series C
- Series M
AIM EQUITY FUNDS
- AIM Capital Development Fund
- AIM Charter Fund
- AIM Constellation Fund
- AIM Diversified Dividend Fund
- AIM Large Cap Basic Value Fund
- AIM Large Cap Growth Fund
- AIM Select Basic Value Fund
AIM FUNDS GROUP
- AIM Basic Balanced Fund
- AIM European Small Company Fund
- AIM Global Value Fund
- AIM International Small Company Fund
- AIM Mid Cap Basic Value Fund
- AIM Select Equity Fund
- AIM Small Cap Equity Fund
AIM GROWTH SERIES
- AIM Basic Value Fund
- AIM Conservative Allocation Fund
- AIM Global Equity Fund
- AIM Growth Allocation Fund
- AIM Income Allocation Fund
- AIM International Allocation Fund
- AIM Mid Cap Core Equity Fund
- AIM Moderate Allocation Fund
- AIM Moderate Growth Allocation Fund
- AIM Moderately Conservative Allocation Fund
- AIM Small Cap Growth Fund
AIM INTERNATIONAL MUTUAL FUNDS
- AIM Asia Pacific Growth Fund
- AIM European Growth Fund
- AIM Global Aggressive Growth Fund
- AIM Global Growth Fund
- AIM International Core Equity Fund
- AIM International Growth Fund
AIM INVESTMENT FUNDS
- AIM China Fund
- AIM Developing Markets Fund
- AIM Enhanced Short Bond Fund
- AIM Global Health Care Fund
- AIM International Bond Fund
- AIM Japan Fund
- AIM Trimark Fund
- AIM Trimark Endeavor Fund
- AIM Trimark Small Companies Fund
AIM INVESTMENT SECURITIES FUNDS
- AIM Global Real Estate Fund
- AIM High Yield Fund
- AIM Income Fund
- AIM Intermediate Government Fund
- AIM Real Estate Fund
- AIM Short Term Bond Fund
- AIM Total Return Bond Fund
AIM SELECT REAL ESTATE INCOME FUND
AIM SPECIAL OPPORTUNITIES FUNDS
- AIM Opportunities I Fund
- AIM Opportunities II Fund
- AIM Opportunities III Fund
AIM SUMMIT FUND
AIM VARIABLE INSURANCE FUNDS
- AIM V.I. Basic Balanced Fund
- AIM V.I. Basic Value Fund
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Capital Development Fund
- AIM V.I. Core Equity Fund
- AIM V.I. Demographic Trends Fund
- AIM V.I. Diversified Dividend Fund
- AIM V.I. Diversified Income Fund
- AIM V.I. Dynamics Fund
- AIM V.I. Financial Services Fund
- AIM V.I. Global Equity Fund
- AIM V.I. Global Health Care Fund
- AIM V.I. Global Real Estate Fund
- AIM V.I. Government Securities Fund
- AIM V.I. High Yield Fund
- AIM V.I. International Core Equity Fund
- AIM V.I. International Growth Fund
- AIM V.I. Large Cap Growth Fund
- AIM V.I. Leisure Fund
- AIM V.I. Mid Cap Core Equity Fund
- AIM V.I. Small Cap Equity Fund
- AIM V.I. Small Cap Growth Fund
- AIM V.I. Technology Fund
- AIM V.I. Utilities Fund
AMENDMENT NO 1
TO
CUSTODY AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Custody Agreement dated as of September 19, 2000 between AIM Variable Insurance Funds (the "Fund") and The Bank of New York (the "Custodian") (hereinafter the "Custody Agreement") is made as of May 31, 2005.
WITNESSETH:
WHEREAS, the Fund desires to execute an Agreement with JP Morgan Chase Bank, N.A.;
NOW, THEREFORE, the Fund and the Custodian hereby amend the Custody Agreement as follows:
1. Section 7 of Article XV is hereby renumbered Section 7(a).
2. A new Section 7(b) is hereby added to Article XV to read in its entirety as follows:
"(b) Notwithstanding any other provision in this Agreement, the Fund shall appoint JP Morgan Chase Bank, N.A. (the "Bank") by executing the form of Agreement attached hereto (the "Agreement"). The Fund agrees that notwithstanding any other provision in this Agreement: (1) the Custodian shall have no duty to supervise or monitor the Bank under the Agreement, nor shall the Custodian have any liability for the acts or omissions of the Bank, for its appointment, or for its receiving, holding, or disbursing any assets; and (2) without limiting the generality of the foregoing, the Fund shall indemnify and hold harmless the Custodian from and against any loss, liability, claim, expense or demand incurred by the Custodian relating to or arising out of the Agreement or the appointment or actions or omissions of the Bank. The provisions of this Section 7(b) shall survive any resignation of the Custodian or the terms of this Agreement."
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be executed by their respective officers, thereof to duly authorize as of the day and year first above written.
AIM VARIABLE INSURANCE FUNDS
By: /s/ Sidney M. Dilgren
------------------------------------
Name: Sidney Dilgren
Title: Vice President & Fund Treasurer
|
THE BANK OF NEW YORK
By: /s/ Edward G. McGann
------------------------------------
Name: Edward G. McGann
Title: Managing Director
Attest:
|
(seal)
AMENDMENT NO. 5
SECOND AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Second Amended and Restated Master Administrative Services Agreement (the "Agreement"), dated July 1, 2004, by and between A I M ADVISORS, INC., a Delaware corporation, and AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to add AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund; and to remove AIM V.I. Aggressive Growth Fund, AIM V.I. Core Stock Fund, AIM V.I. Growth Fund, and AIM V.I. Premier Equity Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
SECOND AMENDED AND RESTATED
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM V.I. Basic Balanced Fund July 1, 2004 AIM V.I. Basic Value Fund July 1, 2004 AIM V.I. Blue Chip Fund July 1, 2004 AIM V.I. Capital Appreciation Fund July 1, 2004 AIM V.I. Capital Development Fund July 1, 2004 AIM V.I. Core Equity Fund July 1, 2004 AIM V.I. Demographic Trends Fund July 1, 2004 AIM V.I. Diversified Dividend Fund May 1, 2006 AIM V.I. Diversified Income Fund July 1, 2004 AIM V.I. Dynamics Fund July 1, 2004 AIM V.I. Financial Services Fund July 1, 2004 AIM V.I. Global Equity Fund May 1, 2006 AIM V.I. Global Health Care Fund July 1, 2004 AIM V.I. Government Securities Fund July 1, 2004 AIM V.I. High Yield Fund July 1, 2004 AIM V.I. International Core Equity Fund May 1, 2006 AIM V.I. International Growth Fund July 1, 2004 AIM V.I. Large Cap Growth Fund July 1, 2004 AIM V.I. Leisure Fund July 1, 2004 AIM V.I. Mid Cap Core Equity Fund July 1, 2004 AIM V.I. Money Market Fund July 1, 2004 AIM V.I. Real Estate Fund July 1, 2004 AIM V.I. Small Cap Equity Fund July 1, 2004 AIM V.I. Small Company Growth Fund July 1, 2004 AIM V.I. Technology Fund July 1, 2004 AIM V.I. Utilities Fund July 1, 2004 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ------------------ 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
* Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: May 1, 2006
A I M ADVISORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ J. Philip Ferguson
----------------------------- ------------------------------------
Assistant Secretary J. Philip Ferguson
Senior Vice President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
AMENDMENT NO. 6
SECOND AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Second Amended and Restated Master Administrative Services Agreement (the "Agreement"), dated July 1, 2004, by and between A I M ADVISORS, INC., a Delaware corporation, and AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Blue Chip Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
SECOND AMENDED AND RESTATED
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM V.I. Basic Balanced Fund July 1, 2004 AIM V.I. Basic Value Fund July 1, 2004 AIM V.I. Capital Appreciation Fund July 1, 2004 AIM V.I. Capital Development Fund July 1, 2004 AIM V.I. Core Equity Fund July 1, 2004 AIM V.I. Demographic Trends Fund July 1, 2004 AIM V.I. Diversified Dividend Fund May 1, 2006 AIM V.I. Diversified Income Fund July 1, 2004 AIM V.I. Dynamics Fund July 1, 2004 AIM V.I. Financial Services Fund July 1, 2004 AIM V.I. Global Equity Fund May 1, 2006 AIM V.I. Global Health Care Fund July 1, 2004 AIM V.I. Government Securities Fund July 1, 2004 AIM V.I. High Yield Fund July 1, 2004 AIM V.I. International Core Equity Fund May 1, 2006 AIM V.I. International Growth Fund July 1, 2004 AIM V.I. Large Cap Growth Fund July 1, 2004 AIM V.I. Leisure Fund July 1, 2004 AIM V.I. Mid Cap Core Equity Fund July 1, 2004 AIM V.I. Money Market Fund July 1, 2004 AIM V.I. Real Estate Fund July 1, 2004 AIM V.I. Small Cap Equity Fund July 1, 2004 AIM V.I. Small Company Growth Fund July 1, 2004 AIM V.I. Technology Fund July 1, 2004 AIM V.I. Utilities Fund July 1, 2004 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ---------- 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
* Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: June 12, 2006
A I M ADVISORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ J. Philip Ferguson
----------------------------- ------------------------------------
Assistant Secretary J. Philip Ferguson
Senior Vice President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
THIRD AMENDED AND RESTATED
MASTER ADMINISTRATIVE SERVICES AGREEMENT
This THIRD AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made this 1st day of July, 2006 by and between A I M ADVISORS, INC., a Delaware corporation (the "Administrator") and AIM VARIABLE INSURANCE FUNDS, a Delaware business trust (the "Trust") with respect to the separate series set forth in Appendix A to this Agreement, as the same may be amended from time to time (the "Portfolios").
WITNESSETH:
WHEREAS, the Trust is an open-end investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust, on behalf of the Portfolios, has retained the Administrator to perform (or arrange for the performance of) accounting, shareholder servicing and other administrative services as well as investment advisory services to the Portfolios, and that the Administrator may receive reasonable compensation or may be reimbursed for its costs in providing such additional services, upon the request of the Board of Trustees and upon a finding by the Board of Trustees that the provision of such services is in the best interest of the Portfolios and their shareholders; and
WHEREAS, the Board of Trustees has found that the provision of such administrative services is in the best interest of the Portfolios and their shareholders, and has requested that the Administrator perform such services;
NOW, THEREFORE, the parties hereby agree as follows:
1. The Administrator hereby agrees to provide, or arrange for the provision of, any or all of the following services by the Administrator or its affiliates:
(a) the services of a principal financial officer of the Trust (including related office space, facilities and equipment) whose normal duties consist of maintaining the financial accounts and books and records of the Trust and the Portfolios, including the review of daily net asset value calculations and the preparation of tax returns; and the services (including related office space, facilities and equipment) of any of the personnel operating under the direction of such principal financial officer;
(b) to the extent not otherwise required under the Administrator's investment advisory agreement with the Trust, supervising the operations of the custodian(s), transfer agent(s) or dividend agent(s) for the Portfolios; or otherwise providing services to shareholders of the Portfolios; and
(c) to the extent not otherwise required under the Administrator's investment advisory agreement with the Trust, such other administrative services as may be furnished from time to time by the Administrator to the Trust or the Portfolios at the request of the Trust's Board of Trustees, provided, however, that nothing in this Agreement shall require the Administrator to pay (i) the salary or other compensation of the senior officer of the Trust appointed pursuant to the New York Attorney General's Assurance of Discontinuance applicable to A I M Advisors, Inc. dated October 8, 2004; or (ii) the salary or other compensation (or any portion of such salary or other compensation) of any other officer of the Trust that the Trust's
Board of Trustees has agreed should be paid by the Trust or the Portfolios so long as such agreement is evidenced by a resolution of the Board of Trustees.
2. The Administrator will provide, or at its expense will assure that the Insurance Company or Qualified Plan (that has entered into a Participation Agreement with the Trust) will provide the following administrative services:
(a) Establish procedures to ensure compliance with the conditions of the Trust's Mixed and Shared Funding Order.
(b) Provide assistance (clerical, administrative and other) in the negotiation of participation agreements between the Trust, on behalf of the various Portfolios and Insurance Companies or Qualified Plans.
(c) Prepare the various forms of prospectus, financial reports and proxy statements as the Trust has agreed to provide in the participation agreements to which it is a party.
(d) Maintain master accounts with the Portfolio and such accounts will be in the name of the Insurance Company or the Qualified Plan (or their nominees) as the record owners of shares on behalf of the Accounts.
(e) Determine the net amount to be transmitted to the Account maintained by the Insurance Company or Qualified Plan as a result of redemptions of Portfolio shares based on Contractowners' redemption requests. Disburse or credit to the Accounts all proceeds of redemptions of shares of the Portfolio. Notify the Portfolio of the cash required to meet payments.
(f) Determine the net amount to be transmitted to the Portfolio as a result of purchases of Portfolio shares based on Contractowners' purchase payments and transfers allocated to the Accounts investing in the Portfolio. Transmit net purchase payment receipts to the Portfolio's custodian.
(g) Distribute (or arrange for the distribution) to Contractowners copies of the Portfolio's prospectus, proxy materials, periodic fund reports to Contractowners and other materials that the Portfolio is required by law or otherwise to provide to its shareholders.
(h) Maintain and preserve all records as required by law to be maintained and preserved in connection with providing administrative services including, but not limited to recording the issuance of Portfolio shares, recording transfers and redemptions, and reconciling and balancing the Accounts.
(i) Provide Contractowner services including, but not limited to, advice with respect to inquiries related to the Portfolio (not including information about performance or related to sales) and communicating with Contractowners about Portfolio (and Separate Account) performance.
3. The services provided hereunder shall at all times be subject to the direction and supervision of the Trust's Board of Trustees.
4. As full compensation for the services performed and the facilities furnished by or at the direction of the Administrator as described under Item 1, above, the Trust, on behalf of the Portfolios, shall pay the Administrator in accordance with the Fee Schedule as set forth in Appendix A attached hereto. Such amounts shall be paid to the Administrator on a monthly basis.
5. As full compensation for the services performed under Item 2, above, the Portfolios shall pay AIM an amount up to an annual rate of 0.25% of the average net asset value of each Portfolio.
In no event will the fee exceed an amount in excess of AIM's costs (including amounts charged by various Insurance Companies and Qualified Plans pursuant to agreements with AIM in amounts up to 0.25% of net assets attributable to separate accounts of such Insurance Companies or Qualified Plans) in providing or causing others to provide such services. Such amounts shall be paid to the Administrator on a quarterly basis. To the extent that the Administrator's costs exceed 0.25%, such excess amount shall be borne by the Administrator and the Administrator will not seek reimbursement at a later time for such excess amounts on services previously rendered if the Administrator's costs are later reduced to an amount below 0.25%.
6. The Administrator shall not be liable for any error of judgment or for any loss suffered by the Trust or the Portfolios in connection with any matter to which this Agreement relates, except a loss resulting from the Administrator's willful misfeasance, bad faith or gross negligence in the performance of its duties or from reckless disregard of its obligations and duties under this Agreement.
7. The Trust and the Administrator each hereby represent and warrant, but only as to themselves, that each has all requisite authority to enter into, execute, deliver and perform its obligations under this Agreement and that this Agreement is legal, valid and binding, and enforceable in accordance with its terms.
8. Nothing in this Agreement shall limit or restrict the rights of any director, officer or employee of the Administrator who may also be a trustee, officer or employee of the Trust to engage in any other business or to devote his time and attention in part to the management or other aspects of any business, whether of a similar or a dissimilar nature, nor limit or restrict the right of the Administrator to engage in any other business or to render services of any kind to any other corporation, firm, individual or association.
9. This Agreement shall become effective with respect to a Portfolio on the Effective Date for such Portfolio, as set forth in Appendix A attached hereto. This Agreement shall continue in effect until June 30, 2007, and may be continued from year to year thereafter, provided that the continuation of the Agreement is specifically approved at least annually:
(a) (i) by the Trust's Board of Trustees or (ii) by the vote of "a majority of the outstanding voting securities" of such Portfolio (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.
This Agreement shall terminate automatically in the event of its assignment (as defined in Section 2(a) (4) of the 1940 Act).
10. This Agreement may be amended or modified with respect to one or more Portfolios, but only by a written instrument signed by both the Trust and the Administrator.
11. 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 stockholders of private corporations for profit.
12. Any notice or other communication required to be given pursuant to this Agreement shall be deemed duly given if delivered or mailed by registered mail, postage prepaid, (a) to the Administrator at Eleven Greenway Plaza, Suite 100, Houston, Texas 77046-1173, Attention: President, with a copy to the General Counsel, or (b) to the Trust at Eleven Greenway Plaza, Suite 100, Houston, Texas 77046-1173, Attention: President, with a copy to the General Counsel.
13. This Agreement contains the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements with respect to the subject matter hereof.
14. 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.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their officers designated below as of the day and year first above written.
A I M ADVISORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ P. Michelle Grace By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Secretary Robert H. Graham
President
|
(SEAL)
APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM V.I. Basic Balanced Fund July 1, 2006 AIM V.I. Basic Value Fund July 1, 2006 AIM V.I. Capital Appreciation Fund July 1, 2006 AIM V.I. Capital Development Fund July 1, 2006 AIM V.I. Core Equity Fund July 1, 2006 AIM V.I. Demographic Trends Fund July 1, 2006 AIM V.I. Diversified Dividend Fund July 1, 2006 AIM V.I. Diversified Income Fund July 1, 2006 AIM V.I. Dynamics Fund July 1, 2006 AIM V.I. Financial Services Fund July 1, 2006 AIM V.I. Global Equity Fund July 1, 2006 AIM V.I. Global Health Care Fund July 1, 2006 AIM V.I. Global Real Estate Fund July 1, 2006 AIM V.I. Government Securities Fund July 1, 2006 AIM V.I. High Yield Fund July 1, 2006 AIM V.I. International Core Equity Fund July 1, 2006 AIM V.I. International Growth Fund July 1, 2006 AIM V.I. Large Cap Growth Fund July 1, 2006 AIM V.I. Leisure Fund July 1, 2006 AIM V.I. Mid Cap Core Equity Fund July 1, 2006 AIM V.I. Money Market Fund July 1, 2006 AIM V.I. Small Cap Equity Fund July 1, 2006 AIM V.I. Small Cap Growth Fund July 1, 2006 AIM V.I. Technology Fund July 1, 2006 AIM V.I. Utilities Fund July 1, 2006 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ------------------ 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
* Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000.
AMENDMENT NO. 1
THIRD AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Third Amended and Restated Master Administrative Services Agreement (the "Agreement"), dated July 1, 2006, by and between A I M ADVISORS, INC., a Delaware corporation, and AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to change the name of AIM V.I. Real Estate Fund to AIM V.I. Global Real Estate Fund and AIM V.I. Small Company Growth Fund to AIM V.I. Small Cap Growth Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM V.I. Basic Balanced Fund July 1, 2006 AIM V.I. Basic Value Fund July 1, 2006 AIM V.I. Capital Appreciation Fund July 1, 2006 AIM V.I. Capital Development Fund July 1, 2006 AIM V.I. Core Equity Fund July 1, 2006 AIM V.I. Demographic Trends Fund July 1, 2006 AIM V.I. Diversified Dividend Fund May 1, 2006 AIM V.I. Diversified Income Fund July 1, 2006 AIM V.I. Dynamics Fund July 1, 2006 AIM V.I. Financial Services Fund July 1, 2006 AIM V.I. Global Equity Fund May 1, 2006 AIM V.I. Global Health Care Fund July 1, 2006 AIM V.I. Global Real Estate Fund July 1, 2006 AIM V.I. Government Securities Fund July 1, 2006 AIM V.I. High Yield Fund July 1, 2006 AIM V.I. International Core Equity Fund May 1, 2006 AIM V.I. International Growth Fund July 1, 2006 AIM V.I. Large Cap Growth Fund July 1, 2006 AIM V.I. Leisure Fund July 1, 2006 AIM V.I. Mid Cap Core Equity Fund July 1, 2006 AIM V.I. Money Market Fund July 1, 2006 AIM V.I. Small Cap Equity Fund July 1, 2006 AIM V.I. Small Cap Growth Fund July 1, 2006 AIM V.I. Technology Fund July 1, 2006 AIM V.I. Utilities Fund July 1, 2006 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ---------- 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
* Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: July 3, 2006
A I M ADVISORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ J. Philip Ferguson
----------------------------- ------------------------------------
Assistant Secretary J. Philip Ferguson
Senior Vice President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary Robert H. Graham
President
|
(SEAL)
AMENDMENT NO. 2
THIRD AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Third Amended and Restated Master Administrative Services Agreement (the "Agreement"), dated July 1, 2006, by and between A I M ADVISORS, INC., a Delaware corporation, and AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Demographic Trends Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM V.I. Basic Balanced Fund July 1, 2006 AIM V.I. Basic Value Fund July 1, 2006 AIM V.I. Capital Appreciation Fund July 1, 2006 AIM V.I. Capital Development Fund July 1, 2006 AIM V.I. Core Equity Fund July 1, 2006 AIM V.I. Diversified Dividend Fund May 1, 2006 AIM V.I. Diversified Income Fund July 1, 2006 AIM V.I. Dynamics Fund July 1, 2006 AIM V.I. Financial Services Fund July 1, 2006 AIM V.I. Global Equity Fund May 1, 2006 AIM V.I. Global Health Care Fund July 1, 2006 AIM V.I. Global Real Estate Fund July 1, 2006 AIM V.I. Government Securities Fund July 1, 2006 AIM V.I. High Yield Fund July 1, 2006 AIM V.I. International Core Equity Fund May 1, 2006 AIM V.I. International Growth Fund July 1, 2006 AIM V.I. Large Cap Growth Fund July 1, 2006 AIM V.I. Leisure Fund July 1, 2006 AIM V.I. Mid Cap Core Equity Fund July 1, 2006 AIM V.I. Money Market Fund July 1, 2006 AIM V.I. Small Cap Equity Fund July 1, 2006 AIM V.I. Small Cap Growth Fund July 1, 2006 AIM V.I. Technology Fund July 1, 2006 AIM V.I. Utilities Fund July 1, 2006 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ------------------ 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
* Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: November 6, 2006
A I M ADVISORS, INC.
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
AMENDMENT NO. 3
THIRD AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Third Amended and Restated Master Administrative Services Agreement (the "Agreement"), dated July 1, 2006, by and between A I M ADVISORS, INC., a Delaware corporation, and AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM V.I. Basic Balanced Fund July 1, 2006 AIM V.I. Basic Value Fund July 1, 2006 AIM V.I. Capital Appreciation Fund July 1, 2006 AIM V.I. Capital Development Fund July 1, 2006 AIM V.I. Core Equity Fund July 1, 2006 AIM V.I. Diversified Income Fund July 1, 2006 AIM V.I. Dynamics Fund July 1, 2006 AIM V.I. Financial Services Fund July 1, 2006 AIM V.I. Global Health Care Fund July 1, 2006 AIM V.I. Global Real Estate Fund July 1, 2006 AIM V.I. Government Securities Fund July 1, 2006 AIM V.I. High Yield Fund July 1, 2006 AIM V.I. International Growth Fund July 1, 2006 AIM V.I. Large Cap Growth Fund July 1, 2006 AIM V.I. Leisure Fund July 1, 2006 AIM V.I. Mid Cap Core Equity Fund July 1, 2006 AIM V.I. Money Market Fund July 1, 2006 AIM V.I. Small Cap Equity Fund July 1, 2006 AIM V.I. Small Cap Growth Fund July 1, 2006 AIM V.I. Technology Fund July 1, 2006 AIM V.I. Utilities Fund July 1, 2006 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ------------------ 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
* Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: December 21, 2006
A I M ADVISORS, INC.
Attest: /s/ Stephen R. Rimes By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Stephen R. Rimes By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
(SEAL)
AMENDMENT NO. 4
THIRD AMENDED AND RESTATED MASTER ADMINISTRATIVE SERVICES AGREEMENT
The Third Amended and Restated Master Administrative Services Agreement (the "Agreement"), dated July 1, 2006, by and between A I M ADVISORS, INC., a Delaware corporation, and AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Small Cap Growth Fund;
Appendix A of the Agreement is hereby deleted in its entirety and replaced with the following:
"APPENDIX A
TO
THIRD AMENDED AND RESTATED
MASTER ADMINISTRATIVE SERVICES AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS EFFECTIVE DATE OF AGREEMENT ---------- --------------------------- AIM V.I. Basic Balanced Fund July 1, 2006 AIM V.I. Basic Value Fund July 1, 2006 AIM V.I. Capital Appreciation Fund July 1, 2006 AIM V.I. Capital Development Fund July 1, 2006 AIM V.I. Core Equity Fund July 1, 2006 AIM V.I. Diversified Income Fund July 1, 2006 AIM V.I. Dynamics Fund July 1, 2006 AIM V.I. Financial Services Fund July 1, 2006 AIM V.I. Global Health Care Fund July 1, 2006 AIM V.I. Global Real Estate Fund July 1, 2006 AIM V.I. Government Securities Fund July 1, 2006 AIM V.I. High Yield Fund July 1, 2006 AIM V.I. International Growth Fund July 1, 2006 AIM V.I. Large Cap Growth Fund July 1, 2006 AIM V.I. Leisure Fund July 1, 2006 AIM V.I. Mid Cap Core Equity Fund July 1, 2006 AIM V.I. Money Market Fund July 1, 2006 AIM V.I. Small Cap Equity Fund July 1, 2006 AIM V.I. Technology Fund July 1, 2006 AIM V.I. Utilities Fund July 1, 2006 |
The Administrator may receive from each Portfolio reimbursement for costs or reasonable compensation for such services as follows:
Rate* Net Assets ----- ------------------ 0.023% First $1.5 billion 0.013% Next $1.5 billion 0.003% Over $3 billion |
* Annual minimum fee is $50,000. An additional $10,000 per class of shares is charged for each class other than the initial class. The $10,000 class fee is waived for any of the above Portfolios with insufficient assets to result in the payment of more than the minimum fee of $50,000."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: May 1, 2007
AIM ADVISORS, INC.
Attest: By:
----------------------------- ------------------------------------
Assistant Secretary John M. Zerr
Senior Vice President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS
Attest: By:
----------------------------- ------------------------------------
Assistant Secretary John M. Zerr
Senior Vice President
|
(SEAL)
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
AIM VARIABLE INSURANCE FUNDS
AND
AIM INVESTMENT SERVICES, INC.
TABLE OF CONTENTS
PAGE
----
ARTICLE 1 TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT 3
ARTICLE 2 FEES AND EXPENSES 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT 5
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE FUND 6
ARTICLE 5 INDEMNIFICATION 6
ARTICLE 6 COVENANTS OF THE FUND AND THE TRANSFER AGENT 7
ARTICLE 7 TERMINATION OF AGREEMENT 8
ARTICLE 8 ADDITIONAL FUNDS 8
ARTICLE 9 LIMITATION OF SHAREHOLDER LIABILITY 8
ARTICLE 10 ASSIGNMENT 9
ARTICLE 11 AMENDMENT 9
ARTICLE 12 TEXAS LAW TO APPLY 9
ARTICLE 13 MERGER OF AGREEMENT 10
ARTICLE 14 COUNTERPARTS 10
|
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of July, 2006, by and between AIM VARIABLE INSURANCE FUNDS, a Delaware business trust, having its principal office and place of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the "Fund"), and AIM Investment Services, Inc., a Delaware corporation having its principal office and place of business at 11 Greenway Plaza, Suite 100, Houston, Texas 77046 (the "Transfer Agent").
WHEREAS, the Transfer Agent is registered as such with the Securities and Exchange Commission (the "SEC"); and
WHEREAS, the Fund is authorized to issue separate series and classes, with each such series representing interests in a separate portfolio of securities and other assets and each such class having different distribution arrangements; and
WHEREAS, the Fund on behalf of all its authorized and issued shares of beneficial interest representing interests of the Fund ("Shares") desires to appoint the Transfer Agent as its transfer agent, and agent in connection with certain other activities, with respect to the Shares, and the Transfer Agent desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
TERMS OF APPOINTMENT; DUTIES OF THE TRANSFER AGENT
1.01 Subject to the terms and conditions set forth in this Agreement, the Fund hereby employs and appoints the Transfer Agent to act as, and the Transfer Agent agrees to act as, its transfer agent for the Shares, dividend disbursing agent, and paying agent in connection with any accumulation or similar plans provided to shareholders of the Shares (the "Shareholders"), as provided in the currently effective prospectus and statement of additional information (the "Prospectus") of the Fund, on behalf of the Shares.
1.02 The Transfer Agent agrees that it will perform the following services:
(a) The Transfer Agent shall, in accordance with procedures established from time to time by agreement between the Fund on behalf of the Shares, and the Transfer Agent:
(i) receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation thereof to the Custodian of the Fund authorized pursuant to the Agreement and Declaration of Trust of the Fund (the "Custodian");
(ii) pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account;
(iii) receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation thereof to the Custodian;
(iv) at the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the Fund;
(v) effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions;
(vi) prepare and transmit payments for dividends and distributions declared by the Fund on behalf of the Shares;
(vii) maintain records of account for and advise the Fund and its Shareholders as to the foregoing; and
(viii) record the issuance of Shares of the Fund and maintain pursuant to SEC Rule 17Ad-10(e) a record of the total number of Shares which are authorized, based upon data provided to it by the Fund, and issued and outstanding.
The Transfer Agent shall also provide the Fund on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which function shall be the sole responsibility of the Fund.
(b) In addition to the services set forth in the above paragraph (a), the Transfer Agent shall: (i) perform the customary services of a transfer agent, including but not limited to: maintaining all Shareholder accounts, mailing Shareholder reports and prospectuses to current Shareholders, preparing and mailing confirmation forms and statements of accounts to Shareholders for all purchases and redemptions of Shares and other confirmable transactions in Shareholder accounts, preparing and mailing activity statements for Shareholders, and providing Shareholder account information.
(c) Procedures as to who shall provide certain of these services in Article 1 may be established from time to time by agreement between the Fund on behalf of the Shares and the Transfer Agent. The Transfer Agent may at times perform only a portion of these services and the Fund or its agent may perform these services on the Fund's behalf.
1.03 Pursuant to procedures established from time to time by agreement between the Fund and the Transfer Agent, the Transfer Agent may, as agent and acting on behalf of the Fund, enter into certain sub-transfer agency, omnibus account service, and sub-accounting agreements (collectively, "third-party servicing arrangements") whereby an intermediary agrees to provide individual shareholder and/or record keeping services with respect to investments in the Portfolios that would otherwise be required to be provided by the Transfer Agent hereunder, provided that such intermediary has entered or will concurrently enter into an Intermediary Agreement Regarding Compliance with SEC Rule 22c-2 in substantially the form approved by the Fund. Such third-party servicing arrangements may, but are not required to, further provide that such intermediaries may designate sub-agents for purposes of receiving orders for the purchase and redemption of Shares, provided that an intermediary appointing such a sub-agent remains contractually responsible for the receipt and processing of orders received by such sub-agent. The Fund, or the Transfer Agent as agent for and on behalf of the Fund, shall maintain copies of all written agreements evidencing third-party servicing arrangements that are
in effect, or that were in effect at any time during the past six years, in an easily accessible place.
ARTICLE 2
FEES AND EXPENSES
2.01 For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of the Shares to pay the Transfer Agent fees as set out in the initial Schedule A attached hereto. Such fees and out-of-pocket expenses and advances identified under Section 2.02 below may be changed from time to time subject to mutual written agreement between the Fund and the Transfer Agent.
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees to reimburse the Transfer Agent for out-of-pocket expenses or advances incurred by the Transfer Agent for the items set out in Schedule A attached hereto. In addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Fund, will be reimbursed by the Fund on behalf of the applicable Shares.
2.03 The Fund agrees on behalf of the Shares to pay all fees and reimbursable expenses following the mailing of the respective billing notice. Postage for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to the Transfer Agent by the Fund at least seven (7) days prior to the mailing date of such materials.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT
The Transfer Agent represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good standing under the laws of the state of Delaware.
3.02 It is duly qualified to carry on its business in Delaware and in Texas.
3.03 It is empowered under applicable laws and by its Certificate of Incorporation and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
3.06 It is registered as a Transfer Agent as required by the federal securities laws.
3.07 This Agreement is a legal, valid and binding obligation to it.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to the Transfer Agent that:
4.01 It is a business trust duly organized and existing and in good standing under the laws of the state of Delaware.
4.02 It is empowered under applicable laws and by its Agreement and Declaration of Trust and Bylaws to enter into and perform this Agreement.
4.03 All proceedings required by said Agreement and Declaration of Trust and Bylaws have been taken to authorize it to enter into and perform this Agreement.
4.04 It is an open-end, diversified management investment company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of 1933, as amended on behalf of the Shares is currently effective and will remain effective, with respect to all Shares of the Fund being offered for sale.
ARTICLE 5
INDEMNIFICATION
5.01 The Transfer Agent shall not be responsible for, and the Fund shall on behalf of the Shares, indemnify and hold the Transfer Agent harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to:
(a) all actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence or willful misconduct;
(b) the Fund's lack of good faith, negligence or willful misconduct which arise out of the breach of any representation or warranty of the Fund hereunder;
(c) the reliance on or use by the Transfer Agent or its agents or subcontractors of information, records and documents or services which (i) are received or relied upon by the Transfer Agent or its agents or subcontractors and/or furnished to it or performed by on behalf of the Fund, and (ii) have been prepared, maintained and/or performed by the Fund or any other person or firm on behalf of the Fund; provided such actions are taken in good faith and without negligence or willful misconduct;
(d) the reliance on, or the carrying out by the Transfer Agent or its agents or subcontractors of any instructions or requests of the Fund on behalf of the Shares; provided such actions are taken in good faith and without negligence or willful misconduct; or
(e) the offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares
be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state.
5.02 The Transfer Agent shall indemnify and hold the Fund harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to any action or failure or omission to act by the Transfer Agent as result of the Transfer Agent's lack of good faith, negligence or willful misconduct.
5.03 At any time the Transfer Agent may apply to any officer of the Fund for instructions, and may consult with legal counsel with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement, and the Transfer Agent and its agents or subcontractors shall not be liable to and shall be indemnified by the Fund on behalf of the Shares for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. The Transfer Agent shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Fund, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided to the Transfer Agent or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Fund, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Fund.
5.04 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any consequential damages arising out of any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this Article 5 shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification in the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent.
ARTICLE 6
COVENANTS OF THE FUND AND THE TRANSFER AGENT
6.01 The Fund shall, upon request, on behalf of the Shares promptly furnish to the Transfer Agent the following:
(a) a certified copy of the resolution of the Board of Trustees of the Fund authorizing the appointment of the Transfer Agent and the execution and delivery of this Agreement; and
(b) a copy of the Agreement and Declaration of Trust and Bylaws of the Fund and all amendments thereto.
6.02 The Transfer Agent shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Transfer Agent agrees that all such records prepared or maintained by the Transfer Agent relating to the services to be performed by the Transfer Agent hereunder are the property of the Fund and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request.
6.03 The Transfer Agent and the Fund agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law.
6.04 In case of any requests or demands for the inspection of the Shareholder records of the Fund, the Transfer Agent will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. The Transfer Agent reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person.
ARTICLE 7
TERMINATION OF AGREEMENT
7.01 This Agreement may be terminated by either party upon sixty (60) days written notice to the other.
7.02 Should the Fund exercise its right to terminate this Agreement, all out-of-pocket expenses associated with the movement of records and material will be borne by the Fund on behalf of the Shares. Additionally, the Transfer Agent reserves the right to charge for any other reasonable expenses associated with such termination and/or a charge equivalent to the average of three (3) months' fees.
ARTICLE 8
ADDITIONAL FUNDS
8.01 In the event that the Fund establishes one or more series of shares in addition to the Shares with respect to which it desires to have the Transfer Agent render services as transfer agent under the terms hereof, it shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees in writing to provide such services, such series of shares shall become a portfolio hereunder.
ARTICLE 9
LIMITATION OF SHAREHOLDER LIABILITY
9.01 Notice is hereby given that this Agreement is being executed by the Fund by a duly authorized officer thereof acting as such and not individually. The obligations of this Agreement are not binding upon any of the Trustees, officers, shareholders or the investment advisor of the Fund individually but are binding only upon the assets and property belonging to the Fund, on its own behalf or on behalf of a Portfolio, for the benefit of which the Trustees or officers have caused this Agreement to be executed.
ARTICLE 10
ASSIGNMENT
10.01 Except as provided in Section 10.03 below, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns.
10.03 The Transfer Agent may, without further consent on the part of the Fund, subcontract for the performance hereof with any entity which is duly registered as a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of 1934 as amended ("Section 17A(c)(1)"); provided, however, that the Transfer Agent shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions.
ARTICLE 11
AMENDMENT
11.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Trustees of the Fund.
ARTICLE 12
TEXAS LAW TO APPLY
12.01 This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of the State of Texas.
ARTICLE 13
MERGER OF AGREEMENT
13.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.
ARTICLE 14
COUNTERPARTS
14.01 This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
ATTEST: AIM VARIABLE INSURANCE FUNDS /s/ Jim Coppedge By: /s/ Robert H. Graham ------------------------------------- ------------------------------------ Assistant Secretary President ATTEST: AIM INVESTMENT SERVICES, INC. /s/ Jim Coppedge By: /s/ William J. Galvin, Jr. ------------------------------------- ------------------------------------ Assistant Secretary President |
SCHEDULE A
1. TRANSACTION FEES
For performance by the Transfer Agent pursuant to this Agreement, the Fund agrees on behalf of the Shares to pay the Transfer Agent a fee equal to:
$2.00 per trade, to be billed monthly in arrears.
2. OUT-OF-POCKET EXPENSES
The Fund shall reimburse the Transfer Agent monthly for applicable out-of-pocket expenses relating to the procurement of the following goods and services, as they relate to the performance of the Transfer Agent's obligations set forth in Article I of the Agreement, including, but not limited to:
(a) Remote access, license and usage charges paid by the Transfer Agent for use of shareholder record keeping and related systems provided by DST Systems, Inc., and used by the Transfer Agent to service Shareholder accounts, including but not limited to:
(i) TA2000(R), the record keeping system on which records related to most Shareholder accounts will be maintained;
(ii) TRAC2000(R), the record keeping system on which records related to Shareholder accounts held by and through employer-sponsored retirement plans are maintained;
(iii) Automated Work Distributor(TM), a document imaging, storage and distribution system;
(iv) Financial Access Network, a computer system and related software applications which will provide the necessary interfaces to allow customers to access account information residing on the TA2000 and TRAC2000 systems through aiminvestments.com;
(v) PowerSelect(TM), a reporting database that the Transfer Agent can query to produce reports derived from Shareholder account data residing on the TA2000 and TRAC2000 systems; and
(vi) Client specific system enhancements.
(b) Computer and data processing and storage equipment, communication lines and equipment, printers and other equipment used in connection with the provision of services hereunder, and any expenses incurred in connection with the installation and use of such equipment and lines.
(c) Microfiche, microfilm and electronic image scanning equipment.
(d) Electronic data and image storage media and related storage costs.
(e) Record retention, retrieval and destruction costs, including, but not limited to exit fees charged by third party record keeping vendors.
(f) Telephone and telecommunication costs, including all lease, maintenance and line costs.
(g) Programming costs, system access and usage fees, electronic presentment service fees, data and document delivery fees, and other related fees and costs which relate to the printing and delivery of the following documents to Shareholders and to each Shareholder's broker of record:
(i) Investment confirmations;
(ii) Periodic account statements;
(iii) Tax forms; and
(iv) Redemption checks.
(h) Printing costs, including, without limitation, the costs associated with printing stationery, envelopes, share certificates, checks, investment confirmations, periodic account statements, and tax forms.
(i) Postage (bulk, pre-sort, ZIP+4, bar coding, first class), certified and overnight mail and private delivery services, courier services and related insurance.
(j) Certificate insurance.
(k) Banking charges, including without limitation, incoming and outgoing wire charges and charges associated with the receipt and processing of government allotments.
(l) Check writing fees.
(m) Federal Reserve charges for check clearance.
(n) Rendering fees.
(o) Audit, consulting and legal fees which relate to the provision of service hereunder.
(p) Shareholder information and education mailings, including, but not limited to, periodic shareholder newsletters and tax guides.
(q) Duplicate services;
(r) Such other miscellaneous expenses reasonably incurred by the Transfer Agent in performing its duties and responsibilities.
(s) Due diligence mailings.
(t) Ad hoc reports.
The Fund agrees that postage and mailing expenses will be paid on the day of or prior to mailing. In addition, the Fund will promptly reimburse the Transfer Agent for any other unscheduled expenses incurred by the Transfer Agent whenever the Fund and the Transfer Agent mutually agree that such expenses are not otherwise properly borne by the Transfer Agent as part of its duties and obligations under the Agreement.
Out-of-pocket expenses incurred by the Transfer Agent hereunder shall first be allocated among the series portfolios of the AIM Funds based upon the number of open accounts holding shares in such portfolios. Such out-of-pocket expenses that have been allocated to a Portfolio shall be further allocated to the Institutional Class, if any, of such Portfolio based upon the number of accounts holding shares of such Class relative to the total number of accounts holding shares of all Classes in the Portfolio. The remaining amount of the Portfolio's fiscal
year-to-date out-of-pocket expenses shall be further allocated among accounts holding Class A, A3, B, C, P, R, AIM Cash Reserve and Investor Class Shares, as applicable, on the basis of fiscal year-to-date average net assets.
3. DEFINITIONS
As used in this Fee Schedule, "AIM Funds" shall mean all investment companies and their series portfolios, if any, comprising, from time to time, the AIM Family of Funds.(R)
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS
A I M DISTRIBUTORS, INC.,
AMERICAN CENTURION LIFE ASSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
IDS LIFE INSURANCE COMPANY OF NEW YORK,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AMERIPRISE FINANCIAL SERVICES, INC.
TABLE OF CONTENTS
Section A. Amendment and Restatement; Form of Agreement .................. 2 A.1 Acknowledgement of Pending Merger and Consent to Transfer ......... 2 A.2 Restatement of Prior Agreements ................................... 2 Section 1. Available Funds ............................................... 3 1.1 Availability ...................................................... 3 1.2 Addition, Deletion or Modification of Funds ....................... 3 1.3 No Sales to the General Public .................................... 3 1.4 Money Laundering Compliance ....................................... 4 Section 2. Processing Transactions ....................................... 4 2.1 Timely Pricing and Orders ......................................... 4 2.2 Timely Payments ................................................... 4 2.3 Applicable Price .................................................. 5 2.4 Dividends and Distributions ....................................... 5 2.5 Book Entry ........................................................ 5 2.6 Control of Market Timing Activity ................................. 5 Section 3. Costs and Expenses ............................................ 7 3.1 General ........................................................... 7 3.2 Registration ...................................................... 7 3.3 Other (Non-Sales-Related) ......................................... 7 3.4 Other (Sales-Related) ............................................. 8 3.5 Parties To Cooperate .............................................. 8 Section 4. Legal Compliance .............................................. 8 4.1 Tax Laws .......................................................... 8 4.2 Insurance and Certain Other Laws .................................. 10 4.3 Securities Laws ................................................... 11 4.4 Notice of Certain Proceedings and Other Circumstances ............. 12 4.5 Company To Provide Documents; Information About AVIF .............. 12 4.6 AVIF To Provide Documents; Information About Company .............. 13 Section 5. Mixed and Shared Funding ...................................... 14 5.1 General ........................................................... 15 5.2 Disinterested Directors ........................................... 15 5.3 Monitoring for Material Irreconcilable Conflicts .................. 15 5.4 Conflict Remedies ................................................. 16 5.5 Notice to Company ................................................. 17 5.6 Information Requested by Board of Directors ....................... 17 5.7 Compliance with SEC Rules ......................................... 17 5.8 Other Requirements ................................................ 18 Section 6. Termination ................................................... 18 6.1 Events of Termination ............................................. 18 6.2 Notice Requirement for Termination ................................ 19 6.3 Funds To Remain Available ......................................... 19 6.4 Survival of Warranties and Indemnifications ....................... 20 6.5 Continuance of Agreement for Certain Purposes ..................... 20 Section 7. Parties To Cooperate Respecting Termination ................... 20 |
Section 8. Assignment ................................................... 20 Section 9. Notices ...................................................... 20 Section 10. Voting Procedures ............................................ 21 Section 11. Foreign Tax Credits .......................................... 21 Section 12. Indemnification .............................................. 22 12.1 Of AVIF and AIM by Company and AFSI .............................. 22 12.2 Of Company and AFSI by AVIF and AIM .............................. 23 12.3 Effect of Notice ................................................. 26 12.4 Successors ....................................................... 26 Section 13. Applicable Law ............................................... 26 Section 14. Execution in Counterparts .................................... 26 Section 15. Severability ................................................. 26 Section 16. Rights Cumulative ............................................ 27 Section 17. Headings ..................................................... 27 Section 18. Confidentiality .............................................. 27 Section 19. Trademarks and Fund Names .................................... 28 Section 20. Parties to Cooperate ......................................... 29 Section 21. Force Majeure ................................................ 29 |
PARTICIPATION AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, made and entered into this 17th day of April, 2006, by and among the following parties:
- AMERICAN CENTURION LIFE ASSURANCE COMPANY ("American Centurion Life"), organized under the laws of the State of Indiana on its own behalf and on behalf of each separate account of the Company named in Schedule A to this Agreement, as may be amended from time to time (each account referred to as the "Account");
- IDS LIFE INSURANCE COMPANY OF NEW YORK ("IDS Life of New York"), organized under the laws of the State of Minnesota, on its own behalf and on behalf of each separate account of the Company named in Schedule A to this Agreement, as may be amended from time to time (each account referred to as the "Account");
(Each of American Centurion Life and IDS Life of New York are hereinafter also referred to as "Company")
- AMERIPRISE FINANCIAL SERVICES, INC., organized under the laws of Delaware ("AFSI"), and an affiliate of American Centurion Life, American Partners Life, and IDS Life of New York, and the principal underwriter of Contracts issued by American Centurion Life and American Partners Life;
- AIM VARIABLE INSURANCE FUNDS, a Delaware trust ("AVIF");
- A I M DISTRIBUTORS, INC., a Delaware Corporation ("AIM")
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the 1940 Act"); and
WHEREAS, AVIF currently consists of twenty-five separate series ("Series"), shares ("Shares") each of which are registered under the Securities Act of 1933, as amended (the "1933 Act") and are currently sold to one or more separate accounts of life insurance companies to fund benefits under variable annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto as the Parties hereto may amend from time to time (each a "Fund"; reference herein to "AVIF" includes reference to each Fund, to the extent the context requires) available for purchase by the Accounts; and
WHEREAS, Company will be the issuer of certain variable annuity contracts and/or variable life insurance contracts ("Contracts") as set forth on Schedule A hereto, as the Parties hereto may
amend from time to time, which Contracts (hereinafter collectively, the "Contracts"), if required by applicable law, will be registered under the 1933 Act; and
WHEREAS, Company will fund the Contracts through the Accounts, each of which may be divided into two or more subaccounts ("Subaccounts"; reference herein to an "Account" includes reference to each Subaccount thereof to the extent the context requires); and
WHEREAS, Company will serve as the depositor of the Accounts, each of which is registered as a unit investment trust investment company under the 1940 Act (or exempt therefrom), and the security interests deemed to be issued by the Accounts under the Contracts will be registered as securities under the 1933 Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations, Company intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, AFSI is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, AIM is a broker-dealer registered with the SEC under the 1934 Act and a member in good standing of the NASD;
NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereto agree as follows:
SECTION A. AMENDMENT AND RESTATEMENT; FORM OF AGREEMENT
A.1 FORM OF AGREEMENT
The Parties have agreed to enter into this form of agreement in view of the planned merger of both American Centurion Life and American Partners Life with and into IDS Life of New York (each merger is collectively, the "Merger") and the "intact transfer" (the "Transfer") of the Accounts of American Centurion Life and American Partners Life to IDS Life of New York by operation of law and incident to the Merger, on December 31, 2006 at 10:59:59 p.m. Central Time (the "Effective Time"), subject to all necessary regulatory approvals being obtained in connection with the Merger and the Transfer, and the re-naming of IDS Life of New York to RiverSource Life Insurance Company simultaneously with the Merger. On and after the Effective Time, all references in this Agreement and its Schedules to "American Centurion Life", "American Partners Life" and "IDS Life of New York" shall mean and refer to RiverSource Life Insurance Company. Until the Effective Time, all references in this Agreement and its Schedules to "American Centurion Life","American Partners Life", "IDS Life of New York". and "Company" shall refer to each such Party individually, as if the same had entered into a agreement with AVIF and AIM.
A.2 AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENTS
This Agreement amends and restates the following participation agreements as of the date first stated above by and among each Company, AFSI, AVIF and AIM with respect to all investments by each Company and its Accounts
(a) Participation Agreement, dated as of October 30, 1997, by and among
American Centurion Life, AVIF and AIM, as amended by the following documents:
(a) Amendment to Participation Agreement, dated as of October 30, 1997; (b)
Amendment to Participation Agreement, dated as of January 1, 2000; (c) Amendment
to Participation Agreement, dated as of May 1, 2002; (d) Amendment to
Participation Agreement dated January 1, 2003; (e) Amendment to Participation
Agreement dated April 30, 2004; and (f) Amendment to Participation Agreement
dated September 16, 2004.
(b) Participation Agreement, dated as of April 30, 2004, by and among American Partners Life, AVIF and AIM.
(c) Participation Agreement, dated as of October 7, 1996, by and among IDS Life of New York, AVIF and AIM, as amended by the following documents: (a) Amendment to Participation Agreement, dated November 11, 1997; (b) Amendment to Participation Agreement, dated as of August 13, 2001; (c) Amendment to Participation Agreement, dated as of May 1, 2002; (d) Amendment to Participation Agreement, dated January 1, 2003; (e) Amendment to Participation Agreement, dated September 30, 2003; and (f) Amendment to Participation Agreement, dated April 30, 2004.
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to {each??} Company for purchase and redemption at net asset value and with no sales charges, subject to the terms and conditions of this Agreement. The Board of Trustees of AVIF (the "Board") may refuse to sell Shares of any Fund to any person, or suspend or terminate the offering of Shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to provide additional funding media for the Contracts, or to delete, combine, or modify existing Funds, by amending Schedule A hereto. Upon such amendment to Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall include a reference to any such additional Fund. Schedule A, as amended from time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or will be sold to the general public.
1.4 MONEY LAUNDERING COMPLIANCE.
Each Party represents and warrants that it shall comply with all the applicable laws and regulations designed to prevent money laundering including without limitation the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT ACT), and if required by such laws or regulations will share information with each other Party about individuals, entities, organizations and countries suspected of possible terrorist or money laundering activities in accordance with Section 314(b) of the USA PATRIOT ACT.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide Company with the net asset value per Share for each Fund by 5:30 p.m. Central Time on each Business Day. As used herein, "Business Day" shall mean any day on which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF calculates the Fund's net asset value, and (iii) Company is open for business.
(b) Company will use the data provided by AVIF each Business Day pursuant to paragraph (a) immediately above to calculate Account unit values and to process transactions that receive that same Business Day's Account unit values. Company will perform such Account processing the same Business Day, and will place corresponding orders to purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following Business Day; provided, however, that AVIF shall provide additional time to Company in the event that AVIF is unable to meet the 5:30 p.m. time stated in paragraph (a) immediately above. Such additional time shall be equal to the additional time that AVIF takes to make the net asset values available to Company.
(c) With respect to payment of the purchase price by Company and of redemption proceeds by AVIF, Company and AVIF shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information (as determined under SEC guidelines), Company shall be entitled to an adjustment to the number of Shares purchased or redeemed to reflect the correct net asset value per Share. Any material error in the calculation or reporting of net asset value per Share, dividend or capital gain information shall be reported promptly upon discovery to Company.
2.2 TIMELY PAYMENTS.
Company will wire payment for net purchases to a custodial account designated by AVIF by 1:00 p.m. Central Time on the same day as the order for Shares is placed, to the extent practicable. AVIF will wire payment for net redemptions to an account designated by Company by 1:00 p.m.
Central Time on the same day as the Order is placed, to the extent practicable, but in any event within five (5) calendar days after the date the order is placed in order to enable Company to pay redemption proceeds within the time specified in Section 22(e) of the 1940 Act or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that Company receives prior to the
close of regular trading on the New York Stock Exchange (or such other time set
by the Board for purposes of determining the current net asset value of a Fund
in accordance with Rule 22c-1 under the 1940 Act) on a Business Day will be
executed at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the orders. For purposes of this
Section 2.3(a), Company shall be the designated agent of AVIF for receipt of
orders relating to Contract transactions, in accordance with all applicable
provisions of Section 22(c) and Rule 22c-1 under the 1940 Act, on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by Company will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written confirmation) on or prior to the payment date to Company of any income dividends or capital gain distributions payable on the Shares of any Fund. Company hereby elects to reinvest all dividends and capital gains distributions in additional Shares of the corresponding Fund at the ex-dividend date net asset values until Company otherwise notifies AVIF in writing, it being agreed by the Parties that the ex-dividend date and the payment date with respect to any dividend or distribution will be the same Business Day. Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock certificates will not be issued to Company. Shares ordered from AVIF will be recorded in an appropriate title for Company, on behalf of its Account.
2.6 CONTROL OF MARKET TIMING ACTIVITY.
(a) The Company acknowledges that AVIF has adopted policies and procedures reasonably designed to prevent frequent or excessive purchases, exchanges and redemptions of Fund Shares in quantities great enough to disrupt orderly management of the corresponding Fund's
investment portfolio. Disclosure pertaining to these policies are contained in the current prospectus for the Fund, as currently required by applicable federal securities law.
(b) AVIF acknowledges that the Company, on behalf of its Account, has adopted policies and procedures reasonably designed to detect and deter frequent transfers of Contract value among the subaccounts of the Account including those investing in the Funds which are available as investment options under the Contracts. These policies and procedures are described in the current prospectuses of the Account through which the Contracts are offered.
(c) The Company will cooperate with AIM's reasonable requests in taking steps to deter and detect such transfers by Contract owners. In connection therewith, and in compliance with Rule 22c-2 under the 1940 Act, the Company will from time-to-time provide AIM, upon AIM's request, with the taxpayer identification number ("TIN") of any or all Contract owners and the amount, date, and transaction type (purchase or redemption) of every purchase or redemption of shares of AVIF held through an Account maintained by the Company during the period covered by the request.
(i) Requests made pursuant to this Section 2.6(c) must set forth a specific time period, not to exceed ninety (90) days from the date of the request, for which the transaction is sought. AIM may request transaction information older than ninety (90) days from the date of the request as it deems necessary to investigate compliance with policies established by AVIF for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by AVIF.
(ii) The Company agrees to transmit the requested information that is on its books and records to the AIM or its designee promptly, but in any event not later than ten (10) business days, after receipt of a request. If the requested information is not on the company's books and records, the Company agrees to: (A) provide or arrange to provide to AIM the requested information from Contract owners who hold an account with an indirect intermediary; or (B) if directed by AIM, block further purchases of AVIF shares from such indirect intermediary. In such instance, the Company agrees to inform AIM whether it plans to perform (A) or (B). Responses required by this Paragraph must be communicated in writing and in a format mutually agreed upon by the Company and AIM. To the extent practicable, the format for any transaction information provided to AIM should be consistent with the NSCC Standardized Data Reporting Format. For purposes of this provision, the term indirect intermediary has the same meaning as in Rule 22c-2 under the 1940 Act.
(iii) The Company agrees to execute written instructions from AIM to restrict or prohibit further purchases of AVIF shares as directed by a Contract owner that has been identified by AIM has having engaged in transactions of AVIF's shares that violate policies established by AVIF for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by AVIF.
(iv) Instructions submitted by AIM to the Company, pursuant to this
Section 2.6(c) must include the TIN and the specific restriction(s) to
be executed.
(v) The Company agrees to execute instructions received by the Company from AIM, pursuant to this Section 2.6(c) as soon as reasonably practicable, but not later than seven (7) business days after receipt of the instructions by the Company. The Company agrees to provide AIM with written confirmation that the instructions have been executed. The Company agrees to provide this written confirmation as soon as reasonably practicable, but in no event, later than ten (10) business days after the instructions have been executed.
(vi) When AIM has given the Company a written instruction pursuant to
Section 2.6(c)(iii) to restrict or prohibit further purchases by a
Contract owner of AVIF shares, AIM may request and the Company will
provide the name or other identifier of any investment professional
employed by a broker dealer affiliate of the Company who is listed on
the Company's records as the agent of record for the restricted
Contract. If the restricted Contract was sold by a broker dealer
unaffiliated with the Company, the Company will provide AIM with the
name of the selling broker dealer.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear all expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
(a) AVIF will bear the cost of its registering as a management investment company under the 1940 Act and registering its Shares under the 1933 Act, and keeping such registrations current and effective; including, without limitation, the preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with respect to AVIF and its Shares and payment of all applicable registration or filing fees with respect to any of the foregoing.
(b) Company will bear the cost of registering, to the extent required, each Account as a unit investment trust under the 1940 Act and registering units of interest under the Contracts under the 1933 Act and keeping such registrations current and effective; including, without limitation, the preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with respect to each Account and its units of interest and payment of all applicable registration or filing fees with respect to any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
(a) AVIF will bear, or arrange for others to bear, the costs of preparing, filing with the SEC and setting for printing AVIF's prospectus, statement of additional information and any amendments or supplements thereto (collectively, the "AVIF Prospectus"), periodic reports to shareholders, AVIF proxy material and other shareholder communications.
(b) Company will bear the costs of preparing, filing with the SEC and setting for printing each Account's prospectus, statement of additional information and any amendments or supplements thereto (collectively, the "Account Prospectus"), any periodic reports to Contract owners, annuitants, insureds or participants (as appropriate) under the Contracts (collectively, "Participants"), voting instruction solicitation material, and other Participant communications.
(c) Company will print in quantity and deliver to existing Participants the documents described in Section 3.3(b) above and the prospectus provided by AVIF in camera ready or computer diskette form. AVIF will print the AVIF statement of additional information, proxy materials relating to AVIF and periodic reports of AVIF.
3.4 OTHER (SALES-RELATED).
Company will bear the expenses of distribution. These expenses would include by way of illustration, but are not limited to, the costs of distributing to Participants the following documents, whether they relate to the Account or AVIF: prospectuses, statements of additional information, proxy materials and periodic reports. These costs would also include the costs of preparing, printing, and distributing sales literature and advertising relating to the Funds, as well as filing such materials with, and obtaining approval from, the SEC, NASD, any state insurance regulatory authority, and any other appropriate regulatory authority, to the extent required.
3.5 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in arranging to print, mail and/or deliver, in a timely manner, combined or coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and represents that it will use its best efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF will notify Company immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and to maintain each Fund's compliance with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will notify Company immediately upon having a reasonable basis for believing that a Fund has ceased to so comply or that a Fund might not so comply in the future. In the event of a breach of this Section 4.1(b) by AVIF, it will take all reasonable steps to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Section 1.817-5 of the regulations under the Code.
(c) Company agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of Company or, to American Partners Life's knowledge, of any Participant, that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or Company otherwise becomes aware of any facts that could give rise to any claim against AVIF or its affiliates as a result of such a failure or alleged failure:
(i) Company shall promptly notify AVIF of such assertion or potential claim (subject to the Confidentiality provisions of Section 18 as to any Participant);
(ii) Company shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure;
(iii) Company shall use its best efforts to minimize any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS that such failure was inadvertent;
(iv) Company shall permit AVIF, its affiliates and their legal and accounting advisors to participate in any conferences, settlement discussions or other administrative or judicial proceeding or contests (including judicial appeals thereof) with the IRS, any Participant or any other claimant regarding any claims that could give rise to liability to AVIF or its affiliates as a result of such a failure or alleged failure; provided, however, that Company will retain control of the conduct of such conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by Company to the IRS, any Participant or any other claimant in connection with any of the foregoing proceedings or contests (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)), (a) shall be provided by Company to AVIF (together with any supporting information or analysis); subject to the confidentiality provisions of Section 18, at least ten (10) business days or such shorter period to which the Parties hereto agree prior to the day on which such proposed materials are to be submitted, and (b) shall not be submitted by Company to any such person without the express written consent of AVIF which shall not be unreasonably withheld;
(vi) Company shall provide AVIF or its affiliates and their accounting and legal advisors with such cooperation as AVIF shall reasonably request (including, without limitation, by permitting AVIF and its accounting and legal advisors to review the Company's relevant books and records) in order to facilitate review by AVIF or its advisors of any written submissions provided to it pursuant to the preceding clause or its assessment of the validity or amount of any claim against its arising from such a failure or alleged failure;
(vii) Company shall not with respect to any claim of the IRS or any Participant that would give rise to a claim against AVIF or its affiliates (a) compromise or settle any claim, (b) accept any adjustment on audit, or (c) forego any allowable administrative or judicial appeals, without the express written consent of AVIF or its affiliates, which shall not be unreasonably withheld, provided that Company shall not be required, after exhausting all administrative penalties, to appeal any adverse judicial decision unless AVIF or its affiliates shall have provided an opinion of independent counsel to the effect that a reasonable basis exists for taking such appeal; and provided further that the costs of any such appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if Company fails to comply with any of the foregoing clauses (i) through (vii), and such failure could be shown to have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, Company may,
in its discretion, authorize AVIF or its affiliates to act in the name of
Company in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall Company have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) Company represents and warrants that the Contracts currently are and will be treated as annuity contracts or life insurance contracts under applicable provisions of the Code and that it will use its best efforts to maintain such treatment; Company will notify AVIF immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future.
(e) Company represents and warrants that each Account is a "segregated asset account" and that interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817 of the Code and the regulations thereunder. Company will use its best efforts to continue to meet such definitional requirements, and it will notify AVIF immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state insurance laws or regulations, to the extent specifically requested in writing by Company, including, the furnishing of
information not otherwise available to Company which is required by state insurance law to enable Company to obtain the authority needed to issue the Contracts in any applicable state.
(b) Company represents and warrants that (i) it is an insurance company duly organized, validly existing and in good standing under applicable state law and has full corporate power, authority and legal right to execute, deliver and perform its duties and comply with its obligations under this Agreement, (ii) it has legally and validly established and maintains each Account as a segregated asset account under applicable state insurance law and the regulations thereunder, and (iii) the Contracts comply in all material respects with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is lawfully organized, validly existing, and in good standing under the laws of the State of Delaware and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) Company represents and warrants that (i) interests in each Account pursuant to the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act, (ii) the Contracts will be duly authorized for issuance and sold in compliance with all applicable federal and state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and Arizona law, (iii) each Account is and will remain registered under the 1940 Act, to the extent required by the 1940 Act, (iv) each Account does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, to the extent required, (v) each Account's 1933 Act registration statement relating to the Contracts, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder, (vi) Company will amend the registration statement for its Contracts under the 1933 Act and for its Accounts under the 1940 Act from time to time as required in order to effect the continuous offering of its Contracts or as may otherwise be required by applicable law, and (vii) each Account Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and duly authorized for issuance and sold in compliance with Delaware law, (ii) AVIF is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend the registration statement for its Shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its Shares, (iv) AVIF does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act registration statement, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and (vi) AVIF's Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in accordance with the laws of any state or other jurisdiction if and to the extent reasonably deemed advisable by AVIF.
(d) AVIF represents and warrants that all of its trustees, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Fund are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF or AIM will immediately notify Company of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to AVIF's registration statement under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such registration statement or AVIF Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of AVIF's Shares, or (iv) any other action or circumstances that may prevent the lawful offer or sale of Shares of any Fund in any state or jurisdiction, including, without limitation, any circumstances in which (a) such Shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law, or (b) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by American Partners Life. AVIF and AIM will make every reasonable effort to prevent the issuance, with respect to any Fund, of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
(b) Company or AFSI will immediately notify AVIF of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to each Account's registration statement under the 1933 Act relating to the Contracts or each Account Prospectus, (ii) any request by the SEC for any amendment to such registration statement or Account Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of each Account's interests pursuant to the Contracts, or (iv) any other action or circumstances that may prevent the lawful offer or sale of said interests in any state or jurisdiction, including, without limitation, any circumstances in which said interests are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law. Company and AFSI will make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
4.5 COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) Company will provide to AVIF or its designated agent at least one (1) complete copy of all SEC registration statements, Account Prospectuses, reports, any preliminary and final voting instruction solicitation material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to each Account or the Contracts, contemporaneously with the filing of such document with the SEC or other regulatory authorities.
(b) Company will provide to AVIF or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which AVIF or any of its affiliates is named, at least five (5) Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if AVIF or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. AVIF hereby designates A I M as the entity to receive such sales literature, until such time as AVIF appoints another designated agent by giving notice to Company in the manner required by Section 9 hereof.
(c) Neither Company nor any of its affiliates, will give any information or
make any representations or statements on behalf of or concerning AVIF or its
affiliates in connection with the sale of the Contracts other than (i) the
information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) Company shall adopt and implement procedures reasonably designed to ensure that information concerning AVIF and its affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither AVIF nor any of its affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT COMPANY.
(a) AVIF will provide to Company at least one (1) complete copy of all SEC registration statements, AVIF Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to AVIF or the Shares of a Fund, contemporaneously with the filing of such document with the SEC or other regulatory authorities.
(b) AVIF will provide to Company camera ready or computer diskette copies of all AVIF prospectuses and printed copies, in an amount specified by American Partners Life, of AVIF statements of additional information, proxy materials, periodic reports to shareholders and other materials required by law to be sent to Participants who have allocated any Contract value to a Fund. AVIF will provide such copies to Company in a timely manner so as to enable Company to print and distribute such materials within the time required by law to be furnished to Participants.
(c) AVIF will provide to Company or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which Company, or any of its respective affiliates is named, or that refers to the Contracts, at least five (5) Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if Company or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. Company shall receive all such sales literature until such time as it appoints a designated agent by giving notice to AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning Company, each Account, or the Contracts other than (i) the information or representations contained in the registration statement, including each Account Prospectus contained therein, relating to the Contracts, as such registration statement and Account Prospectus may be amended from time to time; or (ii) in published reports for the Account or the Contracts that are in the public domain and approved by Company for distribution; or (iii) in sales literature or other promotional material approved by Company or its affiliates, except with the Company's express written permission .
(e) AVIF shall cause its principal underwriter to adopt and implement procedures reasonably designed to ensure that information concerning Company, and its respective affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither Company, nor any of its respective affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain provisions of the 1940 Act and rules thereunder so that AVIF may be available for investment by certain other entities, including, without limitation, separate accounts funding variable annuity contracts or variable life insurance contracts, separate accounts of insurance companies unaffiliated with Company, and trustees of qualified pension and retirement plans (collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC has imposed terms and conditions for such orders that are substantially identical to many of the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies Company that, in the event that AVIF implements Mixed and Shared Funding, it may be appropriate to include in the prospectus pursuant to which a Contract is offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED TRUSTEES.
AVIF agrees that its Board shall at all times consist of trustees a majority of whom (the "Disinterested Trustees") are not interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the rules thereunder and as modified by any applicable orders of the SEC, except that if this condition is not met by reason of the death, disqualification, or bona fide resignation of any director, then the operation of this condition shall be suspended (a) for a period of forty-five (45) days if the vacancy or vacancies may be filled by the Board; (b) for a period of sixty (60) days if a vote of shareholders is required to fill the vacancy or vacancies; or (c) for such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board will monitor for the existence of any material irreconcilable conflict between the interests of the Participants in all separate accounts of life insurance companies utilizing AVIF ("Participating Insurance Companies"), including each Account, and participants in all qualified retirement and pension plans investing in AVIF ("Participating Plans"). Company agrees to inform the Board of AVIF of the existence of or any potential for any such material irreconcilable conflict of which it is aware. The concept of a "material irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may arise for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract and variable life insurance contract Participants or by Participants of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders of the type referred to in Section 5.1 hereof, Company will assist the Board in carrying out its responsibilities by providing the Board with all information reasonably necessary for the Board to consider any issue raised, including information as to a decision by Company to disregard voting instructions of Participants. Company's responsibilities in connection with the foregoing shall be carried out with a view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of the Board or a majority of the Disinterested Trustees that a material irreconcilable conflict exists, Company will, if it is a Participating Insurance Company for which a material irreconcilable conflict is relevant, at its own expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts from AVIF or any Fund and reinvesting such assets in a different investment medium, including another Fund of AVIF, or submitting the question whether such segregation should be implemented to a vote of all affected Participants and, as appropriate, segregating the assets of any particular group (e.g., annuity Participants, life insurance Participants or all Participants) that votes in favor of such segregation, or offering to the affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type defined as a "management company" in Section 4(3) of the 1940 Act or a new separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of Company's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, Company may be required, at AVIF's election, to withdraw each Account's investment in AVIF or any Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six (6) months after AVIF gives notice to Company that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by Company for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to Company conflicts with the majority of other state regulators, then Company will withdraw each Account's investment in AVIF within six (6) months after AVIF's Board informs Company that it has determined that such decision has created a material irreconcilable conflict, and until such withdrawal AVIF shall continue to accept and implement orders by Company for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) Company agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out at its expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will determine whether or not any proposed action adequately remedies any material irreconcilable conflict. In no event, however, will AVIF or any of its affiliates be required to establish a new funding medium for any Contracts. Company will not be required by the terms hereof to establish a new funding medium for any Contracts if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict.
5.5 NOTICE TO COMPANY.
AVIF will promptly make known in writing to Company the Board's determination of the existence of a material irreconcilable conflict, a description of the facts that give rise to such conflict and the implications of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF TRUSTEES.
Company and AVIF (or its investment adviser) will at least annually submit to the Board of AVIF such reports, materials or data as the Board may reasonably request so that the Board may fully carry out the obligations imposed upon it by the provisions hereof or any exemptive order granted by the SEC to permit Mixed and Shared Funding, and said reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board. All reports received by the Board of potential or existing conflicts, and all Board actions with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with the terms and conditions of such exemptive relief that is afforded by any of said rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and Participating Plan enter into an agreement with AVIF that contains in substance the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the Fund, upon six (6) months advance written notice to the other parties, or, if later, upon receipt of any required exemptive relief from the SEC, unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against Company or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding American Partners Life's obligations under this Agreement or related to the sale of the Contracts, the operation of each Account, or the purchase of Shares, if, in each case, AVIF reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of Company upon institution of formal proceedings against AVIF, its principal underwriter, or its investment adviser by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding AVIF's obligations under this Agreement or related to the operation or management of AVIF or the purchase of AVIF Shares, if, in each case, Company reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on Company, or the Subaccount corresponding to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are not registered and, in all material respects, issued and sold in accordance with any applicable federal or state law, or (ii) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by Company; or
(e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of Company if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if Company reasonably believes that the Fund may fail to so qualify; or
(g) at the option of Company if the Fund fails to comply with Section 817(h) of the Code or with successor or similar provisions, or if Company reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by Company cease to qualify as annuity contracts or life insurance contracts under the Code (other than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the Code) or if interests in an Account under the Contracts are not registered, where required, and, in all material respects, are not issued or sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the Party terminating this Agreement gives prior written notice to the other Party to this Agreement of its intent to terminate, and such notice shall set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at least six (6) months in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at least ninety (90) days in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written notice shall be given as soon as possible within twenty-four (24) hours after the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement by Company, AVIF will, at Company's option, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"), unless AIM or the Board determines that doing so would be detrimental to the other shareholders of the affected Funds or would be inconsistent with applicable law or regulation. Specifically, without limitation, the owners of the Existing Contracts will be permitted to reallocate investments in the Fund (as in effect on such date), redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 6.3 will not apply to any (i) terminations under Section 5 and the effect of such terminations will be governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this Agreement shall nevertheless continue in effect as to any Shares of that Fund that are outstanding as of the date of such termination (the "Initial Termination Date"). This continuation shall extend to the earlier of the date as of which an Account owns no Shares of the affected Fund or a date (the "Final Termination Date") six (6) months following the Initial Termination Date, except that Company may, by written notice shorten said six (6) month period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one another in taking all necessary and appropriate steps for the purpose of ensuring that an Account owns no Shares of a Fund after the Final Termination Date with respect thereto, or, in the case of a termination pursuant to Section 6.1(a), the termination date specified in the notice of termination. Such steps may include combining the affected Account with another Account, substituting other mutual fund shares for those of the affected Fund, or otherwise terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof will be given by means mutually acceptable to the Parties concerned. Each other notice or communication required or permitted by this Agreement will be given to the following persons at the following addresses and facsimile numbers, or such other persons, addresses or facsimile numbers as the Party receiving such notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Peter A. Davidson, Esq.
AMERICAN CENTURION LIFE ASSURANCE COMPANY
IDS LIFE INSURANCE COMPANY OF NEW YORK
AMERIPRISE FINANCIAL SERVICES, INC.
50607 Ameriprise Financial Center
Minneapolis, MN 55474
Facsimile: 612-671-3866
Attn: Vice President and Group Counsel
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
Company will distribute all proxy material furnished by AVIF to Participants to
whom pass-through voting privileges are required to be extended and will solicit
voting instructions from Participants. Company will vote Shares in accordance
with timely instructions received from Participants. Company will vote Shares
that are (a) not attributable to Participants to whom pass-through voting
privileges are extended, or (b) attributable to Participants, but for which no
timely instructions have been received, in the same proportion as Shares for
which said instructions have been received from Participants, so long as and to
the extent that the SEC continues to interpret the 1940 Act to require pass
through voting privileges for Participants. Neither Company nor any of its
affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. Company reserves the right to vote shares held in any Account in
its own right, to the extent permitted by law. Company shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies or
in the manner required by the Mixed and Shared Funding exemptive order obtained
by AVIF. AVIF will notify Company of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. AVIF
will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular, AVIF either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of Trustees and with whatever
rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Company concerning any decision to elect or not to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY COMPANY AND AFSI.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, Company and AFSI agree to indemnify and hold harmless AVIF, AIM, their respective affiliates, and each person, if any, who controls AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933 Act and each of their respective Trustees and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of Company and AFSI) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to Company or AFSI by or on behalf of AVIF for use in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of Company, AFSI or their respective affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of Company, AFSI or their respective affiliates or persons under their control (including, without limitation, their employees and "Associated Persons," as that term is defined in paragraph (m) of Article I of the NASD's By-Laws), in connection with the sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, or the omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to AVIF, AIM or their respective affiliates by or on behalf of Company, AFSI or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by Company or AFSI to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement, or any material breach of any representation and/or warranty made by Company or AFSI in this Agreement or arise out of or result from any other material breach of this Agreement by Company or AFSI; or
(v) arise as a result of failure by the Contracts issued by Company to qualify as annuity contracts or life insurance contracts under the Code, otherwise than by reason of any Fund's failure to comply with Subchapter M or Section 817(h) of the Code.
(b) Neither Company nor AFSI shall be liable under this Section 12.1 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of that Indemnified Party's reckless disregard of obligations or duties (i) under this Agreement, or (ii) to AVIF.
(c) Neither Company nor AFSI shall be liable under this Section 12.1 with respect to any action against an Indemnified Party unless AVIF or AIM shall have notified Company and AFSI in writing within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify Company and AFSI of any such action shall not relieve Company and AFSI from any liability which they may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 12.1. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, Company and AFSI shall be entitled to participate, at their own expense, in the defense of such action and also shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from Company or AFSI to such Indemnified Party of Company's or AFSI's election to assume the defense thereof, the Indemnified Party will cooperate fully with Company and AFSI and shall bear the fees and expenses of any additional counsel retained by it, and neither Company nor AFSI will be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation.
12.2 OF COMPANY AND AFSI BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e), below, AVIF and AIM agree to indemnify and hold harmless Company, AFSI, their respective affiliates, and each person, if any, who controls Company, AFSI or their respective affiliates within the meaning of Section 15 of the 1933 Act and each of their respective Trustees and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of AVIF and AIM ) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law, or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus or sales literature or advertising of AVIF (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to AVIF, AIM or their respective affiliates by or on behalf of Company, AFSI or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, or in sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of AVIF,
AIM or their respective affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF, AIM, their respective affiliates or persons
under their control (including, without limitation, their
employees and "Associated Persons" as that Term is defined in
Section (n) of Article 1 of the NASD By-Laws), in connection with
the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to Company, AFSI or their respective
affiliates by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF or AIM to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement, or any material breach of any representation and/or warranty made by AVIF or AIM in this Agreement or arise out of or result from any other material breach of this Agreement by AVIF or AIM.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified Parties from and against any and all losses, claims, damages, liabilities (including amounts paid in settlement thereof with, the written consent of AVIF or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may become subject directly or indirectly under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions directly or indirectly result from or arise out of the failure of any Fund to operate as a regulated investment company in compliance with (i) Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of the Code and regulations thereunder, including, without limitation, any income taxes and related penalties, rescission charges, liability under state law to Participants asserting liability against Company pursuant to the Contracts, the costs of any ruling and closing agreement or other settlement with the IRS, and the cost of any substitution by Company of shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that Company reasonably deems necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of such Indemnified Party's reckless disregard of its obligations and duties (i) under this Agreement, or (ii) to Company, AFSI, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and AIM in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF and AIM of any such action shall not relieve
AVIF and AIM from any liability which they may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and AIM will be entitled to participate, at
their own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the
action, which approval shall not be unreasonably withheld. After notice from AVIF or AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall bear the fees and expenses of any additional counsel retained by it, and neither AVIF nor AIM will be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification provisions contained in this Agreement to any individual or entity, including, without limitation, Company, AFSI or any other Participating Insurance Company or any Participant, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from (i) a breach of any representation, warranty, and/or covenant made by Company or AFSI hereunder or by any Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by Company or any Participating Insurance Company to maintain its segregated asset account (which invests in any Fund) as a legally and validly established segregated asset account under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by Company or any Participating Insurance Company to maintain its variable annuity or life insurance contracts (with respect to which any Fund serves as an underlying funding vehicle) as annuity contracts or life insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party referred to in Sections 12.1(c) or 12.2(d) above of participation in or control of any action by the indemnifying Party will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or responsibility, and the indemnifying Party will remain free to contest liability with respect to the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted under and in accordance with Delaware law, without regard for that state's principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, that the Parties are entitled to under federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
(a) "Company Confidential Information" includes but is not limited to all proprietary and confidential information of the Company and its subsidiaries, affiliates and licensees (collectively the Company Protected Parties" for purposes of this Section 18), including without limitation all information regarding the customers of the Company Protected Parties; the numbers, names, addresses, social security numbers or any other personal identifier of such customers; or any information derived therefrom. Company Confidential Information shall not include information which is (a) in or becomes part of the public domain, except when such information is in the public domain due to disclosure by AVIF in violation of this Agreement, (b) demonstrably known to AVIF prior to execution of this Agreement, (c) independently developed by AVIF in the ordinary course of business, outside of this Agreement, or (d) rightfully and lawfully obtained by AVIF from any third party other than Company.
(b) AVIF and AIM agree that the identities of the customers of Company Protected Parties, information maintained regarding such customers, all computer programs and procedures or other information developed or used by Company Protected Parties or any of their employees or agents in connection with Company's performance of its duties under this Agreement are the valuable property of Company Protected Parties.
(c) Neither AIM nor AVIF may use or disclosure Company Confidential Information for any purpose other than to carry out the purpose for which Company Confidential Information was provided to AIM or AVIF as set forth in the Agreement or as required by law or judicial process; and AIM and AVIF agree to cause all their employees, agents and representatives, or any other party to whom AIM or AVIF may provide access to or disclose Company Confidential Information to limit the use and disclosure of Company Confidential Information to that purpose.
(d) "AVIF Confidential Information" includes but is not limited to all proprietary and confidential information of the AVIF Company and its subsidiaries, affiliates and licensees (collectively the "AVIF Protected Parties" for purposes of this Section 18), including without limitation all information regarding the customers of the Protected Parties; or the accounts, account numbers, names, addresses, social security numbers or any other personal identifier of such
customers; or any information derived therefrom. AVIF Confidential Information shall not include information which is (a) in or becomes part of the public domain, except when such information is in the public domain due to disclosure by Company in violation of this Agreement, (b) demonstrably known to Company prior to execution of this Agreement, (c) independently developed by Company in the ordinary course of business outside of this Agreement, or (d) rightfully and lawfully obtained by Company from any third party other than AVIF.
(e) Company agrees that the identities of the customers of AVIF, information maintained regarding such customers, all computer programs and procedures or other information developed or used by AVIF Protected Parties or any of their employees or agents in connection with AVIF's performance of its duties under this Agreement are the valuable property of AVIF Protected Parties.
(f) Company may not use or disclose AVIF Confidential Information for any purpose other than to carry out the purpose for which AVIF Confidential Information was provided to Company as set forth in the Agreement or as required by law or judicial process; and Company agrees to cause all its employees, agents and representatives, or any other party to whom Company may provide access to or disclose AVIF Confidential Information to limit the use and disclosure of AVIF Confidential Information.
(g) Each party agrees to implement appropriate measures designed to ensure the security and confidentiality of such confidential information, to protect such confidential information against any anticipated threats or hazards to the security or integrity of such confidential information, and to protect against unauthorized access to, or use of, such confidential information that could result in substantial harm or inconvenience to any party's customer; each party further agrees to cause all their agents, representatives or subcontractors of, or any other party to whom such party may provide access to or disclose such confidential information to implement appropriate measures designed to meet the objectives set forth in this Section 18.
(h) Each party acknowledges that any breach of the agreements in this
Section 18 may result in immediate and irreparable harm for which there may be
no adequate remedy at law and agree that in the event of such a breach, the
other parties may be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate. This Section 18 shall survive termination of
this Agreement.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) AIM, or its affiliates, owns all right, title and interest in and to the name, trademark and service mark "AIM" and such other tradenames, trademarks and service marks as may be set forth on Schedule B, as amended time to time by written notice from AIM to Company (the "AIM licensed marks" or the "licensor's licensed marks") and is authorized to use and to license other persons to use such marks. AIM hereby grants to Company and its affiliates a non-exclusive license to use the AIM licensed marks in connection with Company's performance of the services contemplated under this Agreement, subject to the terms and conditions set forth in this Section 19.
(b) The grant of license by AIM (a "licensor") to Company and its affiliates (the "licensee") shall terminate automatically upon termination of this Agreement. Upon automatic
termination, the licensee shall cease to use the licensor's licensed marks, except that Company shall have the right to continue to service any outstanding Contracts bearing any of the AIM licensed marks. Upon AIM's elective termination of this license, Company and its affiliates shall immediately cease to issue any new annuity or life insurance contracts bearing any of the AIM licensed marks and shall likewise cease any activity which suggests that it has any right under any of the AIM licensed marks or that it has any association with AIM, except that Company shall have the right to continue to service outstanding Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the licensor for the public release by such licensee of any materials bearing the licensor's licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that a licensee submit samples of any materials bearing any of the licensor's licensed marks which were previously approved by the licensor but, due to changed circumstances, the licensor may wish to reconsider. If, on reconsideration, or on initial review, respectively, any such samples fail to meet with the written approval of the licensor, then the licensee shall immediately cease distributing such disapproved materials. The licensor's approval shall not be unreasonably withheld, and the licensor, when requesting reconsideration of a prior approval, shall assume the reasonable expenses of withdrawing and replacing such disapproved materials. The licensee shall obtain the prior written approval of the licensor for the use of any new materials developed to replace the disapproved materials, in the manner set forth above
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the best of the knowledge of the licensee, the licensor's licensed marks are valid and enforceable trademarks and/or service marks and that such licensee does not own the licensor's licensed marks and claims no rights therein other than as a licensee under this Agreement; (ii) agrees never to contend otherwise in legal proceedings or in other circumstances; and (iii) acknowledges and agrees that the use of the licensor's licensed marks pursuant to this grant of license shall inure to the benefit of the licensor.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all appropriate governmental authorities (including, without limitation, the SEC, the NASD and state insurance regulators) and will permit each other and such authorities reasonable access to its books and records (including copies thereof) in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.
SECTION 21. FORCE MAJEURE
Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use
all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for so long as, in any given case, the force or circumstances making performance impossible shall exist.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below.
ATTEST: AIM VARIABLE INSURANCE FUNDS
By: /s/ Jim Coppedge By: /s/ John M. Zerr
--------------------------------- ------------------------------------
Name: Jim Coppedge Name: John M. Zerr
Title: Assistant Secretary Title: Senior Vice President
ATTEST: A I M DISTRIBUTORS, INC.
By: /s/ P. Michelle Grace By: /s/ Gene L. Needles
--------------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
ATTEST: AMERICAN CENTURION LIFE INSURANCE
COMPANY, on behalf of itself and its
separate accounts
IDS LIFE INSURANCE COMPANY OF NEW YORK,
on behalf of itself and its separate
accounts
AMERIPRISE FINANCIAL SERVICES, INC.
By: //s Betsy Hannum By: /s/ Patrick H. Carey, III
--------------------------------- ------------------------------------
Name: Betsy Hannum Name: Patrick H. Carey, III,
Title: Assistant Secretary of each Vice President of each Company
Company
|
SCHEDULE A
AIM VARIABLE INSURANCE FUNDS
Shares of each class of the following funds are currently available for purchase by the Accounts:
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
AMERICAN CENTURION LIFE ASSURANCE COMPANY ACCOUNTS AND CONTRACTS
ACL Variable Annuity Account 1:
Privileged Assets(R) Select Annuity File No. 333-00041)
ACL Variable Annuity Account 2:
ACL Personal Portfolio Plus(2) (File No. 333-00519)(no longer offered);
ACL Personal Portfolio Plus (File No. 333-00519)(no longer offered);
AEL Personal Portfolio (File No. 33-54471)(no longer offered);
RiverSource Endeavor Select(SM) Variable Annuity (File No. 333-101051);
RiverSource Innovations(SM) Select Variable Annuity (File No. 333-101051);
IDS LIFE INSURANCE COMPANY OF NEW YORKACCOUNTS AND CONTRACTS
IDS Life of New York Variable Annuity Account:
RiverSource(SM) Retirement Advisor 4 Advantage Variable Annuity
(File No. 333-91691)
RiverSource(SM) Retirement Advisor 4 Select Variable Annuity
(File No. 333-91691)
RiverSource(SM) Retirement Advisor 4 Access Variable Annuity
(File No. 333-91691)
RiverSource(SM) Retirement Advisor Advantage Plus(SM) Variable Annuity
(File No. 333-91691)
RiverSource(SM) Retirement Advisor Advantage(SM) Variable Annuity
(File No. 333-91691)
RiverSource(SM) Retirement Advisor Advantage(SM) Variable Annuity - Band 3
(File No. 333-91691)
RiverSource(SM) Retirement Advisor Select Plus(SM) Variable Annuity
(File No. 333-91691)
RiverSource(SM) Retirement Advisor Select(SM) Variable Annuity
(File No. 333- 91691)
RiverSource(SM) Retirement Advisor Variable Annuity(R) (File No. 333-91691) RiverSource(SM) Retirement Advisor Variable Annuity(R) - Band 3
(File No. 333-91691)
IDS Life Flexible Portfolio Annuity (File No. 333-03867)
IDS Life of New York Account 8:
RiverSource(SM) Succession Select Variable Life Insurance(SM)
(File No. 333-42257)
RiverSource(SM) Variable Second-To-Die Life Insurance(SM) (File No. 333-42257) RiverSource(SM) Variable Universal Life III(SM) (File No. 333-44644) RiverSource(SM) Variable Universal Life Insurance(SM) (File No. 333-15290) RiverSource(SM) Variable Universal Life IV (File No. 333-44644) RiverSource(SM) Variable Universal Life IV - Estate Series (File No. 333-44644)
SCHEDULE B
AIM and Design
(AIM INVESTMENTS(SM) LOGO)
AMENDED AND RESTATED
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS
A I M DISTRIBUTORS, INC.,
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AMERICAN PARTNERS LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
IDS LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AMERIPRISE FINANCIAL SERVICES, INC.
TABLE OF CONTENTS
Section A. Amendment and Restatement; Form of Agreement.................... 2 A.1 Acknowledgement of Pending Merger and Consent to Transfer........ 2 A.2 Restatement of Prior Agreements.................................. 2 Section 1. Available Funds................................................. 3 1.1 Availability..................................................... 3 1.2 Addition, Deletion or Modification of Funds...................... 3 1.3 No Sales to the General Public................................... 4 1.4 Money Laundering Compliance...................................... 4 Section 2. Processing Transactions......................................... 4 2.1 Timely Pricing and Orders........................................ 4 2.2 Timely Payments.................................................. 4 2.3 Applicable Price................................................. 5 2.4 Dividends and Distributions...................................... 5 2.5 Book Entry....................................................... 5 2.6 Control of Market Timing Activity................................ 5 Section 3. Costs and Expenses.............................................. 7 3.1 General.......................................................... 7 3.2 Registration..................................................... 7 3.3 Other (Non-Sales-Related)........................................ 7 3.4 Other (Sales-Related)............................................ 8 3.5 Parties To Cooperate............................................. 8 Section 4. Legal Compliance................................................ 8 4.1 Tax Laws......................................................... 8 4.2 Insurance and Certain Other Laws................................. 11 4.3 Securities Laws.................................................. 11 4.4 Notice of Certain Proceedings and Other Circumstances............ 12 4.5 Company To Provide Documents; Information About AVIF............. 13 4.6 AVIF To Provide Documents; Information About Company............. 14 Section 5. Mixed and Shared Funding........................................ 15 5.1 General.......................................................... 15 5.2 Disinterested Directors.......................................... 15 5.3 Monitoring for Material Irreconcilable Conflicts................. 15 5.4 Conflict Remedies................................................ 16 5.5 Notice to Company................................................ 17 5.6 Information Requested by Board of Directors...................... 17 5.7 Compliance with SEC Rules........................................ 18 5.8 Other Requirements............................................... 18 Section 6. Termination..................................................... 18 6.1 Events of Termination............................................ 18 6.2 Notice Requirement for Termination............................... 19 6.3 Funds To Remain Available........................................ 19 6.4 Survival of Warranties and Indemnifications...................... 20 6.5 Continuance of Agreement for Certain Purposes.................... 20 Section 7. Parties To Cooperate Respecting Termination..................... 20 |
Section 8. Assignment...................................................... 20 Section 9. Notices......................................................... 20 Section 10. Voting Procedures.............................................. 21 Section 11. Foreign Tax Credits............................................ 21 Section 12. Indemnification................................................ 22 12.1 Of AVIF and AIM by Company and AFSI.............................. 22 12.2 Of Company and AFSI by AVIF and AIM.............................. 24 12.3 Effect of Notice................................................. 26 12.4 Successors....................................................... 26 Section 13. Applicable Law................................................. 26 Section 14. Execution in Counterparts...................................... 26 Section 15. Severability................................................... 27 Section 16. Rights Cumulative.............................................. 27 Section 17. Headings....................................................... 27 Section 18. Confidentiality................................................ 27 Section 19. Trademarks and Fund Names...................................... 28 Section 20. Parties to Cooperate........................................... 29 Section 21. Force Majeure.................................................. 29 |
PARTICIPATION AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, made and entered into this 17th day of April, 2006, by and among the following parties:
- AMERICAN ENTERPRISE LIFE INSURANCE COMPANY ("American Enterprise Life"), organized under the laws of the State of Indiana on its own behalf and on behalf of each separate account of the Company named in Schedule A to this Agreement, as may be amended from time to time (each account referred to as the "Account");
- AMERICAN PARTNERS LIFE INSURANCE COMPANY ("American Partners Life"), organized under the laws of the State of Arizona on its own behalf and on behalf of each separate account of the Company named in Schedule A to this Agreement, as may be amended from time to time (each account referred to as the "Account");
- IDS LIFE INSURANCE COMPANY ("IDS Life"), organized under the laws of the State of Minnesota, on its own behalf and on behalf of each separate account of the Company named in Schedule A to this Agreement, as may be amended from time to time (each account referred to as the "Account");
(Each of American Enterprise Life, American Partners Life and IDS Life are hereinafter also referred to as "Company")
- AMERIPRISE FINANCIAL SERVICES, INC., organized under the laws of Delaware ("AFSI"), and an affiliate of American Enterprise Life, American Partners Life, and IDS Life, and the principal underwriter of Contracts issued by American Enterprise Life and American Partners Life;
- AIM VARIABLE INSURANCE FUNDS, a Delaware trust ("AVIF");
- A I M DISTRIBUTORS, INC., a Delaware Corporation ("AIM")
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the 1940 Act"); and
WHEREAS, AVIF currently consists of twenty-five separate series ("Series"), shares ("Shares") each of which are registered under the Securities Act of 1933, as amended (the "1933 Act") and are currently sold to one or more separate accounts of life insurance companies to fund benefits under variable annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto as the Parties hereto may amend from time to time (each a "Fund"; reference herein to "AVIF" includes
reference to each Fund, to the extent the context requires) available for purchase by the Accounts; and
WHEREAS, Company will be the issuer of certain variable annuity contracts and/or variable life insurance contracts ("Contracts") as set forth on Schedule A hereto, as the Parties hereto may amend from time to time, which Contracts (hereinafter collectively, the "Contracts"), if required by applicable law, will be registered under the 1933 Act; and
WHEREAS, Company will fund the Contracts through the Accounts, each of which may be divided into two or more subaccounts ("Subaccounts"; reference herein to an "Account" includes reference to each Subaccount thereof to the extent the context requires); and
WHEREAS, Company will serve as the depositor of the Accounts, each of which is registered as a unit investment trust investment company under the 1940 Act (or exempt therefrom), and the security interests deemed to be issued by the Accounts under the Contracts will be registered as securities under the 1933 Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations, Company intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, AFSI is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, AIM is a broker-dealer registered with the SEC under the 1934 Act and a member in good standing of the NASD;
NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereto agree as follows:
SECTION A. AMENDMENT AND RESTATEMENT; FORM OF AGREEMENT
A.1 FORM OF AGREEMENT
The Parties have agreed to enter into this form of agreement in view of the planned merger of both American Enterprise Life and American Partners Life with and into IDS Life (each merger is collectively, the "Merger") and the "intact transfer" (the "Transfer") of the Accounts of American Enterprise Life and American Partners Life to IDS Life by operation of law and incident to the Merger, on December 31, 2006 at 10:59:59 p.m. Central Time (the "Effective Time"), subject to all necessary regulatory approvals being obtained in connection with the Merger and the Transfer, and the re-naming of IDS Life to RiverSource Life Insurance Company simultaneously with the Merger. On and after the Effective Time, all references in this Agreement and its Schedules to "American Enterprise Life", "American Partners Life" and "IDS Life" shall mean and refer to RiverSource Life Insurance Company. Until the Effective Time, all references in this Agreement and its Schedules to "American Enterprise Life","American Partners Life", "IDS Life". and "Company" shall refer to
each such Party individually, as if the same had entered into a agreement with
AVIF and AIM.
A.2 AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENTS
This Agreement amends and restates the following participation agreements as of the date first stated above by and among each Company, AFSI, AVIF and AIM with respect to all investments by each Company and its Accounts
(a) Participation Agreement, dated as of October 30, 1997, by and among
American Enterprise Life, AVIF and AIM, as amended by the following documents:
(a) Amendment to Participation Agreement, dated as of October 30, 1997; (b)
Amendment to Participation Agreement, dated as of January 1, 2000; (c) Amendment
to Participation Agreement, dated as of May 1, 2002; (d) Amendment to
Participation Agreement dated January 1, 2003; (e) Amendment to Participation
Agreement dated April 30, 2004; and (f) Amendment to Participation Agreement
dated September 16, 2004.
(b) Participation Agreement, dated as of April 30, 2004, by and among American Partners Life, AVIF and AIM.
(c) Participation Agreement, dated as of October 7, 1996, by and among IDS Life, AVIF and AIM, as amended by the following documents: (a) Amendment to Participation Agreement, dated November 11, 1997; (b) Amendment to Participation Agreement, dated as of August 13, 2001; (c) Amendment to Participation Agreement, dated as of May 1, 2002; (d) Amendment to Participation Agreement, dated January 1, 2003; (e) Amendment to Participation Agreement, dated September 30, 2003; and (f) Amendment to Participation Agreement, dated April 30, 2004.
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to {each??} Company for purchase and redemption at net asset value and with no sales charges, subject to the terms and conditions of this Agreement. The Board of Trustees of AVIF (the "Board") may refuse to sell Shares of any Fund to any person, or suspend or terminate the offering of Shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Board acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to provide additional funding media for the Contracts, or to delete, combine, or modify existing Funds, by amending Schedule A hereto. Upon such amendment to Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall include a reference to any such additional Fund. Schedule A, as amended from time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or will be sold to the general public.
1.4 MONEY LAUNDERING COMPLIANCE.
Each Party represents and warrants that it shall comply with all the applicable laws and regulations designed to prevent money laundering including without limitation the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT ACT), and if required by such laws or regulations will share information with each other Party about individuals, entities, organizations and countries suspected of possible terrorist or money laundering activities in accordance with Section 314(b) of the USA PATRIOT ACT.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide Company with the net asset value per Share for each Fund by 5:30 p.m. Central Time on each Business Day. As used herein, "Business Day" shall mean any day on which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF calculates the Fund's net asset value, and (iii) Company is open for business.
(b) Company will use the data provided by AVIF each Business Day pursuant to paragraph (a) immediately above to calculate Account unit values and to process transactions that receive that same Business Day's Account unit values. Company will perform such Account processing the same Business Day, and will place corresponding orders to purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following Business Day; provided, however, that AVIF shall provide additional time to Company in the event that AVIF is unable to meet the 5:30 p.m. time stated in paragraph (a) immediately above. Such additional time shall be equal to the additional time that AVIF takes to make the net asset values available to Company.
(c) With respect to payment of the purchase price by Company and of redemption proceeds by AVIF, Company and AVIF shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information (as determined under SEC guidelines), Company shall be entitled to an adjustment to the number of Shares purchased or redeemed to reflect the correct net asset value per Share. Any material error in the calculation or reporting of net asset value per Share, dividend or capital gain information shall be reported promptly upon discovery to Company.
2.2 TIMELY PAYMENTS.
Company will wire payment for net purchases to a custodial account designated by AVIF by 1:00 p.m. Central Time on the same day as the order for Shares is placed, to the extent practicable. AVIF will wire payment for net redemptions to an account designated by Company by 1:00 p.m. Central Time on the same day as the Order is placed, to the extent practicable, but in any event within five (5) calendar days after the date the order is placed in order to enable Company to pay redemption proceeds within the time specified in Section 22(e) of the 1940 Act or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that Company receives prior to the
close of regular trading on the New York Stock Exchange (or such other time set
by the Board for purposes of determining the current net asset value of a Fund
in accordance with Rule 22c-1 under the 1940 Act) on a Business Day will be
executed at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the orders. For purposes of this
Section 2.3(a), Company shall be the designated agent of AVIF for receipt of
orders relating to Contract transactions, in accordance with all applicable
provisions of Section 22(c) and Rule 22c-1 under the 1940 Act, on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
provided that AVIF receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by Company will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written confirmation) on or prior to the payment date to Company of any income dividends or capital gain distributions payable on the Shares of any Fund. Company hereby elects to reinvest all dividends and capital gains distributions in additional Shares of the corresponding Fund at the ex-dividend date net asset values until Company otherwise notifies AVIF in writing, it being agreed by the Parties that the ex-dividend date and the payment date with respect to any dividend or distribution will be the same Business Day. Company reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock certificates will not be issued to Company. Shares ordered from AVIF will be recorded in an appropriate title for Company, on behalf of its Account.
2.6 CONTROL OF MARKET TIMING ACTIVITY.
(a) The Company acknowledges that AVIF has adopted policies and procedures reasonably designed to prevent frequent or excessive purchases, exchanges and redemptions of Fund Shares in quantities great enough to disrupt orderly management of the corresponding Fund's investment portfolio. Disclosure pertaining to these policies are contained in the current prospectus for the Fund, as currently required by applicable federal securities law.
(b) AVIF acknowledges that the Company, on behalf of its Account, has adopted policies and procedures reasonably designed to detect and deter frequent transfers of Contract value among the subaccounts of the Account including those investing in the Funds which are available as investment options under the Contracts. These policies and procedures are described in the current prospectuses of the Account through which the Contracts are offered.
(c) The Company will cooperate with AIM's reasonable requests in taking steps to deter and detect such transfers by Contract owners. In connection therewith, and in compliance with Rule 22c-2 under the 1940 Act, the Company will from time-to-time provide AIM, upon AIM's request, with the taxpayer identification number ("TIN") of any or all Contract owners and the amount, date, and transaction type (purchase or redemption) of every purchase or redemption of shares of AVIF held through an Account maintained by the Company during the period covered by the request.
(i) Requests made pursuant to this Section 2.6(c) must set forth a specific time period, not to exceed ninety (90) days from the date of the request, for which the transaction is sought. AIM may request transaction information older than ninety (90) days from the date of the request as it deems necessary to investigate compliance with policies established by AVIF for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by AVIF.
(ii) The Company agrees to transmit the requested information that is on its books and records to the AIM or its designee promptly, but in any event not later than ten (10) business days, after receipt of a request. If the requested information is not on the company's books and records, the Company agrees to: (A) provide or arrange to provide to AIM the requested information from Contract owners who hold an account with an indirect intermediary; or (B) if directed by AIM, block further purchases of AVIF shares from such indirect intermediary. In such instance, the Company agrees to inform AIM whether it plans to perform (A) or (B). Responses required by this Paragraph must be communicated in writing and in a format mutually agreed upon by the Company and AIM. To the extent practicable, the format for any transaction information provided to AIM should be consistent with the NSCC Standardized Data Reporting Format. For purposes of this provision, the term indirect intermediary has the same meaning as in Rule 22c-2 under the 1940 Act.
(iii) The Company agrees to execute written instructions from AIM to restrict or prohibit further purchases of AVIF shares as directed by a Contract owner that has been identified by AIM has having engaged in transactions of AVIF's shares that violate policies established by AVIF for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by AVIF.
(iv) Instructions submitted by AIM to the Company, pursuant to this Section 2.6(c) must include the TIN and the specific restriction(s) to be executed.
(v) The Company agrees to execute instructions received by the
Company from AIM, pursuant to this Section 2.6(c) as soon as
reasonably practicable, but not later than seven (7) business days
after receipt of the instructions by the Company. The Company agrees
to provide AIM with written confirmation that the instructions have
been executed. The Company agrees to provide this written confirmation
as soon as reasonably practicable, but in no event, later than ten
(10) business days after the instructions have been executed.
(vi) When AIM has given the Company a written instruction pursuant to Section 2.6(c)(iii) to restrict or prohibit further purchases by a Contract owner of AVIF shares, AIM may request and the Company will provide the name or other identifier of any investment professional employed by a broker dealer affiliate of the Company who is listed on the Company's records as the agent of record for the restricted Contract. If the restricted Contract was sold by a broker dealer unaffiliated with the Company, the Company will provide AIM with the name of the selling broker dealer.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear all expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
(a) AVIF will bear the cost of its registering as a management investment company under the 1940 Act and registering its Shares under the 1933 Act, and keeping such registrations current and effective; including, without limitation, the preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with respect to AVIF and its Shares and payment of all applicable registration or filing fees with respect to any of the foregoing.
(b) Company will bear the cost of registering, to the extent required, each Account as a unit investment trust under the 1940 Act and registering units of interest under the Contracts under the 1933 Act and keeping such registrations current and effective; including, without limitation, the preparation and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices with respect to each Account and its units of interest and payment of all applicable registration or filing fees with respect to any of the foregoing.
3.3 OTHER (NON-SALES-RELATED).
(a) AVIF will bear, or arrange for others to bear, the costs of preparing, filing with the SEC and setting for printing AVIF's prospectus, statement of additional information and any amendments or supplements thereto (collectively, the "AVIF Prospectus"), periodic reports to shareholders, AVIF proxy material and other shareholder communications.
(b) Company will bear the costs of preparing, filing with the SEC and setting for printing each Account's prospectus, statement of additional information and any amendments or supplements thereto (collectively, the "Account Prospectus"), any periodic reports to Contract owners, annuitants, insureds or participants (as appropriate) under the Contracts (collectively, "Participants"), voting instruction solicitation material, and other Participant communications.
(c) Company will print in quantity and deliver to existing Participants the documents described in Section 3.3(b) above and the prospectus provided by AVIF in camera ready or computer diskette form. AVIF will print the AVIF statement of additional information, proxy materials relating to AVIF and periodic reports of AVIF.
3.4 OTHER (SALES-RELATED).
Company will bear the expenses of distribution. These expenses would include by way of illustration, but are not limited to, the costs of distributing to Participants the following documents, whether they relate to the Account or AVIF: prospectuses, statements of additional information, proxy materials and periodic reports. These costs would also include the costs of preparing, printing, and distributing sales literature and advertising relating to the Funds, as well as filing such materials with, and obtaining approval from, the SEC, NASD, any state insurance regulatory authority, and any other appropriate regulatory authority, to the extent required.
3.5 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in arranging to print, mail and/or deliver, in a timely manner, combined or coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and represents that it will use its best efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF will notify Company immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and to maintain each Fund's compliance with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will notify Company immediately upon having
a reasonable basis for believing that a Fund has ceased to so comply or that a Fund might not so comply in the future. In the event of a breach of this Section 4.1(b) by AVIF, it will take all reasonable steps to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Section 1.817-5 of the regulations under the Code.
(c) Company agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of Company or, to American Partners Life's knowledge, of any Participant, that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or Company otherwise becomes aware of any facts that could give rise to any claim against AVIF or its affiliates as a result of such a failure or alleged failure:
(i) Company shall promptly notify AVIF of such assertion or potential claim (subject to the Confidentiality provisions of Section 18 as to any Participant);
(ii) Company shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure;
(iii) Company shall use its best efforts to minimize any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS that such failure was inadvertent;
(iv) Company shall permit AVIF, its affiliates and their legal and accounting advisors to participate in any conferences, settlement discussions or other administrative or judicial proceeding or contests (including judicial appeals thereof) with the IRS, any Participant or any other claimant regarding any claims that could give rise to liability to AVIF or its affiliates as a result of such a failure or alleged failure; provided, however, that Company will retain control of the conduct of such conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by Company to the IRS, any Participant or any other claimant in connection with any of the foregoing proceedings or contests (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)), (a) shall be provided by Company to AVIF (together with any supporting information or analysis); subject to the confidentiality provisions of Section 18, at least ten (10) business days or such shorter period to which the Parties hereto agree prior to the day on which such proposed materials are to be submitted, and (b) shall not be submitted by Company to any such person without the express written consent of AVIF which shall not be unreasonably withheld;
(vi) Company shall provide AVIF or its affiliates and their accounting and legal advisors with such cooperation as AVIF shall reasonably request (including, without limitation, by permitting AVIF and its accounting and legal advisors
to review the Company's relevant books and records) in order to facilitate review by AVIF or its advisors of any written submissions provided to it pursuant to the preceding clause or its assessment of the validity or amount of any claim against its arising from such a failure or alleged failure;
(vii) Company shall not with respect to any claim of the IRS or any Participant that would give rise to a claim against AVIF or its affiliates (a) compromise or settle any claim, (b) accept any adjustment on audit, or (c) forego any allowable administrative or judicial appeals, without the express written consent of AVIF or its affiliates, which shall not be unreasonably withheld, provided that Company shall not be required, after exhausting all administrative penalties, to appeal any adverse judicial decision unless AVIF or its affiliates shall have provided an opinion of independent counsel to the effect that a reasonable basis exists for taking such appeal; and provided further that the costs of any such appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if Company fails to comply with any of the foregoing clauses (i) through (vii), and such failure could be shown to have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, Company may,
in its discretion, authorize AVIF or its affiliates to act in the name of
Company in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall Company have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) Company represents and warrants that the Contracts currently are and will be treated as annuity contracts or life insurance contracts under applicable provisions of the Code and that it will use its best efforts to maintain such treatment; Company will notify AVIF immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future.
(e) Company represents and warrants that each Account is a "segregated asset account" and that interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817 of the Code and the regulations thereunder. Company will use its best efforts to continue to meet such definitional requirements, and it will notify AVIF immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best efforts to comply with any applicable state insurance laws or regulations, to the extent specifically requested in writing by Company, including, the furnishing of information not otherwise available to Company which is required by state insurance law to enable Company to obtain the authority needed to issue the Contracts in any applicable state.
(b) Company represents and warrants that (i) it is an insurance company duly organized, validly existing and in good standing under applicable state law and has full corporate power, authority and legal right to execute, deliver and perform its duties and comply with its obligations under this Agreement, (ii) it has legally and validly established and maintains each Account as a segregated asset account under applicable state insurance law and the regulations thereunder, and (iii) the Contracts comply in all material respects with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is lawfully organized, validly existing, and in good standing under the laws of the State of Delaware and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) Company represents and warrants that (i) interests in each Account pursuant to the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act, (ii) the Contracts will be duly authorized for issuance and sold in compliance with all applicable federal and state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and Arizona law, (iii) each Account is and will remain registered under the 1940 Act, to the extent required by the 1940 Act, (iv) each Account does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, to the extent required, (v) each Account's 1933 Act registration statement relating to the Contracts, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder, (vi) Company will amend the registration statement for its Contracts under the 1933 Act and for its Accounts under the 1940 Act from time to time as required in order to effect the continuous offering of its Contracts or as may otherwise be required by applicable law, and (vii) each Account Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and duly authorized for issuance and sold in compliance with Delaware law, (ii) AVIF is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend the registration statement for its Shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its Shares, (iv) AVIF does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act registration statement, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and (vi) AVIF's Prospectus will
at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in accordance with the laws of any state or other jurisdiction if and to the extent reasonably deemed advisable by AVIF.
(d) AVIF represents and warrants that all of its trustees, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Fund are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF or AIM will immediately notify Company of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to AVIF's registration statement under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such registration statement or AVIF Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of AVIF's Shares, or (iv) any other action or circumstances that may prevent the lawful offer or sale of Shares of any Fund in any state or jurisdiction, including, without limitation, any circumstances in which (a) such Shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law, or (b) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by American Partners Life. AVIF and AIM will make every reasonable effort to prevent the issuance, with respect to any Fund, of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
(b) Company or AFSI will immediately notify AVIF of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to each Account's registration statement under the 1933 Act relating to the Contracts or each Account Prospectus, (ii) any request by the SEC for any amendment to such registration statement or Account Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of each Account's interests pursuant to the Contracts, or (iv) any other action or circumstances that may prevent the lawful offer or sale of said interests in any state or jurisdiction, including, without limitation, any circumstances in which said interests are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law. Company and AFSI will make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
4.5 COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) Company will provide to AVIF or its designated agent at least one (1) complete copy of all SEC registration statements, Account Prospectuses, reports, any preliminary and final voting instruction solicitation material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to each Account or the Contracts, contemporaneously with the filing of such document with the SEC or other regulatory authorities.
(b) Company will provide to AVIF or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which AVIF or any of its affiliates is named, at least five (5) Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if AVIF or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. AVIF hereby designates A I M as the entity to receive such sales literature, until such time as AVIF appoints another designated agent by giving notice to Company in the manner required by Section 9 hereof.
(c) Neither Company nor any of its affiliates, will give any information or
make any representations or statements on behalf of or concerning AVIF or its
affiliates in connection with the sale of the Contracts other than (i) the
information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) Company shall adopt and implement procedures reasonably designed to ensure that information concerning AVIF and its affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither AVIF nor any of its affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT COMPANY.
(a) AVIF will provide to Company at least one (1) complete copy of all SEC registration statements, AVIF Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to AVIF or the Shares of a Fund, contemporaneously with the filing of such document with the SEC or other regulatory authorities.
(b) AVIF will provide to Company camera ready or computer diskette copies of all AVIF prospectuses and printed copies, in an amount specified by American Partners Life, of AVIF statements of additional information, proxy materials, periodic reports to shareholders and other materials required by law to be sent to Participants who have allocated any Contract value to a Fund. AVIF will provide such copies to Company in a timely manner so as to enable Company to print and distribute such materials within the time required by law to be furnished to Participants.
(c) AVIF will provide to Company or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which Company, or any of its respective affiliates is named, or that refers to the Contracts, at least five (5) Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if Company or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. Company shall receive all such sales literature until such time as it appoints a designated agent by giving notice to AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning Company, each Account, or the Contracts other than (i) the information or representations contained in the registration statement, including each Account Prospectus contained therein, relating to the Contracts, as such registration statement and Account Prospectus may be amended from time to time; or (ii) in published reports for the Account or the Contracts that are in the public domain and approved by Company for distribution; or (iii) in sales literature or other promotional material approved by Company or its affiliates, except with the Company's express written permission .
(e) AVIF shall cause its principal underwriter to adopt and implement procedures reasonably designed to ensure that information concerning Company, and its respective affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither Company, nor any of its respective affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain provisions of the 1940 Act and rules thereunder so that AVIF may be available for investment by certain other entities, including, without limitation, separate accounts funding variable annuity contracts or variable life insurance contracts, separate accounts of insurance companies unaffiliated with Company, and trustees of qualified pension and retirement plans (collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC has imposed terms and conditions for such orders that are substantially identical to many of the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies Company that, in the event that AVIF implements Mixed and Shared Funding, it may be appropriate to include in the prospectus pursuant to which a Contract is offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED TRUSTEES.
AVIF agrees that its Board shall at all times consist of trustees a majority of whom (the "Disinterested Trustees") are not interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the rules thereunder and as modified by any applicable orders of the SEC, except that if this condition is not met by reason of the death, disqualification, or bona fide resignation of any director, then the operation of this condition shall be suspended (a) for a period of forty-five (45) days if the vacancy or vacancies may be filled by the Board; (b) for a period of sixty (60) days if a vote of shareholders is required to fill the vacancy or vacancies; or (c) for such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board will monitor for the existence of any material irreconcilable conflict between the interests of the Participants in all separate accounts of life insurance companies utilizing AVIF ("Participating Insurance Companies"), including each Account, and participants in all qualified retirement and pension plans investing in AVIF ("Participating Plans"). Company agrees to inform the Board of AVIF of the existence of or any potential for any such material irreconcilable conflict of which it is aware. The concept of a "material irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may arise for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract and variable life insurance contract Participants or by Participants of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders of the type referred to in Section 5.1 hereof, Company will assist the Board in carrying out its responsibilities by providing the Board with all information reasonably necessary for the Board to consider any issue raised, including information as to a decision by Company to disregard voting instructions of Participants. Company's responsibilities in connection with the foregoing shall be carried out with a view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of the Board or a majority of the Disinterested Trustees that a material irreconcilable conflict exists, Company will, if it is a Participating Insurance Company for which a material irreconcilable conflict is relevant, at its own expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts from AVIF or any Fund and reinvesting such assets in a different investment medium, including another Fund of AVIF, or submitting the question whether such segregation should be implemented to a vote of all affected Participants and, as appropriate, segregating the assets of any particular group (e.g., annuity Participants, life insurance Participants or all Participants) that votes in favor of such segregation, or offering to the affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type defined as a "management company" in Section 4(3) of the 1940 Act or a new separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of Company's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, Company may be required, at AVIF's election, to withdraw each Account's investment in AVIF or any Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six (6) months after AVIF gives notice to Company that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by Company for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to Company conflicts with the majority of other state regulators, then Company will withdraw each Account's investment in AVIF within six (6) months after AVIF's Board informs Company that it has determined that such decision has created a material irreconcilable conflict, and until such withdrawal AVIF shall continue to accept and implement orders by Company for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) Company agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out at its expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will determine whether or not any proposed action adequately remedies any material irreconcilable conflict. In no event, however, will AVIF or any of its affiliates be required to establish a new funding medium for any Contracts. Company will not be required by the terms hereof to establish a new funding medium for any Contracts if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict.
5.5 NOTICE TO COMPANY.
AVIF will promptly make known in writing to Company the Board's determination of the existence of a material irreconcilable conflict, a description of the facts that give rise to such conflict and the implications of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF TRUSTEES.
Company and AVIF (or its investment adviser) will at least annually submit to the Board of AVIF such reports, materials or data as the Board may reasonably request so that the Board may fully carry out the obligations imposed upon it by the provisions hereof or any exemptive order granted by the SEC to permit Mixed and Shared Funding, and said reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board. All reports received by the Board of potential or existing conflicts, and all Board actions with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and conditions thereof and that the terms of this Section 5 shall be deemed modified if and only to the extent required in order also to comply with the terms and conditions of such exemptive relief that is afforded by any of said rules that are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and Participating Plan enter into an agreement with AVIF that contains in substance the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the Fund, upon six (6) months advance written notice to the other parties, or, if later, upon receipt of any required exemptive relief from the SEC, unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against Company or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding American Partners Life's obligations under this Agreement or related to the sale of the Contracts, the operation of each Account, or the purchase of Shares, if, in each case, AVIF reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of Company upon institution of formal proceedings against AVIF, its principal underwriter, or its investment adviser by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding AVIF's obligations under this Agreement or related to the operation or management of AVIF or the purchase of AVIF Shares, if, in each case, Company reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on Company, or the Subaccount corresponding to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are not registered and, in all material respects, issued and sold in accordance with any applicable federal or state law, or (ii) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by Company; or
(e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of Company if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if Company reasonably believes that the Fund may fail to so qualify; or
(g) at the option of Company if the Fund fails to comply with Section 817(h) of the Code or with successor or similar provisions, or if Company reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by Company cease to qualify as annuity contracts or life insurance contracts under the Code (other than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the Code) or if interests in an Account under the Contracts are not registered, where required, and, in all material respects, are not issued or sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the Party terminating this Agreement gives prior written notice to the other Party to this Agreement of its intent to terminate, and such notice shall set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at least six (6) months in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at least ninety (90) days in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written notice shall be given as soon as possible within twenty-four (24) hours after the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement by Company, AVIF will, at Company's option, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"), unless AIM or the Board determines that doing so would be detrimental to the other shareholders of the affected Funds or would be inconsistent with applicable law or regulation. Specifically,
without limitation, the owners of the Existing Contracts will be permitted to
reallocate investments in the Fund (as in effect on such date), redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 6.3 will not apply to any (i) terminations under Section 5 and the
effect of such terminations will be governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this Agreement shall nevertheless continue in effect as to any Shares of that Fund that are outstanding as of the date of such termination (the "Initial Termination Date"). This continuation shall extend to the earlier of the date as of which an Account owns no Shares of the affected Fund or a date (the "Final Termination Date") six (6) months following the Initial Termination Date, except that Company may, by written notice shorten said six (6) month period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one another in taking all necessary and appropriate steps for the purpose of ensuring that an Account owns no Shares of a Fund after the Final Termination Date with respect thereto, or, in the case of a termination pursuant to Section 6.1(a), the termination date specified in the notice of termination. Such steps may include combining the affected Account with another Account, substituting other mutual fund shares for those of the affected Fund, or otherwise terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof will be given by means mutually acceptable to the Parties concerned. Each other notice or communication required or permitted by this Agreement will be given to the following persons at the following addresses and facsimile numbers, or such other persons, addresses or facsimile numbers as the Party receiving such notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Peter A. Davidson, Esq.
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
AMERICAN PARTNERS LIFE INSURANCE COMPANY
IDS LIFE INSURANCE COMPANY
AMERIPRISE FINANCIAL SERVICES, INC.
50607 Ameriprise Financial Center
Minneapolis, MN 55474
Facsimile: 612-671-3866
Attn: Vice President and Group Counsel
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
Company will distribute all proxy material furnished by AVIF to Participants to
whom pass-through voting privileges are required to be extended and will solicit
voting instructions from Participants. Company will vote Shares in accordance
with timely instructions received from Participants. Company will vote Shares
that are (a) not attributable to Participants to whom pass-through voting
privileges are extended, or (b) attributable to Participants, but for which no
timely instructions have been received, in the same proportion as Shares for
which said instructions have been received from Participants, so long as and to
the extent that the SEC continues to interpret the 1940 Act to require pass
through voting privileges for Participants. Neither Company nor any of its
affiliates will in any way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such
Participants. Company reserves the right to vote shares held in any Account in
its own right, to the extent permitted by law. Company shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies or
in the manner required by the Mixed and Shared Funding exemptive order obtained
by AVIF. AVIF will notify Company of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. AVIF
will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular, AVIF either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of Trustees and with whatever
rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Company concerning any decision to elect or not to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY COMPANY AND AFSI.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, Company and AFSI agree to indemnify and hold harmless AVIF, AIM, their respective affiliates, and each person, if any, who controls AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933 Act and each of their respective Trustees and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of Company and AFSI) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to Company or AFSI by or on behalf of AVIF for use in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of Company, AFSI or their respective affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of Company, AFSI or their respective affiliates or persons under their control (including, without limitation, their employees and "Associated Persons," as that term is defined in paragraph (m) of Article I of the NASD's By-Laws), in connection with the sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to AVIF, AIM or their respective affiliates by or on behalf of Company, AFSI or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by Company or AFSI to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement, or any material breach of any representation and/or warranty made by Company or AFSI in this Agreement or arise out of or result from any other material breach of this Agreement by Company or AFSI; or
(v) arise as a result of failure by the Contracts issued by Company to qualify as annuity contracts or life insurance contracts under the Code, otherwise than by reason of any Fund's failure to comply with Subchapter M or Section 817(h) of the Code.
(b) Neither Company nor AFSI shall be liable under this Section 12.1 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of that Indemnified Party's reckless disregard of obligations or duties (i) under this Agreement, or (ii) to AVIF.
(c) Neither Company nor AFSI shall be liable under this Section 12.1 with respect to any action against an Indemnified Party unless AVIF or AIM shall have notified Company and AFSI in writing within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify Company and AFSI of any such action shall not relieve Company and AFSI from any liability which they may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 12.1. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, Company and AFSI shall be entitled to participate, at their own expense, in the defense of such action and also shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from Company or AFSI to such Indemnified Party of Company's or AFSI's election to assume the defense thereof, the Indemnified Party will cooperate fully with Company and AFSI and shall bear the fees and expenses of any additional counsel retained by it, and neither Company nor AFSI will be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation.
12.2 OF COMPANY AND AFSI BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e), below, AVIF and AIM agree to indemnify and hold harmless Company, AFSI, their respective affiliates, and each person, if any, who controls Company, AFSI or their respective affiliates within the meaning of Section 15 of the 1933 Act and each of their respective Trustees and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of AVIF and AIM ) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law, or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus or sales literature or advertising of AVIF (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to AVIF, AIM or their respective affiliates by or on behalf of Company, AFSI or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, or in sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of AVIF,
AIM or their respective affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of AVIF, AIM, their respective affiliates or persons
under their control (including, without limitation, their
employees and "Associated Persons" as that Term is defined in
Section (n) of Article 1 of the NASD By-Laws), in connection with
the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising
covering the Contracts, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to Company, AFSI or their respective affiliates by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF or AIM to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement, or any material breach of any representation and/or warranty made by AVIF or AIM in this Agreement or arise out of or result from any other material breach of this Agreement by AVIF or AIM.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified Parties from and against any and all losses, claims, damages, liabilities (including amounts paid in settlement thereof with, the written consent of AVIF or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may become subject directly or indirectly under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions directly or indirectly result from or arise out of the failure of any Fund to operate as a regulated investment company in compliance with (i) Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of the Code and regulations thereunder, including, without limitation, any income taxes and related penalties, rescission charges, liability under state law to Participants asserting liability against Company pursuant to the Contracts, the costs of any ruling and closing agreement or other settlement with the IRS, and the cost of any substitution by Company of shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that Company reasonably deems necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of such Indemnified Party's reckless disregard of its obligations and duties (i) under this Agreement, or (ii) to Company, AFSI, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any action against an Indemnified Party unless the Indemnified Party shall have notified AVIF and AIM in writing within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify AVIF and AIM of any such action shall not relieve AVIF and AIM from any liability which they may have to the Indemnified Party against whom such action is brought otherwise than on
account of this Section 12.2. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, AVIF and AIM will be entitled to participate, at their own expense, in the defense of such action and also shall be entitled to assume the defense thereof (which shall include, without limitation, the conduct of any ruling request and closing agreement or other settlement proceeding with the IRS), with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from AVIF or AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall bear the fees and expenses of any additional counsel retained by it, and neither AVIF nor AIM will be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification provisions contained in this Agreement to any individual or entity, including, without limitation, Company, AFSI or any other Participating Insurance Company or any Participant, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from (i) a breach of any representation, warranty, and/or covenant made by Company or AFSI hereunder or by any Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by Company or any Participating Insurance Company to maintain its segregated asset account (which invests in any Fund) as a legally and validly established segregated asset account under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by Company or any Participating Insurance Company to maintain its variable annuity or life insurance contracts (with respect to which any Fund serves as an underlying funding vehicle) as annuity contracts or life insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party referred to in Sections 12.1(c) or 12.2(d) above of participation in or control of any action by the indemnifying Party will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or responsibility, and the indemnifying Party will remain free to contest liability with respect to the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted under and in accordance with Delaware law, without regard for that state's principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, that the Parties are entitled to under federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
(a) "Company Confidential Information" includes but is not limited to all proprietary and confidential information of the Company and its subsidiaries, affiliates and licensees (collectively the Company Protected Parties" for purposes of this Section 18), including without limitation all information regarding the customers of the Company Protected Parties; the numbers, names, addresses, social security numbers or any other personal identifier of such customers; or any information derived therefrom. Company Confidential Information shall not include information which is (a) in or becomes part of the public domain, except when such information is in the public domain due to disclosure by AVIF in violation of this Agreement, (b) demonstrably known to AVIF prior to execution of this Agreement, (c) independently developed by AVIF in the ordinary course of business, outside of this Agreement, or (d) rightfully and lawfully obtained by AVIF from any third party other than Company.
(b) AVIF and AIM agree that the identities of the customers of Company Protected Parties, information maintained regarding such customers, all computer programs and procedures or other information developed or used by Company Protected Parties or any of their employees or agents in connection with Company's performance of its duties under this Agreement are the valuable property of Company Protected Parties.
(c) Neither AIM nor AVIF may use or disclosure Company Confidential Information for any purpose other than to carry out the purpose for which Company Confidential Information was provided to AIM or AVIF as set forth in the Agreement or as required by law or judicial process; and AIM and AVIF agree to cause all their employees, agents and representatives, or any other party to whom AIM or AVIF may provide access to or disclose Company Confidential Information to limit the use and disclosure of Company Confidential Information to that purpose.
(d) "AVIF Confidential Information" includes but is not limited to all proprietary and confidential information of the AVIF Company and its subsidiaries, affiliates and licensees (collectively the "AVIF Protected Parties" for purposes of this Section 18), including without limitation all information regarding the customers of the Protected Parties; or the accounts, account numbers, names, addresses, social security numbers or any other personal identifier of such customers; or any information derived therefrom. AVIF Confidential Information shall not include information which is (a) in or becomes part of the public domain, except when such information is in the public domain due to disclosure by Company in violation of this Agreement, (b) demonstrably known to Company prior to execution of this Agreement, (c) independently developed by Company in the ordinary course of business outside of this Agreement, or (d) rightfully and lawfully obtained by Company from any third party other than AVIF.
(e) Company agrees that the identities of the customers of AVIF, information maintained regarding such customers, all computer programs and procedures or other information developed or used by AVIF Protected Parties or any of their employees or agents in connection with AVIF's performance of its duties under this Agreement are the valuable property of AVIF Protected Parties.
(f) Company may not use or disclose AVIF Confidential Information for any purpose other than to carry out the purpose for which AVIF Confidential Information was provided to Company as set forth in the Agreement or as required by law or judicial process; and Company agrees to cause all its employees, agents and representatives, or any other party to whom Company may provide access to or disclose AVIF Confidential Information to limit the use and disclosure of AVIF Confidential Information.
(g) Each party agrees to implement appropriate measures designed to ensure the security and confidentiality of such confidential information, to protect such confidential information against any anticipated threats or hazards to the security or integrity of such confidential information, and to protect against unauthorized access to, or use of, such confidential information that could result in substantial harm or inconvenience to any party's customer; each party further agrees to cause all their agents, representatives or subcontractors of, or any other party to whom such party may provide access to or disclose such confidential information to implement appropriate measures designed to meet the objectives set forth in this Section 18.
(h) Each party acknowledges that any breach of the agreements in this
Section 18 may result in immediate and irreparable harm for which there may be
no adequate remedy at law and agree that in the event of such a breach, the
other parties may be entitled to equitable relief by way of temporary and
permanent injunctions, as well as such other relief as any court of competent
jurisdiction deems appropriate. This Section 18 shall survive termination of
this Agreement.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) AIM, or its affiliates, owns all right, title and interest in and to the name, trademark and service mark "AIM" and such other tradenames, trademarks and service marks as may be set forth on Schedule B, as amended time to time by written notice from AIM to Company (the "AIM licensed marks" or the "licensor's licensed marks") and is authorized to use and to license other persons to use such marks. AIM hereby grants to Company and its affiliates a non-exclusive license
to use the AIM licensed marks in connection with Company's performance of the services contemplated under this Agreement, subject to the terms and conditions set forth in this Section 19.
(b) The grant of license by AIM (a "licensor") to Company and its affiliates (the "licensee") shall terminate automatically upon termination of this Agreement. Upon automatic termination, the licensee shall cease to use the licensor's licensed marks, except that Company shall have the right to continue to service any outstanding Contracts bearing any of the AIM licensed marks. Upon AIM's elective termination of this license, Company and its affiliates shall immediately cease to issue any new annuity or life insurance contracts bearing any of the AIM licensed marks and shall likewise cease any activity which suggests that it has any right under any of the AIM licensed marks or that it has any association with AIM, except that Company shall have the right to continue to service outstanding Contracts bearing any of the AIM licensed marks.
(c) The licensee shall obtain the prior written approval of the licensor for the public release by such licensee of any materials bearing the licensor's licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that a licensee submit samples of any materials bearing any of the licensor's licensed marks which were previously approved by the licensor but, due to changed circumstances, the licensor may wish to reconsider. If, on reconsideration, or on initial review, respectively, any such samples fail to meet with the written approval of the licensor, then the licensee shall immediately cease distributing such disapproved materials. The licensor's approval shall not be unreasonably withheld, and the licensor, when requesting reconsideration of a prior approval, shall assume the reasonable expenses of withdrawing and replacing such disapproved materials. The licensee shall obtain the prior written approval of the licensor for the use of any new materials developed to replace the disapproved materials, in the manner set forth above
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the best of the knowledge of the licensee, the licensor's licensed marks are valid and enforceable trademarks and/or service marks and that such licensee does not own the licensor's licensed marks and claims no rights therein other than as a licensee under this Agreement; (ii) agrees never to contend otherwise in legal proceedings or in other circumstances; and (iii) acknowledges and agrees that the use of the licensor's licensed marks pursuant to this grant of license shall inure to the benefit of the licensor.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all appropriate governmental authorities (including, without limitation, the SEC, the NASD and state insurance regulators) and will permit each other and such authorities reasonable access to its books and records (including copies thereof) in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.
SECTION 21. FORCE MAJEURE
Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for so long as, in any given case, the force or circumstances making performance impossible shall exist.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below.
ATTEST: AIM VARIABLE INSURANCE FUNDS
By: /s/ Jim Coppedge By: /s/ John M. Zerr
--------------------------------- ------------------------------------
Name: Jim Coppedge Name: John M. Zerr
Title: Assistant Secretary Title: Senior Vice President
ATTEST: A I M DISTRIBUTORS, INC.
By: /s/ P. Michelle Grace By: /s/ Gene L. Needles
--------------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
ATTEST: AMERICAN ENTERPRISE LIFE
INSURANCE COMPANY, on behalf of itself
and its separate accounts
AMERICAN PARTNERS LIFE
INSURANCE COMPANY, on behalf of itself
and its separate accounts
IDS LIFE INSURANCE COMPANY, on
behalf of itself and its
separate accounts
AMERIPRISE FINANCIAL SERVICES, INC.
By: /s/ Betsy Hannum By: /s/ Patrick H. Carey, III
--------------------------------- ------------------------------------
Name: Betsy Hannum Name: Patrick H. Carey, III,
Title: Assistant Secretary of each Vice President of each Company
Company
|
SCHEDULE A
AIM VARIABLE INSURANCE FUNDS
Shares of each class of the following funds are currently available for purchase by the Accounts:
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY ACCOUNTS AND CONTRACTS
American Enterprise Variable Annuity Account:
AEL Personal Portfolio Plus(2) (File No. 33-54471)(no longer offered); AEL Personal Portfolio Plus (File No. 33-54471)(no longer offered); AEL Personal Portfolio (File No. 33-54471)(no longer offered); Evergreen Essential(SM) Variable Annuity (File No. 333-92297); Evergreen New Solutions Variable Annuity (File No. 333-92297); Evergreen New Solutions Select Variable Annuity (File No. 333-92297); Evergreen Privilege(SM) Variable Annuity (File No. 333-73958); Evergreen Pathways(SM) Variable Annuity (File No. 333-73958); Evergreen Pathways(SM) Select Variable Annuity (File No. 333-73958);
RiverSource(SM) AccessChoice Select(SM) Variable Annuity (File No. 333-92297);
RiverSource(SM) FlexChoice(SM) Variable Annuity (File No. 333-73958);
RiverSource(SM) FlexChoice(SM) Select Variable Annuity (File No. 333-73958);
RiverSource(SM) Endeavor Select(SM) Variable Annuity (File No. 333-92297);
RiverSource(SM) Galaxy Premier Variable Annuity (File No. 333-82149);
RiverSource(SM) Innovations Variable Annuity (File No. 333-92297);
RiverSource(SM) Innovations(R) Select Variable Annuity (File No. 333-92297);
RiverSource(SM) Innovations Classic Variable Annuity (File No. 333-92297);
RiverSource(SM) Innovations(R) Classic Select Variable Annuity (File No.
333-92297);
RiverSource(SM) New Solutions Variable Annuity(SM) (File No. 333-92297);
RiverSource(SM) Pinnacle Variable Annuity(SM) (File No. 333-82149);
RiverSource(SM) Platinum Variable Annuity (File No. 333-72777)(no longer
offered);
RiverSource(SM) Signature Variable Annuity(SM) (File No. 333-74865);
RiverSource(SM) Signature Variable Select Annuity(R) (File 333-74865);
RiverSource(SM) Signature One Variable Annuity(SM) (File No. 333-85567);
RiverSource(SM) Signature One Select Variable Annuity (File No. 333-85567);
Wells Fargo Advantage(R) Variable Annuity (File No. 333-85567);
Wells Fargo Advantage(R) Builder Variable Annuity (File No. 333-85567);
Wells Fargo Advantage Choice(SM) Variable Annuity (File No. 333-73958);
Wells Fargo Advantage(R) Select Variable Annuity (File No. 333-92297);
Wells Fargo Advantage(R) Builder Select Variable Annuity (File No. 333-85567);
Wells Fargo Advantage Choice(SM) Select Variable Annuity (File No. 333-73958);
American Enterprise Variable Life Account:
RiverSource(SM) Signature Variable Life Universal Life (File No. 333-84121)(no longer offered).
AMERICAN PARTNERS LIFE INSURANCE COMPANY ACCOUNTS AND CONTRACTS
APL Variable Annuity Account 1:
Privileged Assets(R) Select Annuity (File No. 33-57731).
IDS LIFE INSURANCE COMPANY ACCOUNTS AND CONTRACTS
IDS Life Variable Account 10:
RiverSource(SM) Retirement Advisor 4 Advantage Variable Annuity (File No.
333-333-91691)
RiverSource(SM) Retirement Advisor 4 Select Variable Annuity (File No.
333-91691)
RiverSource(SM) Retirement Advisor Access Variable Annuity (File No. 333-91691)
RiverSource(SM) Retirement Advisor Advantage Plus(SM) Variable Annuity (File No.
333-79311)
RiverSource(SM) Retirement Advisor Advantage(SM) Variable Annuity (File No.
333-79311)
RiverSource(SM) Retirement Advisor Advantage(SM) Variable Annuity - Band 3
(File No. 333-79311)
RiverSource(SM) Retirement Advisor Select Plus(SM) Variable Annuity (File No.
333-79311)
RiverSource(SM) Retirement Advisor Select(SM) Variable Annuity (File No. 333-
79311)
RiverSource(SM) Retirement Advisor Variable Annuity(R) (File No. 333-79311)
RiverSource(SM) Retirement Advisor Variable Annuity(R) - Band 3 (File No.
333-79311)
IDS Life Flexible Annuity (File No. 333-62407)
IDS Life Variable Life Separate Account:
RiverSource(SM) Succession Select Variable Life Insurance(SM) (File No.
333-62457)
RiverSource(SM) Variable Second-To-Die Life Insurance(SM) (File No. 333-62457)
RiverSource(SM) Variable Universal Life III(SM) (File No. 333-69777)
RiverSource(SM) Variable Universal Life Insurance(SM) (File No. 333-11165)
RiverSource(SM) Single Premium Variable Life (File No. 333-83456)
RiverSource(SM) Variable Universal Life IV (File No. 333-69777)
RiverSource(SM) Variable Universal Life IV - Estate Series (File No. 333-69777)
SCHEDULE B
AIM and Design
(AIM INVESTMENTS(SM) LOGO)
AMENDMENT NO. 12
PARTICIPATION AGREEMENT
JANUARY 29, 2007
The Participation Agreement, made and entered into as of the 17th day of February, 1998, and amended on December 11, 1998, March 15, 1999, April 17, 2000, May 1, 2000, May 1, 2001, September 1, 2001, April 1, 2002, August 14, 2003, December 31, 2003 and September 1, 2004 (the "Agreement"), by and among AIM Variable Insurance Funds, a Delaware business trust, A I M Distributors, Inc., a Delaware corporation, Sun Life Assurance Company of Canada (U.S.), a Delaware life insurance company, and Clarendon Insurance Agency, Inc., a Massachusetts corporation, is hereby amended as follows:
1. Schedule A of the Agreement is deleted in its entirety and replaced with the following:
SCHEDULE A
SEPARATE ACCOUNTS UTILIZING
FUNDS AVAILABLE UNDER THE POLICIES THE FUNDS CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
---------------------------------- --------------------------- -------------------------------------------------------
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - FUTURITY VARIABLE AND FIXED ANNUITY CONTRACT
AIM V.I. Growth Fund Variable Account F - FUTURITY FOCUS VARIABLE AND FIXED ANNUITY CONTRACT
AIM V.I. Core Equity Fund
AIM V.I. International Growth Fund
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - FUTURITY II VARIABLE AND FIXED ANNUITY CONTRACT
AIM V.I. Growth Fund Variable Account F - FUTURITY III VARIABLE AND FIXED ANNUITY CONTRACT
AIM V.I. Core Equity Fund - FUTURITY FOCUS II VARIABLE AND FIXED ANNUITY
AIM V.I. International Growth Fund CONTRACT
AIM V.I. Premier Equity Fund - FUTURITY ACCOLADE VARIABLE AND FIXED ANNUITY
CONTRACT
- FUTURITY SELECT FOUR VARIABLE AND FIXED ANNUITY
CONTRACT
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - FUTURITY VARIABLE UNIVERSAL LIFE INSURANCE
AIM V.I. Growth Fund Variable Account I POLICIES
AIM V.I. Core Equity Fund - FUTURITY SURVIVORSHIP VARIABLE UNIVERSAL LIFE
AIM V.I. International Growth Fund INSURANCE POLICIES
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - FUTURITY SURVIVORSHIP II VARIABLE UNIVERSAL LIFE
AIM V.I. Growth Fund Variable Account I INSURANCE POLICIES
AIM V.I. Core Equity Fund - FUTURITY PROTECTOR VARIABLE UNIVERSAL LIFE
AIM V.I. International Growth Fund INSURANCE POLICIES
AIM V.I. Premier Equity Fund - FUTURITY ACCUMULATOR VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES
- FUTURITY ACCUMULATOR II VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES
- FUTURITY PROTECTOR II VARIABLE UNIVERSAL LIFE
INSURANCE POLICIES
|
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SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - SUN LIFE CORPORATE VARIABLE UNIVERSAL LIFE
AIM V.I. Premier Equity Fund Variable Account G INSURANCE POLICIES
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - FUTURITY CORPORATE VARIABLE UNIVERSAL LIFE
AIM V.I. Growth Fund Variable Account G INSURANCE POLICIES
AIM V.I. Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Premier Equity Fund
SERIES (II) SHARES
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - FUTURITY SELECT FOUR PLUS
AIM V.I. Growth Fund Variable Account F - FUTURITY SELECT SEVEN
AIM V.I. Core Equity Fund - FUTURITY SELECT FREEDOM
AIM V.I. International Growth Fund - FUTURITY SELECT INCENTIVE
AIM V.I. Premier Equity Fund
SERIES (II) SHARES
AIM V.I. Capital Appreciation Fund Sun Life of Canada (U.S.) - ALL-STAR
AIM V.I. International Growth Fund Variable Account F - ALL-STAR TRADITIONS
AIM V.I. Premier Equity Fund - ALL-STAR FREEDOM
- ALL-STAR EXTRA
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Keyport Variable Account A - KEYPORT ADVISOR CHARTER
AIM V.I. Premier Equity Fund
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Keyport Variable Account A - KEYPORT ADVISOR OPTIMA
AIM V.I. Growth Fund
AIM V.I. Premier Equity Fund
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Keyport Variable Account A - KEYPORT ADVISOR VISTA
AIM V.I. Growth Fund
AIM V.I. International Growth Fund
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Keyport Variable Account A - KEYPORT CHARTER
AIM V.I. International Growth Fund - KEYPORT VISTA
AIM V.I. Premier Equity Fund - KEYPORT OPTIMA
- KEYPORT LATITUDE
SERIES (I) SHARES
AIM V.I. Basic Value Fund Sun Life of Canada (U.S.) SUN LIFE LARGE CASE VUL
AIM V.I. Mid Cap Core Fund Variable Account G
SERIES (I) SHARES
AIM V.I. Basic Value Fund Sun Life of Canada (U.S.) SUN LIFE LARGE CASE PPVUL
AIM V.I. Mid Cap Core Fund Variable Account H
|
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SERIES (I) SHARES Keyport 401 Variable ALTERNATIVE ADVANTAGE
AIM V.I. International Growth Fund Account P
SERIES (I) SHARES
AIM V.I. Basic Value Fund Sun Life of Canada (U.S.) MAGNASTAR PPVUL
AIM V.I. International Growth Fund Variable Account R and S
|
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Philip A. Taylor
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.)
By: /s/ Raymond Scanlon
------------------------------------
For the President
Name: Raymond Scanlon
Title: Vice President
By: /s/ Bruce Teichner
------------------------------------
For the Secretary
Name: Bruce Teichner
Title: Assistant Vice President and
Senior Counsel
CLARENDON INSURANCE AGENCY, INC.
By: /s/ Michelle D'Albero
------------------------------------
For the President
Name: Michelle D'Albero
By: /s/ William T. Evers
------------------------------------
For the Secretary
Name: William T. Evers
|
3 of 3
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated May 1, 1998, by and among AIM Variable Insurance Funds, a Delaware trust; A I M Distributors, Inc., a Delaware corporation, Fortis Benefits Insurance Company, a Minnesota corporation, Fortis Investors, Inc., a Minnesota corporation, is hereby amended as follows:
The following entity is hereby added as a party to the Agreement and will be encompassed by the defined term "LIFE COMPANY" as set forth in the Agreement:
- Union Security Life Insurance Company of New York (formerly known as First Fortis Life Insurance Company), organized under the laws of the State of New York.
Effective October 1, 2004, Fortis Benefits will change its state of domicile and become an Iowa corporation. Effective September 2, 2005, Fortis Benefits Insurance Company (defined as "LIFE COMPANY") will change its name to "Union Security Insurance Company." All references to Fortis Benefits Insurance Company will hereby be deleted and replaced with "Union Security Insurance Company."
Effective April 1, 2001 Fortis Investors, Inc., changed its name to "Woodbury Financial Services, Inc." All references to Fortis Investors, Inc. are hereby deleted and replaced with "Woodbury Financial Services, Inc."
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS (AS OF MAY 1, 2006)
AIM V.I. Basic 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. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Equity Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity 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. Real Estate Fund**
AIM V.I. Small Cap Equity Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Health Care Fund
AIM V.I. Leisure Fund
AIM V.I. Small Company Growth Fund***
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
** Effective July 3, 2006, AIM V.I. Real Estate Fund will be renamed AIM V.I.
Global Real Estate Fund.
*** Effective July 3, 2006, AIM V.I. Small Company Growth Fund will be renamed AIM V.I. Small Cap Growth Fund.
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- Separate Account D of Union Security Insurance Company
- Separate Account D of Union Security Insurance Company
- Separate Account A of Union Security Life Insurance Company of New York
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- Norwest Passage Variable Annuity
- Contract Form Number 56952
- Contract Form Number 56758
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Effective date: April 30, 2004
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
UNION SECURITY INSURANCE COMPANY
(FORMERLY KNOWN AS FORTIS BENEFITS
INSURANCE COMPANY)
Attest: /s/ Catherine J. Janik By: /s/ Douglas R. Lowe
----------------------------- ------------------------------------
Name: Catherine J. Janik Name: Douglas R. Lowe
Title: V.P. Corporate Counsel Title: Vice President - Law
|
UNION SECURITY LIFE INSURANCE COMPANY OF
NEW YORK ((FORMERLY KNOWN AS FIRST
FORTIS LIFE INSURANCE COMPANY OF NEW
YORK)
Attest: /s/ Catherine J. Janik By: /s/ Douglas R. Lowe
----------------------------- ------------------------------------
Name: Catherine J. Janik Name: Douglas R. Lowe
Title: V.P. Corporate Counsel Title: Vice President - Law
WOODBURY FINANCIAL SERVICES, INC.
(FORMERLY KNOWN AS FORTIS INVESTORS,
INC.)
Attest: /s/ Carol D. Rademacher By: /s/ Mark A. Sides
----------------------------- ------------------------------------
Name: Carol D. Rademacher Name: Mark A. Sides
Title: Sr Administrative Assistant Title: Chief Legal Officer
|
AMENDMENT NO. 9
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated June 1, 1998, by and among AIM Variable Insurance Funds (formerly AIM Variable Insurance Funds, Inc.), a Delaware Trust corporation, A I M Distributors, Inc., a Delaware Corporation, American General Life Insurance Company ("Life Company"), a Texas Life Insurance Company and American General Equity Services Corporation ("AGESC"), a Delaware Corporation, and collectively (the "Parties"), is hereby amended as follows. All capitalized terms not otherwise defined in this Amendment, shall have the same meaning as described in the Agreement.
WHEREAS, the Parties desire to amend the Agreement to add to Schedule A of the Agreement the contracts of the Life Company relating to the Life Company's Platinum Investor VIP VUL, Form No. 05604.
NOW, THEREFORE, in consideration of their mutual promises, the Parties agree as follows:
1. Except as amended herein, the Agreement is hereby ratified and confirmed in all respects.
2. Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
SEPARATE ACCOUNTS
FUNDS AVAILABLE UNDER UTILIZING SOME OR POLICIES/CONTRACTS FUNDED BY
THE POLICIES ALL OF THE FUNDS THE SEPARATE ACCOUNTS
--------------------- ------------------------------- -------------------------------------------
AIM V.I. International Growth Fund American General Life Insurance Platinum Investor I
AIM V.I. Premier Equity Fund Company Separate Account VL-R Flexible Premium Variable Life
Established: May 1, 1997 Insurance Policy
Policy Form No. 97600
Platinum Investor II
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 97610
Corporate America
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 99301
Platinum Investor Survivor Last Survivor
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 99206
Platinum Investor Survivor II Last Survivor
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 01206
Platinum Investor III
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 00600
Platinum Investor FlexDirector
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 03601
Platinum Investor IV
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 04604
|
AIM V.I. International Growth Fund Platinum Investor VIP
Flexible Premium Variable Universal
Life Insurance Policy
Policy Form No. 05604
Legacy Plus
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 98615
AIM V.I. Capital Appreciation Fund The One VUL Solution
AIM V.I. Government Securities Fund Flexible Premium Variable Life
AIM V.I. High Yield Fund Insurance Policy
AIM V.I. International Growth Fund Policy Form No. 99615
AIM V.I. International Growth Fund Legacy Plus
Flexible Premium Variable Life
Insurance Policy
Policy Form No. 99616
AIM V.I. International Growth Fund American General Life Insurance Company Platinum Investor Variable Annuity
AIM V.I. Premier Equity Fund Separate Account D Policy Form No. 98020
Established: November 19, 1973
Platinum Investor Immediate Variable
Annuity
Policy Form No. 03017
|
Effective Date: February 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim A. Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim A. Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
AMERICAN GENERAL LIFE INSURANCE COMPANY
Attest: /s/ Lauren W. Jones By: /s/ S. Douglas Israel
----------------------------- ------------------------------------
Name: Lauren W. Jones Name: S. Douglas Israel
Title: Assistant Secretary Title: Senior Vice President
|
(SEAL)
AMERICAN GENERAL EQUITY SERVICES
CORPORATION
Attest: /s/ Lauren W. Jones By: /s/ Mark R. McGuire
----------------------------- ------------------------------------
Name: Lauren W. Jones Name: Mark R. McGuire
Title: Assistant Secretary Title: Senior Vice President
|
(SEAL)
AMENDMENT NO. 9
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated June 16, 1998, by and among AIM Variable Insurance Funds, a Delaware trust; A I M Distributors, Inc., a Delaware corporation, and The Lincoln National Life Insurance Company, an Indiana life insurance company, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
SERIES I AND II SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Blue Chip Fund(1)
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Real Estate Fund(2)
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Company Growth Fund(3)
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
(1) Effective June 12, 2006, AIM V.I. Blue Chip Fund will merge into AIM V.I.
Large Cap Growth Fund.
(2) Effective July 3, 2006, AIM V.I. Real Estate Fund will be renamed AIM V.I.
Global Real Estate Fund.
(3) Effective July 3, 2006, AIM V.I. Small Company Growth Fund will be renamed AIM V.I. Small Cap Growth Fund.
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- Lincoln National Variable Annuity Account C
- Lincoln Life Flexible Premium Variable Life Account M
- Lincoln Life Flexible Premium Variable Life Account R
- Lincoln Life Variable Annuity Account N
- Lincoln Life Variable Annuity Account W
- Lincoln Life Variable Annuity Account Z
- Lincoln National Life Insurance Separate Account 13
- Lincoln National Life Insurance Separate Account 15
- Lincoln National Life Insurance Separate Account 16
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
ChoicePlus
ChoicePlus Access
ChoicePlus Bonus
ChoicePlus II
ChoicePlus II Access
ChoicePlus II Bonus
ChoicePlus II Advance
ChoicePlus Assurance (B Share)
ChoicePlus Assurance (C Share)
ChoicePlus Assurance (L Share)
ChoicePlus Assurance (Bonus)
MultiFund(R) 5
Wells Fargo New Directions Core
Wells Fargo New Directions Access
Wells Fargo New Directions Access 4
Director
Lincoln VUL I
Lincoln VUL(DB)
Lincoln VUL(CV)
Lincoln SVUL
Lincoln SVUL I
Lincoln SVUL II
Lincoln Corporate Private Solution
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Effective date: May 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
Attest: /s/ Kevin J. Adamson By: /s/ Kelly D. Clevenger
----------------------------- ------------------------------------
Name: Kevin J. Adamson Name: Kelly D. Clevenger
Title: 2nd Vice President Title: Vice President
|
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated July 1, 1998 by and among AIM Variable Insurance Funds (formerly AIM Variable Insurance Funds, Inc.) a Delaware trust, A I M Distributors, Inc., a Delaware corporation, The Union Central Life Insurance Company, an Ohio corporation, and Carillon Investments, Inc., an Ohio corporation, previously amended effective May 1, 1999, is hereby amended as follows:
1. Schedule A of the Agreement, under the Column "Funds Available Under the Policies" in the chart pertaining to Carillon Account and Carillon Life Account, has the AIM V.I. Growth Fund added to the AIM V.I. Capital Appreciation Fund, effective May 1, 1999.
2. In addition, all parties to the Agreement state that Section 18, titled "Confidentiality", is intended to comply with the parties' duties, if any, under Gramm-Leach-Bliley, SEC Regulation S-P or any other applicable state or federal privacy laws and regulations. This provision is effective on July 1, 2001.
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
THE UNION CENTRAL LIFE INSURANCE COMPANY
Attest: /s/ John F. Lambeier By: /s/ Kristal E. Hambrick
----------------------------- ------------------------------------
Name: John L. Lambeier Name: Kristal E. Hambrick
Title: Vice President Title: Vice President
|
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ Jim Coppedge By: /s/ Michael J. Cemo
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Michael J. Cemo
Title: Vice President Title: President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Vice President Title: President
|
(SEAL)
CARILLON INVESTMENTS, INC.
Attest: /s/ John F. Lambeier By: /s/ Elizabeth H. Monsell
----------------------------- ------------------------------------
Name: John L. Lambeier Name: Elizabeth H. Monsell
Title: Vice President Title: President
|
(SEAL)
AMENDMENT NO. 4
PARTICIPATION AGREEMENT
This Amendment No. 4 to Participation Agreement (the "Amendment") is by and among AIM Variable Insurance Funds ("Fund"), A I M Distributors, Inc. ("Distributor"), The Union Central Life Insurance Company ("Union Central"), and Ameritas Investment Corp., formerly known as Carillon Investments, Inc., ("Underwriter").
WHEREAS, the Fund, Distributor, Union Central and Carillon Investments, Inc. are the parties to a Participation Agreement for offering Shares of the Fund through retirement plans issued by Union Central, dated July 1, 1998 (the "Agreement");
WHEREAS, effective June 30, 2006 Carillon Investments, Inc. merged with Ameritas Investment Corp., such that Ameritas Investment Corp. is the surviving corporation, with all rights and obligations of Carillon Investments, Inc.;
NOW, THEREFORE, in consideration of the mutual promises set forth herein, the parties hereto agree as follows:
AS OF JUNE 30, 2006, CARILLON INVESTMENTS, INC. MERGED WITH AMERITAS INVESTMENT CORP., SUCH THAT AMERITAS INVESTMENT CORP. IS THE SURVIVING CORPORATION, WITH ALL RIGHTS AND OBLIGATIONS OF CARILLON INVESTMENTS, INC. THEREFORE, EFFECTIVE JUNE 30, 2006, ALL REFERENCES TO "UNDERWRITER" SHALL BE DEEMED TO REFER TO AMERITAS INVESTMENT CORP., AND AMERITAS INVESTMENT CORP. AGREES TO ABIDE BY ALL TERMS, CONDITIONS AND OBLIGATIONS APPLICABLE TO THE UNDERWRITER, AS SET FORTH IN THE AGREEMENT.
This Amendment No. 4 to Participation Agreement is effective as of June 30, 2006.
All other provisions of the Participation Agreement shall remain the same.
The undersigned parties have caused this Amendment No. 4 to Participation Agreement to be duly executed by the following authorized individuals for the purposes expressed herein.
AIM VARIABLE INSURANCE FUNDS THE UNION CENTRAL LIFE INSURANCE COMPANY
By: John M. Zerr By: /s/ Angelo de Jesus
--------------------------------- ------------------------------------
Print: John M. Zerr Print: Angelo de Jesus
Title: Senior Vice President Title: 2nd Vice President,
Investment Products
Date: 11/13/06 Date: 12/1/06
A I M DISTRIBUTORS, INC. AMERITAS INVESTMENT CORP.
By: /s/ Gene L. Needles By: /s/ Wendell G. Hutsell
--------------------------------- ------------------------------------
Print: Gene L. Needles Print: Wendell G. Hutsell
Title: President Title: Vice President
Date: 11-13-06 Date: November 29, 2006
|
AMENDMENT NO. 6
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated October 15, 1998, by and among AIM Variable Insurance Funds, a Delaware trust; A I M Distributors, Inc., a Delaware corporation, Lincoln Life & Annuity Company of New York, a New York life insurance company, and Lincoln Financial Advisors Corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
Series I and II shares
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- Lincoln Life & Annuity Flexible Premium Variable Life Account M
- LLANY Separate Account R for Flexible Premium Variable Life Insurance
- Lincoln New York Separate Account N for Variable Annuities
- LLANY Separate Account S for Flexible Premium Variable Life Insurance
- Lincoln Life & Annuity Flexible Premium Variable Life Account Z
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- The Lincoln Life & Annuity Company of New York: Flexible Premium Variable Life Insurance Policy LN615NY; LN660NY; :LN665NY; LN670NY; LN680NY; LN690NY
- The Lincoln Life & Annuity Company of New York: Flexible Premium Variable Life Insurance Policy On the Lives of Two Insureds LN650NY; LN655NY
- Lincoln Life & Annuity Company of New York: Lincoln Choice Plus Variable Annuity AN426NY; Lincoln Choice Plus Access Variable Annuity 30296NY
- Lincoln Life & Annuity Company of New York: Lincoln ChoicePlus II Variable
Annuity, Lincoln Choice Plus II Access Variable Annuity, Lincoln ChoicePlus
II Advance Variable Annuity, Lincoln ChoicePlus II Bonus Variable Annuity
30070BNYMVA3
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS (CONT'D)
- Lincoln Life & Annuity Company of New York: Lincoln ChoicePlus Assurance (B Share) Variable Annuhuuity 30070BNYBA; Lincoln ChoicePlus Assurance (C Share) Variable Annuity 30070BNYC; Lincoln ChoicePlus Assurance (L Share) Variable Annuity 30070BNYAL; Lincoln ChoicePlus Assurance (Bonus) Variable Annuity 30070BNYN
- The Lincoln National Life Insurance Company: Corporate-owned Group Variable Universal Life Policies LN925NY
- Lincoln Life & Annuity Company of New York: Lincoln Corporate Private Solution LN930NY
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Effective date: October 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Philip A. Taylor
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
LINCOLN LIFE & ANNUITY COMPANY OF
NEW YORK
Attest: /s/ Rise' C.M. Taylor By: /s/ Kelly D. Clevenger
----------------------------- ------------------------------------
Name: Rise' C.M. Taylor Name: Kelly D. Clevenger
Title: Second Vice President Title: Second Vice President
LINCOLN FINANCIAL ADVISORS CORPORATION
Attest: /s/ Marilyn K. Ondecker By: /s/ Lucy D. Gase
----------------------------- ------------------------------------
Name: Marilyn K. Ondecker Name: Lucy D. Gase
Title: Secretary Title: Vice President
|
AMENDMENT TO
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of August 21, 1999, by and among AIM Variable Insurance Funds, a Delaware trust ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"), Life Investors Insurance Company of America, an Iowa life insurance company ("LIFE COMPANY") and AFSG Securities Corporation, is hereby amended as follows:
The following is added under: "SECTION 2 PROCESSING AND TRANSACTIONS" before SECTION 2.1(A):
"Notwithstanding the provisions of paragraph (b) of this Section 2.1, the Parties agree to communicate, process and settle purchase and redemption transactions for Shares (collectively, "Share transactions") via the Fund/SERV and Networking systems of the National Securities Clearing Corporation (hereinafter, "NSCC"). LIFE COMPANY and AVIF each represents and warrants that it: (a) has entered into an agreement with NSCC, (b) has met and will continue to meet all of the requirements to participate in Fund/SERV and Networking, and (c) intends to remain at all times in compliance with the then current rules and procedures of NSCC, all to the extent necessary or appropriate to facilitate such communications, processing, and settlement of Share transactions. AVIF agrees to provide LIFE COMPANY with account positions and activity data relating to Share transactions via Networking. LIFE COMPANY shall place trades with NSCC using Defined Contribution Clearance & Settlement (hereinafter, "DCC&S") indicators, no later than 8:00 a.m. Central Time, and LIFE COMPANY shall pay for Shares by the scheduled close of federal funds transmissions on the same Business Day on which it places an order to purchase Shares in accordance with this section. Payment shall be in federal funds transmitted by wire from the designated NSCC Settling Bank (on behalf of LIFE COMPANY).
For purposes of this Agreement, "Fund/SERV" shall mean NSCC's system for automated, centralized processing of mutual fund purchase and redemption orders, settlement, and account registration; "Networking" shall mean NSCC's (Level Zero) system that allows mutual funds and life insurance companies to exchange account level information electronically; "DCC&S" shall refer to an NSCC program that facilitates the automated processing and reporting of defined contribution transactions among asset managers, plan trustees, and plan administrators, including third-party administrators; and "Settling Bank" shall mean the entity appointed by AVIF to perform such settlement services on behalf of AVIF, which agrees to abide by NSCC's then current rules and procedures insofar as they relate to same day funds settlement. In all cases, processing and settlement of Share transactions shall be done in a manner consistent with applicable law.
In the event that any Party is prohibited from communicating, processing or settling Share transactions via Fund/SERV or Networking, such Party shall notify the other Parties by 9:00 a.m. Central Time. After all Parties have been notified, the provisions of paragraphs (b) and (c) of this Section 2.1 shall apply."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Unless otherwise specified, all defined terms shall have the same meaning given to them in the Agreement.
Effective Date: July 12, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ John M. Zerr
----------------------------- ------------------------------------
Name: Jim Coppedge Name: John M. Zerr
Title: Assistant Secretary Title: Senior Vice President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
LIFE INVESTORS INSURANCE COMPANY OF
AMERICA
Attest: /s/ Kathleen S. Mullorkey By: /s/ Priscilla I. Hechler
----------------------------- ------------------------------------
Name: /s/ Kathleen S. Mullorkey Name: Priscilla I. Hechler
Title: Paralegal Title: Assistant Secretary
AFSG SECURITIES CORPORATION
Attest: /s/ Kathleen S. Mullorkey By: /s/ Priscilla I. Hechler
----------------------------- ------------------------------------
Name: /s/ Kathleen S. Mullorkey Name: Priscilla I. Hechler
Title: Paralegal Title: Assistant Vice President &
Assistant Secretary
|
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of July 27, 1999, by and among AIM Variable Insurance Funds, a Delaware trust ("AVIF"); Allianz Life Insurance Company of North America, a Delaware life insurance company ("LIFE COMPANY"); and USAllianz Investor Services, LLC ("UNDERWRITER"), is hereby amended as follows:
Section 2.3 of the Agreement is hereby deleted in its entirety and replaced with the following:
2.3 APPLICABLE PRICE
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions
under Contracts (collectively, "Contract transactions") and that LIFE
COMPANY receives prior to the close of regular trading on the New York
Stock Exchange (or such other time set by the Board for purposes of
determining the current net asset value of a Fund in accordance with Rule
22c-1 under the 1940 Act) on a Business Day will be executed at the net
asset values of the appropriate Funds next computed after receipt by AVIF
or its designated agent of the orders. For purposes of this Section 2.3(a),
LIFE COMPANY shall be the designated agent of AVIF for receipt of orders
relating to Contract transactions, , in accordance with Section 22(c) and
Rule 22c-1 under the 1940 Act, on each Business Day and receipt by such
designated agent shall constitute receipt by AVIF; provided that AVIF
receives notice of such orders by 9:00 a.m. Central Time on the next
following Business Day or such later time as computed in accordance with
Section 2.1(b) hereof. In connection with this Section 2.3(a), LIFE COMPANY
represents and warrants that it will not submit any order for Shares or
engage in any practice, nor will it allow or suffer any person acting on
its behalf to submit any order for Shares or engage in any practice, that
would violate or cause a violation of applicable law or regulation
including, without limitation Section 22 of the 1940 Act and the rules
thereunder.
(b) All other Share purchases and redemptions by LIFE COMPANY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable.
(c) Without limiting the scope or effect of Section 1.1 hereof, pursuant to which the Board may reject a Share purchase order by or on behalf of LIFE COMPANY under the circumstances described therein, LIFE COMPANY and UNDERWRITER agree to cooperate with the Fund to prevent any person exercising, or purporting to exercise, rights or privileges under one or more
Contracts (including, but not limited to Contract owners, annuitants, insureds or participants, as the case may be (collectively, "Participants")) from engaging in any trading practices in any Fund that the Board determines, in good faith and in their sole discretion, to be detrimental or potentially detrimental to the other shareholders of the Fund, or to be in contravention of any applicable law or regulation including, without limitation, Section 22 of the 1940 Act and the rules thereunder. Such cooperation may include, but shall not be limited to, identifying the person or persons engaging in such trading practices, facilitating the imposition of any applicable redemption fee on such person or persons, limiting the telephonic or electronic trading privileges of such person or persons, and taking such other remedial steps, all to the extent permitted or required by applicable law.
Section 6.3 of the Agreement is hereby deleted in its entirety and replaced with the following:
6.3 FUNDS TO REMAIN AVAILABLE
Notwithstanding any termination of this Agreement by LIFE COMPANY, AVIF will, at the option of LIFE COMPANY, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"), unless the Board determines that doing so would not serve the best interests of the shareholders of the affected Funds or would be inconsistent with applicable law or regulation. Specifically, without limitation, the owners of the Existing Contracts will be permitted to reallocate investments in the Fund (as in effect on such date), redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 6.3 will not apply to any (i) terminations under Section 5 and the effect of such terminations will be governed by Section 5 of this Agreement or (ii) any rejected purchase and/or redemption order as described in Section 2.3(c) hereof.
Section 22 is hereby added to the Agreement:
SECTION 22. FORCE MAJEURE
Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for so long as, in any given case, the force or circumstances making performance impossible shall exist.
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM V.I. Aggressive Growth Fund
AIM V.I. Basic 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. Demographic Trends Fund
AIM V.I. Diversified Income 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. Premier Equity Fund
AIM V.I. Real Estate Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Core Stock Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Health Care Fund
AIM V.I. Leisure Fund
AIM V.I. Small Company Growth Fund
AIM V.I. Technology Fund
AIM V.I. Total Return Fund
AIM V.I. Utilities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- Allianz Life Variable Account A
- Allianz Life Variable Account B
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
Allianz Variable Account A
- LifeFund
Allianz Variable Account B
- Value Mark II
- Valuemark III
- Valuemark IV
- Valuemark Income Plus
- USAllianz Charter II
- USAllianz Alterity
- USAllianz Rewards
- USAllianz High Five
- USAllianz High Five Bonus
- USAllianz High Five L
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Effective date: May 1, 2005
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim A. Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim A. Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
ALLIANZ LIFE INSURANCE COMPANY OF NORTH
AMERICA
Attest: /s/ Jane M. Wiess By: /s/ Stewart Gregg
----------------------------- ------------------------------------
Name: Jane M. Wiess Name: Stewart Gregg
Title: Sr. Compliance Analyst Title: 2nd VP
USALLIANZ INVESTOR SERVICES, LLC
Attest: /s/ Jane M. Wiess By: /s/ Stewart Gregg
----------------------------- ------------------------------------
Name: Jane M. Wiess Name: Stewart Gregg
Title: Sr. Compliance Analyst Title: Secretary and VP
|
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of July 27, 1999, by and among AIM Variable Insurance Funds, a Delaware trust "AVIF"); Allianz Life Insurance Company of North America, a Minnesota life insurance company ("LIFE COMPANY"), and Allianz Life Financial Services, LLC, (formerly NALAC Financial Plans, LLC and formerly USAllianz Investor Services, LLC) ("UNDERWRITER") is hereby amended as follows:
Section 2.3 of the Agreement is hereby deleted in its entirety and replaced with the following:
2.3 APPLICABLE PRICE
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions
under Contracts (collectively, "Contract transactions") and that LIFE
COMPANY receives prior to the close of regular trading on the New York
Stock Exchange (or such other time set by the Board for purposes of
determining the current net asset value of a Fund in accordance with Rule
22c-1 under the 1940 Act) on a Business Day will be executed at the net
asset values of the appropriate Funds next computed after receipt by AVIF
or its designated agent of the orders. For purposes of this Section 2.3(a),
LIFE COMPANY shall be the designated agent of AVIF for receipt of orders
relating to Contract transactions, , in accordance with Section 22(c) and
Rule 22c-1 under the 1940 Act, on each Business Day and receipt by such
designated agent shall constitute receipt by AVIF; provided that AVIF
receives notice of such orders by 9:00 a.m. Central Time on the next
following Business Day or such later time as computed in accordance with
Section 2.1(b) hereof. In connection with this Section 2.3(a), LIFE COMPANY
represents and warrants that it will not submit any order for Shares or
engage in any practice, nor will it allow or suffer any person acting on
its behalf to submit any order for Shares or engage in any practice, that
would violate or cause a violation of applicable law or regulation
including, without limitation Section 22 of the 1940 Act and the rules
thereunder.
(b) All other Share purchases and redemptions by LIFE COMPANY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable.
(c) Without limiting the scope or effect of Section 1.1 hereof, pursuant to which the Board may reject a Share purchase order by or on behalf of LIFE COMPANY under the circumstances described therein, LIFE COMPANY and UNDERWRITER agree to cooperate with the Fund to prevent any person exercising, or purporting to exercise, rights or privileges under one or more Contracts (including, but not limited to Contract owners, annuitants, insureds or participants, as the case may be (collectively, "Participants")) from engaging in
any trading practices in any Fund that the Board determines, in good faith and in their sole discretion, to be detrimental or potentially detrimental to the other shareholders of the Fund, or to be in contravention of any applicable law or regulation including, without limitation, Section 22 of the 1940 Act and the rules thereunder. Such cooperation may include, but shall not be limited to, identifying the person or persons engaging in such trading practices, facilitating the imposition of any applicable redemption fee on such person or persons, limiting the telephonic or electronic trading privileges of such person or persons, and taking such other remedial steps, all to the extent permitted or required by applicable law.
Section 6.3 of the Agreement is hereby deleted in its entirety and replaced with the following:
6.3 FUNDS TO REMAIN AVAILABLE
Notwithstanding any termination of this Agreement by LIFE COMPANY, AVIF will, at the option of LIFE COMPANY, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"), unless the Board determines that doing so would not serve the best interests of the shareholders of the affected Funds or would be inconsistent with applicable law or regulation. Specifically, without limitation, the owners of the Existing Contracts will be permitted to reallocate investments in the Fund (as in effect on such date), redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The parties agree that this Section 6.3 will not apply to any (i) terminations under Section 5 and the effect of such terminations will be governed by Section 5 of this Agreement or (ii) any rejected purchase and/or redemption order as described in Section 2.3(c) hereof.
Section 22 is hereby added to the Agreement:
SECTION 22. FORCE MAJEURE
Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for so long as, in any given case, the force or circumstances making performance impossible shall exist.
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Core Equity Fund
- AIM V.I. International Growth Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- Allianz Life Variable Account A
- Allianz Life Variable Account B
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- Valuemark II
- Valuemark III
- Valuemark IV
- Valuemark Income Plus
- Valuemark Life
- Allianz LifeFund
- Allianz Charter
- Allianz Dimensions
- Allianz Alterity
- Allianz Rewards
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Effective date: May 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ John M. Zerr
----------------------------- ------------------------------------
Name: Jim Coppedge Name: John M. Zerr
Title: Assistant Secretary Title: Senior Vice President
ALLIANZ LIFE INSURANCE COMPANY OF
NORTH AMERICA
Attest: /s/ Jane Wiese By: /s/ Stewart D. Gregg
----------------------------- ------------------------------------
Name: Jane Wiese Name: Stewart D. Gregg
Title: Sr. Compliance Analyst Title: Second VP and Senior Securities
Counsel
ALLIANZ LIFE FINANCIAL SERVICES, LLC
Attest: /s/ Jan Wiese By: /s/ Jeffrey Kletti
----------------------------- ------------------------------------
Name: Jane Wiese Name: Jeffrey Kletti
Title: Sr. Compliance Analyst Title: Sr. VP Advisory Management
|
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of July 27, 1999, by and among AIM Variable Insurance Funds, a Delaware trust "AVIF"); Allianz Life Insurance Company of New York (formerly Preferred Life Insurance Company of New York), a New York life insurance company ("LIFE COMPANY") and Allianz Life Financial Services, LLC, (formerly NALAC Financial Plans, LLC and formerly USAllianz Investor Services, LLC) ("UNDERWRITER") is hereby amended as follows:
Section 2.3 of the Agreement is hereby deleted in its entirety and replaced with the following:
2.3 APPLICABLE PRICE
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions
under Contracts (collectively, "Contract transactions") and that LIFE
COMPANY receives prior to the close of regular trading on the New York
Stock Exchange (or such other time set by the Board for purposes of
determining the current net asset value of a Fund in accordance with Rule
22c-1 under the 1940 Act) on a Business Day will be executed at the net
asset values of the appropriate Funds next computed after receipt by AVIF
or its designated agent of the orders. For purposes of this Section 2.3(a),
LIFE COMPANY shall be the designated agent of AVIF for receipt of orders
relating to Contract transactions, , in accordance with Section 22(c) and
Rule 22c-1 under the 1940 Act, on each Business Day and receipt by such
designated agent shall constitute receipt by AVIF; provided that AVIF
receives notice of such orders by 9:00 a.m. Central Time on the next
following Business Day or such later time as computed in accordance with
Section 2.1(b) hereof. In connection with this Section 2.3(a), LIFE COMPANY
represents and warrants that it will not submit any order for Shares or
engage in any practice, nor will it allow or suffer any person acting on
its behalf to submit any order for Shares or engage in any practice, that
would violate or cause a violation of applicable law or regulation
including, without limitation Section 22 of the 1940 Act and the rules
thereunder.
(b) All other Share purchases and redemptions by LIFE COMPANY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable.
(c) Without limiting the scope or effect of Section 1.1 hereof, pursuant to which the Board may reject a Share purchase order by or on behalf of LIFE COMPANY under the circumstances described therein, LIFE COMPANY and UNDERWRITER agree to cooperate with the Fund and AIM to prevent any
person exercising, or purporting to exercise, rights or privileges under one or more Contracts (including, but not limited to Contract owners, annuitants, insureds or participants, as the case may be (collectively, "Participants")) from engaging in any trading practices in any Fund that the Board or AIM determines, in good faith and in their sole discretion, to be detrimental or potentially detrimental to the other shareholders of the Fund, or to be in contravention of any applicable law or regulation including, without limitation, Section 22 of the 1940 Act and the rules thereunder. Such cooperation may include, but shall not be limited to, identifying the person or persons engaging in such trading practices, facilitating the imposition of any applicable redemption fee on such person or persons, limiting the telephonic or electronic trading privileges of such person or persons, and taking such other remedial steps, all to the extent permitted or required by applicable law.
Section 6.3 of the Agreement is hereby deleted in its entirety and replaced with the following:
6.3 FUNDS TO REMAIN AVAILABLE
Notwithstanding any termination of this Agreement by LIFE COMPANY,
AVIF will, at the option of LIFE COMPANY, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts"), unless
AIM or the Board determines that doing so would not serve the best
interests of the shareholders of the affected Funds or would be
inconsistent with applicable law or regulation. Specifically, without
limitation, the owners of the Existing Contracts will be permitted to
reallocate investments in the Fund (as in effect on such date), redeem
investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties
agree that this Section 6.3 will not apply to any (i) terminations under
Section 5 and the effect of such terminations will be governed by Section 5
of this Agreement or (ii) any rejected purchase and/or redemption order as
described in Section 2.3(c) hereof.
Section 22 is hereby added to the Agreement:
SECTION 22. FORCE MAJEURE
Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for
so long as, in any given case, the force or circumstances making performance impossible shall exist.
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- AIM V.I. Capital Appreciation Fund
- AIM V.I. Core Equity Fund
- AIM V.I. International Growth Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- Allianz Life Variable Account C
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- Allianz Advantage
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Effective date: May 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ John M. Zerr
----------------------------- ------------------------------------
Name: Jim Coppedge Name: John M. Zerr
Title: Assistant Secretary Title: Senior Vice President
ALLIANZ LIFE INSURANCE COMPANY OF NEW
YORK
Attest: /s/ Jane Wiese By: /s/ Stewart D. Gregg
----------------------------- ------------------------------------
Name: Jane Wiese Name: Stewart D. Gregg
Title: Sr. Compliance Analyst Title: Second VP and Senior Securities
Counsel
ALLIANZ LIFE FINANCIAL SERVICES, LLC
Attest: /s/ Jane Wiese By: /s/ Jeffrey Kletti
----------------------------- ------------------------------------
Name: Jane Wiese Name: Jeffrey Kletti
Title: Sr. Compliance Analyst Title: Sr. VP Advisory Management
|
AMENDMENT NO. 7
PARTICIPATION AGREEMENT
EFFECTIVE OCTOBER 1, 2006
The Participation Agreement, made and entered into as of the 17th day of April, 2000, and amended on May 1, 2000 and again on September 1, 2000, April 1, 2002, and September 1, 2004 (the "Agreement"), by and among AIM Variable Insurance Funds, a Delaware business trust, AIM Distributors, Inc., a Delaware corporation, Sun Life Insurance and Annuity Company of New York, a New York life insurance company ("Insurer"), and Clarendon Insurance Agency, Inc. a Massachusetts corporation, is hereby amended as follows:
1. Schedule A of the Agreement is deleted in its entirety and replaced with the following:
SCHEDULE A
SEPARATE ACCOUNTS UTILIZING
FUNDS AVAILABLE UNDER THE POLICIES THE FUNDS CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
---------------------------------- ----------------------------- -------------------------------------------
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life (N.Y.) - Futurity - NY Variable and Fixed
AIM V.I. Core Equity Fund Variable Account C Annuity Contract
AIM V.I. International Growth Fund
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life (N.Y.) - Futurity Accolade - NY Variable
AIM.V.I. Dynamics Fund Variable Account C and Fixed Annuity Contract
AIM V.I. Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Small Cap Growth Fund
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life (N.Y.) - DVA(1)/CERT(NY)
AIM.V.I. Dynamics Fund KBL Variable Account A
AIM V.I. International Growth Fund - DVA(1)/NY
AIM V.I. Small Cap Growth Fund
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life (N.Y.) - Futurity Accumulator II Variable
AIM.V.I. Dynamics Fund Variable Account D Universal Life Insurance Policies
AIM V.I. Core Equity Fund
AIM V.I. International Growth Fund - Futurity Protector II Variable
AIM V.I. Small Cap Growth Fund Universal Life Insurance Policies
- Futurity Survivorship II Variable
Universal Life Insurance
Policies
SERIES (I) SHARES
AIM V.I. Capital Appreciation Fund Sun Life (N.Y.) - Futurity Corporate Variable
AIM.V.I. Dynamics Fund Variable Account J Universal Life Insurance Policies
AIM V.I. Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Small Cap Growth Fund
SERIES (I) SHARES
AIM V.I. Basic Value Fund Sun Life (N.Y.) - Large Case Variable Universal
AIM V.I. Mid Cap Core Equity Fund Variable Account J Life Insurance Policies
SERIES (I) SHARES
AIM V.I. Basic Value Fund Sun Life (N.Y.) - Large Case Private Placement
AIM V.I. Mid Cap Core Equity Fund Variable Account H Variable Universal Life Insurance
Policies
SERIES (II) SHARES
AIM V.I. Capital Appreciation Fund Sun Life (N.Y.) - All-Star NY
AIM V.I. International Growth Fund Variable Account C
AIM V.I. Small Cap Growth Fund - All-Star Freedom NY
- All-Star Extra NY
|
1 of 2
SERIES (I) SHARES Sun Life (N.Y.) Variable - Alternative Advantage
AIM V.I. International Growth Fund Account E
SERIES (I) SHARES
AIM V.I. International Growth Fund Variable accounts created - Alternative Advantage
under Sun Life Financial
Insurance and Annuity Company
(Bermuda) Ltd. for private
placement products
SERIES (I) SHARES
AIM V.I. Core Equity Fund KBL Variable Account A - Keyport Optima
AIM V.I. Capital Appreciation Fund
AIM V.I. International Growth Fund - Keyport Advisor Optima
- Keyport Advisor
- Keyport Latitude
|
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Philip A. Taylor
Title: Assistant Secretary Title: President
|
AIM DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
|
SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK
By: /s/ John E. Coleman By: /s/ Susan J. Lazzo
--------------------------------- ------------------------------------
For the President For the Secretary
Name: John E. Coleman Name: Susan J. Lazzo
Title: Vice President Title: Senior Counsel
|
SUN LIFE FINANCIAL INSURANCE AND ANNUITY COMPANY (BERMUDA) LTD.
By: /s/ Robert Vrolyk By: /s/ Daniel Smyth
--------------------------------- ------------------------------------
For the President For the Secretary
Name: Robert Vrolyk Name: Daniel Smyth
Title: Vice President Title: Vice President
|
CLARENDON INSURANCE AGENCY, INC.
By: /s/ Michelle D'Albero
---------------------------------
For the President
Name: Michelle D'Albero
Title: Counsel
By: /s/ William T. Evers
---------------------------------
For the Secretary
Name: William T. Evers
Title: Assistant Vice President and
Senior Counsel
|
2 of 2
AMENDMENT NO. 3
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of March 28, 2001, by and among AIM Variable Insurance Funds ("AVIF"), a Delaware trust, A I M Distributors, Inc., a Delaware corporation ("AIM"), Security Benefit Life Insurance Company ("LIFE COMPANY") and Security Distributors, Inc. (the "UNDERWRITER"), is hereby amended as follows:
1. The parties agree to change the definition of the terms, "Account," "Contracts," and "Fund" in such a way that the Accounts, Contracts and Fund need not be listed on Schedule A to the Agreement, but nonetheless, for convenience the parties may determine to list them on Schedule A. Accordingly:
a. "Account" shall mean each segregated asset account of the Company that invests in a Fund. An Account shall become subject to the terms of this Agreement as of the date such Account first invests in a Fund.
b. "Contracts" shall mean those variable annuity and variable life insurance contracts issued by the Company supported wholly or partially by an Account.
c. "Fund" shall mean a Series of AVIF in which an Account invests. A Series of AVIF shall become a "Fund" hereunder as of the date an Account of the Life Company first invests in such Series.
2. Section 1.2 of the Agreement is hereby deleted in its entirety and replaced with the following:
"1.2 ADDITIONAL FUNDS.
It is agreed that Company, on behalf of an Account, has access under this Agreement to all Series of the Fund and all share classes thereof (including Series and share classes created in the future). It shall not be necessary to list the Accounts, the Contracts, the Funds or the share classes on Schedule A. Notwithstanding the foregoing, a Series(other than a Series that constitutes a "Fund" hereunder as of November 15, 2006) may be established in the future may be made available to the Company on terms different than those set forth herein as AVIF may so provide in writing to the Company. Notwithstanding the fact that Accounts, Contracts and Funds need not be listed on Schedule A, the parties may, in their discretion and for convenience and ease of reference only, include one or more Accounts, Contracts and Funds on Schedule A from time to time."
3. The following is added under: "SECTION 2 PROCESSING AND TRANSACTIONS" before SECTION 2.1(A):
"Notwithstanding the provisions of paragraph (b) of this Section 2.1,
the Parties agree to communicate, process and settle purchase and
redemption transactions for Shares (collectively, "Share
transactions") via the Fund/SERV and Networking systems of the
National Securities Clearing Corporation (hereinafter, "NSCC"). LIFE
COMPANY and AVIF each represents and warrants that it: (a) has entered
into an agreement with NSCC, (b) has met and will continue to meet all
of the requirements to participate in Fund/SERV and Networking, and
(c) intends to remain at all times in compliance with the then current
rules and procedures of NSCC, all to the extent necessary or
appropriate to facilitate such communications, processing, and
settlement of Share transactions. AVIF agrees to provide LIFE COMPANY
with account positions and activity data relating to Share
transactions via Networking. LIFE COMPANY shall place trades with NSCC
using Defined Contribution Clearance & Settlement (hereinafter,
"DCC&S") indicators, no later than 8:00 a.m. Central Time on the
Business Day following the day on which it receives the order from the
Contract owner. LIFE COMPANY shall pay for Shares purchased by the
scheduled close of federal funds transmissions on the same Business
Day on which it places an order to purchase Shares in accordance with
this section. AVIF shall pay for Shares redeemed by the Life Company
by the scheduled close of federal funds transmissions on the same
Business Day on which AVIF receives an order to redeem Shares in
accordance with this section. Payment shall be in federal funds
transmitted by wire from the applicable party's designated NSCC
Settling Bank.
For purposes of this Agreement, "Fund/SERV" shall mean NSCC's system for automated, centralized processing of mutual fund purchase and redemption orders, settlement, and account registration; "Networking" shall mean NSCC's (Level Zero) system that allows mutual funds and life insurance companies to exchange account level information electronically; "DCC&S" shall refer to an NSCC program that facilitates the automated processing and reporting of defined contribution transactions among asset managers, plan trustees, and plan administrators, including third-party administrators; and "Settling Bank" shall mean the entity appointed by AVIF or Life Company, as applicable, to perform such settlement services, which agree to abide by NSCC's then current rules and procedures insofar as they relate to same day funds settlement. In all cases, processing and settlement of Share transactions shall be done in a manner consistent with applicable law.
In the event that any Party is prohibited from communicating, processing or settling Share transactions via Fund/SERV or Networking, such Party shall notify the other Parties by 9:00 a.m. Central Time. After all Parties have been notified, the provisions of paragraphs (b) and (c) of this Section 2.1 shall apply."
4. Schedule A is deleted in its entirety and replaced with the accompanying Schedule A.
5. In the event of a conflict between the terms of the Amendment No. 3 and the Agreement, it is the intent of the parties that the terms of this Amendment No. 3, shall control and the Agreement shall be interpreted on that basis. To the extent the provisions of the Agreement have not been amended by this Amendment No. 3, the parties hereby confirm and ratify the Agreement. The Agreement dated March 2001 and this Amendment No. 3 constitute the entire agreement among the parties with respect to the arrangements described herein.
6. This Amendment No. 3 may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one instrument.
Effective Date: November 15, 2006.
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
------------------------------ ------------------------------------
Name: Jim Coppedge Name: Philip A. Taylor
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
SECURITY BENEFIT LIFE INSURANCE COMPANY
Attest: /s/ David A. Sophl By: /s/ Gregory J. Garvin
----------------------------- ------------------------------------
Name: David A. Sophl Name: Gregory J. Garvin
Title: BDA Title: Vice President
SECURITY DISTRIBUTORS, INC.
Attest: /s/ David A. Sophl By: /s/ Gregory J. Garvin
----------------------------- ------------------------------------
Name: David A. Sophl Name: Gregory J. Garvin
Title: BDA Title: President
|
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
SERIES I AND II SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- SBL VARIABLE ANNUITY ACCOUNT XIV (created 06-26-00)
- VARIFLEX SEPARATE ACCOUNT (created 1/31/84)
- SBL VARIABLE ANNUITY ACCOUNT VIII (created 9/12/94)
- SBL VARIABLE ANNUITY ACCOUNT XVII (created 11/24/03)
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- AdvisorDesigns
- SecureDesigns
- AdvanceDesigns
- EliteDesigns
- Variflex
- Variflex Signature
- Variflex LS
- Variflex Extra Credit
- ClassicStrategies
- VIVA
- PGA
AMENDMENT TO
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of April 30, 2001, by and among AIM Variable Insurance Funds, a Delaware trust ("AVIF"), Western Reserve Life Assurance Co. of Ohio, an Ohio life insurance company ("LIFE COMPANY"), and AFSG Securities Corporation (the "UNDERWRITER"), is hereby amended as follows:
The following is added under: "SECTION 2 PROCESSING AND TRANSACTIONS" before SECTION 2.1(A):
"Notwithstanding the provisions of paragraph (b) of this Section 2.1, the Parties agree to communicate, process and settle purchase and redemption transactions for Shares (collectively, "Share transactions") via the Fund/SERV and Networking systems of the National Securities Clearing Corporation (hereinafter, "NSCC"). LIFE COMPANY and AVIF each represents and warrants that it: (a) has entered into an agreement with NSCC, (b) has met and will continue to meet all of the requirements to participate in Fund/SERV and Networking, and (c) intends to remain at all times in compliance with the then current rules and procedures of NSCC, all to the extent necessary or appropriate to facilitate such communications, processing, and settlement of Share transactions. AVIF agrees to provide LIFE COMPANY with account positions and activity data relating to Share transactions via Networking. LIFE COMPANY shall place trades with NSCC using Defined Contribution Clearance & Settlement (hereinafter, "DCC&S") indicators, no later than 8:00 a.m. Central Time, and LIFE COMPANY shall pay for Shares by the scheduled close of federal funds transmissions on the same Business Day on which it places an order to purchase Shares in accordance with this section. Payment shall be in federal funds transmitted by wire from the designated NSCC Settling Bank (on behalf of LIFE COMPANY).
For purposes of this Agreement, "Fund/SERV" shall mean NSCC's system for automated, centralized processing of mutual fund purchase and redemption orders, settlement, and account registration; "Networking" shall mean NSCC's (Level Zero) system that allows mutual funds and life insurance companies to exchange account level information electronically; "DCC&S" shall refer to an NSCC program that facilitates the automated processing and reporting of defined contribution transactions among asset managers, plan trustees, and plan administrators, including third-party administrators; and "Settling Bank" shall mean the entity appointed by AVIF to perform such settlement services on behalf of AVIF, which agrees to abide by NSCC's then current rules and procedures insofar as they relate to same day funds settlement. In all cases, processing and settlement of Share transactions shall be done in a manner consistent with applicable law.
In the event that any Party is prohibited from communicating, processing or settling Share transactions via Fund/SERV or Networking, such Party shall notify the other Parties by 9:00 a.m. Central Time. After all Parties have been notified, the provisions of paragraphs (b) and (c) of this Section 2.1 shall apply."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Unless otherwise specified, all defined terms shall have the same meaning given to them in the Agreement.
Effective Date: July 12, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
WESTERN RESERVE LIFE ASSURANCE CO. OF
OHIO, on behalf of itself and its
separate accounts
Attest: /s/ Kathleen S. Mullorkey By: /s/ Priscilla I. Hechler
----------------------------- ------------------------------------
Name: /s/ Kathleen S. Mullorkey Name: Priscilla I. Hechler
Title: Paralegal Title: Asst. Vice President & Asst. Sec.
AFSG SECURITIES CORPORATION
Attest: /s/ Kathleen S. Mullorkey By: /s/ Priscilla I. Hechler
----------------------------- ------------------------------------
Name: /s/ Kathleen S. Mullorkey Name: Priscilla I. Hechler
Title: Paralegal Title: Asst. Vice President & Asst. Sec.
|
AMENDMENT NO. 3
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated March 4, 2002, by and among AIM Variable Insurance Funds, a Delaware trust; A I M Distributors, Inc., a Delaware corporation, Minnesota Life Insurance Company, a Minnesota life insurance company, and Securian Financial Services, Inc., is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
Series I and II shares
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- Variable Annuity Account
- Minnesota Life Variable Life Account
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- Multi-Option Classic Variable Annuity
- Multi-Option Achiever Variable Annuity
- Multi-Option Advisor Variable Annuity
- Multi-Option Legend Variable Annuity
- TBA Variable Annuity June 2007
- Variable Adjustable Life
- Variable Adjustable Life - Second Death
- Variable Adjustable Life - Horizon
- Variable Adjustable Life - Summit
- Variable Adjustable Life - Survivor
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Effective date: October 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Philip A. Taylor
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
MINNESOTA LIFE INSURANCE COMPANY
Attest: /s/ Michael Boyle By: /s/ Bruce P. Shay
----------------------------- ------------------------------------
Name: Michael Boyle Name: Bruce P. Shay
Title: Counsel Title: Senior Vice President
SECURIAN FINANCIAL SERVICES, INC.
Attest: /s/ Michael Boyle By: /s/ George I. Connolly
----------------------------- ------------------------------------
Name: Michael Boyle Name: George I. Connolly
Title: Counsel Title: President
|
AMENDMENT TO
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of May 1, 2002, by and among AIM Variable Insurance Funds, a Delaware trust ("AVIF"), Transamerica Financial Life Insurance Company (formerly, AUSA Life Insurance Company, Inc.) ("LIFE COMPANY") and AFSG Securities Corporation, is hereby amended as follows:
The following is added under: "SECTION 2 PROCESSING AND TRANSACTIONS" before SECTION 2.1(A):
"Notwithstanding the provisions of paragraph (b) of this Section
2.1, the Parties agree to communicate, process and settle purchase and
redemption transactions for Shares (collectively, "Share
transactions") via the Fund/SERV and Networking systems of the
National Securities Clearing Corporation (hereinafter, "NSCC"). LIFE
COMPANY and AVIF each represents and warrants that it: (a) has entered
into an agreement with NSCC, (b) has met and will continue to meet all
of the requirements to participate in Fund/SERV and Networking, and
(c) intends to remain at all times in compliance with the then current
rules and procedures of NSCC, all to the extent necessary or
appropriate to facilitate such communications, processing, and
settlement of Share transactions. AVIF agrees to provide LIFE COMPANY
with account positions and activity data relating to Share
transactions via Networking. LIFE COMPANY shall place trades with NSCC
using Defined Contribution Clearance & Settlement (hereinafter,
"DCC&S") indicators, no later than 8:00 a.m. Central Time, and LIFE
COMPANY shall pay for Shares by the scheduled close of federal funds
transmissions on the same Business Day on which it places an order to
purchase Shares in accordance with this section. Payment shall be in
federal funds transmitted by wire from the designated NSCC Settling
Bank (on behalf of LIFE COMPANY).
For purposes of this Agreement, "Fund/SERV" shall mean NSCC's system for automated, centralized processing of mutual fund purchase and redemption orders, settlement, and account registration; "Networking" shall mean NSCC's (Level Zero) system that allows mutual funds and life insurance companies to exchange account level information electronically; "DCC&S" shall refer to an NSCC program that facilitates the automated processing and reporting of defined contribution transactions among asset managers, plan trustees, and plan administrators, including third-party administrators; and "Settling Bank" shall mean the entity appointed by AVIF to perform such settlement services on behalf of AVIF, which agrees to abide by NSCC's then current rules and procedures insofar as they relate to same day funds settlement. In all cases, processing and settlement of Share transactions shall be done in a manner consistent with applicable law.
In the event that any Party is prohibited from communicating, processing or settling Share transactions via Fund/SERV or Networking, such Party shall notify the other Parties by 9:00 a.m. Central Time. After all Parties have been notified, the provisions of paragraphs (b) and (c) of this Section 2.1 shall apply."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Unless otherwise specified, all defined terms shall have the same meaning given to them in the Agreement.
Effective Date: July 12, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
TRANSAMERICA FINANCIAL LIFE
INSURANCE COMPANY (FORMERLY, AUSA LIFE
INSURANCE COMPANY, INC.)
BY ITS AUTHORIZED OFFICER,
Attest: /s/ Kathleen S. Mullorkey By: /s/ Priscilla I. Hechler
----------------------------- ------------------------------------
Name: /s/ Kathleen S. Mullorkey Name: Priscilla I. Hechler
Title: Paralegal Title: Asst. Vice President & Asst. Sec.
AFSG SECURITIES CORPORATION
Attest: /s/ Kathleen S. Mullorkey By: /s/ Priscilla I. Hechler
----------------------------- ------------------------------------
Name: /s/ Kathleen S. Mullorkey Name: Priscilla I. Hechler
Title: Paralegal Title: Asst. Vice President & Asst. Sec.
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AMENDMENT NO. 3
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of June 21, 2002, by and among AIM Variable Insurance Funds ("AVIF"), a Delaware trust, A I M Distributors, Inc., a Delaware corporation ("AIM"), and First Security Benefit Life Insurance and Annuity Company ("LIFE COMPANY"), is hereby amended as follows:
1. The parties agree to change the definition of the terms, "Account," "Contracts," and "Fund" in such a way that the Accounts, Contracts and Fund need not be listed on Schedule A to the Agreement, but nonetheless, for convenience the parties may determine to list them on Schedule A. Accordingly:
a. "Account" shall mean each segregated asset account of the Life Company that invests in a Fund. An Account shall become subject to the terms of this Agreement as of the date such Account first invests in a Fund.
b. "Contracts" shall mean those variable annuity and variable life insurance contracts issued by the Company supported wholly or partially by an Account.
c. "Fund" shall mean a Series of AVIF in which an Account invests. A Series of AVIF shall become a "Fund" hereunder as of the date an Account of the Life Company first invests in such Series.
2. Section 1.2 of the Agreement is hereby deleted in its entirety and replaced with the following:
"1.2 ADDITIONAL FUNDS.
It is agreed that Company, on behalf of an Account, has access under this Agreement to all Series of the Fund and all share classes thereof (including Series and share classes created in the future). It shall not be necessary to list the Accounts, the Contracts, the Funds or the share classes on Schedule A. Notwithstanding the foregoing, a Series(other than a Series that constitutes a "Fund" hereunder as of [November __, 2006]) may be established in the future may be made available to the Company on terms different than those set forth herein as AVIF may so provide in writing to the Company. Notwithstanding the fact that Accounts, Contracts and Funds need not be listed on Schedule A, the parties may, in their discretion and for convenience and ease of reference only, include one or more Accounts, Contracts and Funds on Schedule A from time to time."
3. The following is added under: "SECTION 2 PROCESSING AND TRANSACTIONS" before SECTION 2.1(A):
"Notwithstanding the provisions of paragraph (b) of this Section 2.1, the Parties agree to communicate, process and settle purchase and redemption transactions for Shares (collectively, "Share transactions") via the Fund/SERV and Networking systems of the National Securities Clearing Corporation (hereinafter, "NSCC"). LIFE COMPANY and AVIF each represents and warrants that it or an affiliate: (a) has entered into an agreement with NSCC, (b) has met and will continue to meet all of the requirements to participate in Fund/SERV and Networking, and (c) intends to remain at all times in compliance with the then current rules and procedures of NSCC, all to the extent necessary or appropriate to facilitate such communications, processing, and settlement of Share transactions. AVIF agrees to provide LIFE COMPANY with account positions and activity data relating to Share transactions via Networking. LIFE COMPANY shall place trades with NSCC using Defined Contribution Clearance & Settlement (hereinafter, "DCC&S") indicators, no later than 8:00 a.m. Central Time on the Business Day following the day on which it receives the order from the Contract owner. LIFE COMPANY shall pay for Shares purchased by the scheduled close of federal funds transmissions on the same Business Day on which it places an order to purchase Shares in accordance with this section. AVIF shall pay for Shares redeemed by the Life Company by the scheduled close of federal funds transmissions on the same Business Day on which AVIF receives an order to redeem Shares in accordance with this section. Payment shall be in federal funds transmitted by wire from the applicable party's designated NSCC Settling Bank.
For purposes of this Agreement, "Fund/SERV" shall mean NSCC's system for automated, centralized processing of mutual fund purchase and redemption orders, settlement, and account registration; "Networking" shall mean NSCC's (Level Zero) system that allows mutual funds and life insurance companies to exchange account level information electronically; "DCC&S" shall refer to an NSCC program that facilitates the automated processing and reporting of defined contribution transactions among asset managers, plan trustees, and plan administrators, including third-party administrators; and "Settling Bank" shall mean the entity appointed by AVIF or Life Company, as applicable, to perform such settlement services, which agree to abide by NSCC's then current rules and procedures insofar as they relate to same day funds settlement. In all cases, processing and settlement of Share transactions shall be done in a manner consistent with applicable law.
In the event that any Party is prohibited from communicating, processing or settling Share transactions via Fund/SERV or Networking, such Party shall notify the other Parties by 9:00 a.m. Central Time. After all Parties have been notified, the provisions of paragraphs (b) and (c) of this Section 2.1 shall apply."
4. Schedule A is deleted in its entirety and replaced with the accompanying Schedule A.
5. In the event of a conflict between the terms of the Amendment No. 3 and the Agreement, it is the intent of the parties that the terms of this Amendment No. 3, shall control and the Agreement shall be interpreted on that basis. To the extent the provisions of the Agreement have not been amended by this Amendment No. 3, the parties hereby confirm and ratify the Agreement. The Agreement dated June 2002 and this Amendment No. 3 constitute the entire agreement among the parties with respect to the arrangements described herein.
6. This Amendment No. 3 may be executed in two or more counterparts, each of which shall be an original and all of which together shall constitute one instrument.
Effective Date: November 15, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Philip A. Taylor
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
FIRST SECURITY BENEFIT LIFE INSURANCE
AND ANNUITY COMPANY
Attest: David A. Sophl By: /s/ Thomas A. Swank
----------------------------- ------------------------------------
Name: David A. Sophl Name: Thomas A. Swank
Title: BDA Title: Vice President and CFO and
Treasurer
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SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
SERIES I AND II SHARES
AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
- VARIABLE ANNUITY SEPARATE ACCOUNT A (created 01-22-96)
- VARIABLE ANNUITY SEPARATE ACCOUNT B (created 01-22-96)
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
- AdvisorDesigns
- SecureDesigns
- AdvanceDesigns
- EliteDesigns
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of April 30, 2004, by and among AIM Variable Insurance Funds, a Delaware trust ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"), Ameritas Variable Life Insurance Company, a Nebraska life insurance company ("LIFE COMPANY") and Ameritas Investment Corp. (the "UNDERWRITER"), is hereby amended as follows:
The following is added under: "SECTION 2 PROCESSING AND TRANSACTIONS" before SECTION 2.1(A):
"Notwithstanding the provisions of paragraph (b) of this Section 2.1, the Parties agree to communicate, process and settle purchase and redemption transactions for Shares (collectively, "Share transactions") via the Fund/SERV and Networking systems of the National Securities Clearing Corporation (hereinafter, "NSCC"). LIFE COMPANY and AVIF each represents and warrants that it: (a) has entered into an agreement with NSCC, (b) has met and will continue to meet all of the requirements to participate in Fund/SERV and Networking, and (c) intends to remain at all times in compliance with the then current rules and procedures of NSCC, all to the extent necessary or appropriate to facilitate such communications, processing, and settlement of Share transactions. AVIF agrees to provide LIFE COMPANY with account positions and activity data relating to Share transactions via Networking. LIFE COMPANY shall place trades with NSCC using Defined Contribution Clearance & Settlement (hereinafter, "DCC&S") indicators, no later than 8:00 a.m. Central Time, and LIFE COMPANY shall pay for Shares by the scheduled close of federal funds transmissions on the same Business Day on which it places an order to purchase Shares in accordance with this section. Payment shall be in federal funds transmitted by wire from the designated NSCC Settling Bank (on behalf of LIFE COMPANY).
For purposes of this Agreement, "Fund/SERV" shall mean NSCC's system for automated, centralized processing of mutual fund purchase and redemption orders, settlement, and account registration; "Networking" shall mean NSCC's (Level Zero) system that allows mutual funds and life insurance companies to exchange account level information electronically; "DCC&S" shall refer to an NSCC program that facilitates the automated processing and reporting of defined contribution transactions among asset managers, plan trustees, and plan administrators, including third-party administrators; and "Settling Bank" shall mean the entity appointed by AVIF to perform such settlement services on behalf of AVIF, which agrees to abide by NSCC's then current rules and procedures insofar as they relate to same day funds settlement. In all cases, processing and settlement of Share transactions shall be done in a manner consistent with applicable law.
In the event that any Party is prohibited from communicating, processing or settling Share transactions via Fund/SERV or Networking, such Party shall notify the other Parties by 9:00 a.m. Central Time. After all Parties have been notified, the provisions of paragraphs (b) and (c) of this Section 2.1 shall apply."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Unless otherwise specified, all defined terms shall have the same meaning given to them in the Agreement.
Effective Date: 7-31-06
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
AMERITAS VARIABLE LIFE INSURANCE
COMPANY, on behalf of itself and its
separate accounts
Attest: /s/ Robert G. Lange By: /s/ Robert C. Barth
----------------------------- ------------------------------------
Name: Robert G. Lange Name: /s/ Robert C. Barth
Title: Vice President Title: Vice President, Controller, &
Chief Accounting Officer
AMERITAS INVESTMENT CORP.
Attest: /s/ Robert G. Lange By: /s/ Cheryl L. Heilman
----------------------------- ------------------------------------
Name: /s/ Robert G. Lange Name: Cheryl L. Heilman
Title: Vice President Title: Vice President
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NOVATION TO PARTICIPATION AGREEMENT
WHEREAS, on April 30, 2004, a Participation Agreement (the "Agreement") was entered into by and among Ameritas Variable Life Insurance Company ("AVLIC"), on its own behalf and on behalf of Ameritas Variable Life Insurance Co Separate Account V and Ameritas Variable Life Insurance Co Separate Account VA-2 of AVLIC (the "Separate Accounts"), AIM Variable Insurance Funds (the "Fund"), AIM Distributors, Inc. (the "Adviser") and Ameritas Investment Corp. ("AIC") whereby AVLIC issues certain individual variable life and/or variable annuity contracts (the "Contracts"), the Fund acts as the underlying investment vehicle of such contracts and the Adviser serves as investment adviser to the Fund. A copy of the Agreement is attached hereto and made a part hereof. The Agreement, by its terms, provides for amendment upon the written agreement of all parties; and
WHEREAS, the closing of the merger of AVLIC with and into Ameritas Life Insurance Corp. ("Ameritas"), with Ameritas as the surviving company (the "Merger") is currently scheduled to occur after the close of business on April 30, 2007; It is therefore agreed:
1. Substitution of Party - The Agreement is amended to provide for Ameritas to act as the issuer of the Contracts in substitution of AVLIC.
2. Change of Name - The Agreement is amended to reflect the change of the names of the following Separate Accounts from "Ameritas Variable Life Insurance Co Separate Account V" and "Ameritas Variable Life Insurance Co Separate Account VA-2" to "Ameritas Variable Separate Account V" and "Ameritas Variable Separate Account VA-2."
3. Performance of Duties - Ameritas hereby assumes and agrees to perform the duties previously performed by AVLIC under the Agreement.
4. Assumption. of Rights - Ameritas hereby assumes the rights previously held by AVLIC under the Agreement.
5. Effective Date - This Novation shall take effect as of the actual closing date of the Merger, and such effectiveness is conditioned upon the closing of the Merger. Ameritas will notify the other parties hereto of any change in the scheduled closing date and of the actual closing date.
In witness whereof the parties have signed this instrument.
Executed this 26th day of February, 2007.
AMERITAS VARIABLE LIFE AIM VARIABLE INSURANCE FUNDS
INSURANCE COMPANY
By: /s/ Robert C. Barth By: /s/ Philip A. Taylor
--------------------------------- ------------------------------------
Print: Robert C. Barth Print: Philip A. Taylor
Title: Vice President Title: President
Date: February 7, 2007 Date: February 26, 2007
AMERITAS INVESTMENT CORP. AIM DISTRIBUTORS, INC.
By: /s/ Cheryl L. Heilman By: /s/ Gene L. Needles
--------------------------------- ------------------------------------
Print: Cheryl L. Heilman Print: Gene L. Needles
Title: Vice President Title: President
Date: February 7, 2007 Date: February 26, 2007
|
AMERITAS LIFE INSURANCE CORP.
By: /s/ Robert C. Barth
---------------------------------
Print: Robert C. Barth
Title: Sr. Vice President
Date: February 7, 2007
|
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS,
A I M DISTRIBUTORS, INC.,
FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS, AND AS UNDERWRITER OF VARIABLE
CONTRACTS AND POLICIES
TABLE OF CONTENTS
DESCRIPTION PAGE ----------- ---- SECTION 1. AVAILABLE FUNDS............................................... 2 1.1 Availability.................................................... 2 1.2 Addition, Deletion or Modification of Funds..................... 2 1.3 No Sales to the General Public.................................. 2 SECTION 2. PROCESSING TRANSACTIONS....................................... 2 2.1 Timely Pricing and Orders....................................... 2 2.2 Timely Payments................................................. 3 2.3 Applicable Price................................................ 3 2.4 Dividends and Distributions..................................... 4 2.5 Book Entry...................................................... 4 SECTION 3. COSTS AND EXPENSES............................................ 5 3.1 General......................................................... 5 3.2 Parties To Cooperate............................................ 5 SECTION 4. LEGAL COMPLIANCE.............................................. 5 4.1 Tax Laws........................................................ 5 4.2 Insurance and Certain Other Laws................................ 7 4.3 Securities Laws................................................. 8 4.4 Notice of Certain Proceedings and Other Circumstances........... 8 4.5 FG-WL&A To Provide Documents; Information About AVIF............ 9 4.6 AVIF To Provide Documents; Information About FG-WL&A............ 10 SECTION 5. MIXED AND SHARED FUNDING...................................... 11 5.1 General......................................................... 11 5.2 Disinterested Trustees.......................................... 12 5.3 Monitoring for Material Irreconcilable Conflicts................ 12 5.4 Conflict Remedies............................................... 13 5.5 Notice to FG-WL&A............................................... 14 5.6 Information Requested by Board.................................. 14 5.7 Compliance with SEC Rules....................................... 14 5.8 Other Requirements.............................................. 15 SECTION 6. TERMINATION................................................... 15 6.1 Events of Termination........................................... 15 6.2 Notice Requirement for Termination.............................. 16 6.3 Funds To Remain Available....................................... 17 6.4 Survival of Warranties and Indemnifications..................... 17 6.5 Continuance of Agreement for Certain Purposes................... 17 SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION................... 17 SECTION 8. ASSIGNMENT.................................................... 18 SECTION 9. NOTICES....................................................... 18 SECTION 10. VOTING PROCEDURES............................................ 18 SECTION 11. FOREIGN TAX CREDITS.......................................... 19 |
SECTION 12. INDEMNIFICATION.............................................. 19 12.1 Of AVIF and AIM by FG-WL&A and UNDERWRITER..................... 19 12.2 Of FG-WL&A and UNDERWRITER by AVIF and AIM..................... 21 12.3 Effect of Notice............................................... 24 12.4 Successors..................................................... 24 SECTION 13. APPLICABLE LAW............................................... 24 SECTION 14. EXECUTION IN COUNTERPARTS.................................... 24 SECTION 15. SEVERABILITY................................................. 24 SECTION 16. RIGHTS CUMULATIVE............................................ 24 SECTION 17. HEADINGS..................................................... 24 SECTION 18. CONFIDENTIALITY.............................................. 25 SECTION 19. TRADEMARKS AND FUND NAMES.................................... 25 SECTION 20. PARTIES TO COOPERATE......................................... 26 SECTION 21. AMENDMENTS; NEED FOR......................................... 26 SECTION 22. FORCE MAJEURE................................................ 26 |
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th day of April, 2004 ("Agreement"), by and among AIM VARIABLE INSURANCE FUNDS, a Delaware Trust ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"), FIRST GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY, a New York life insurance company ("FG-WL&A"), on behalf of itself and each of its segregated asset accounts listed in Schedule A hereto, as the parties hereto may amend from time to time (each, an "Account," and collectively, the "Accounts"); and as the principal underwriter of the Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of twenty-eight separate series ("Series"), shares ("Shares") each of which are registered under the Securities Act of 1933, as amended (the "1933 Act") and are currently sold to one or more separate accounts of life insurance companies to fund benefits under variable annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto as the Parties hereto may amend from time to time (each a "Fund"; reference herein to "AVIF" includes reference to each Fund, to the extent the context requires) available for purchase by the Accounts; and
WHEREAS, FG-WL&A will be the issuer of certain variable annuity contracts and variable life insurance contracts ("Contracts") as set forth on Schedule A hereto, as the Parties hereto may amend from time to time, which Contracts (hereinafter collectively, the "Contracts"), if required by applicable law, will be registered under the 1933 Act; and
WHEREAS, FG-WL&A will fund the Contracts through the Accounts, each of which may be divided into two or more subaccounts ("Subaccounts"; reference herein to an "Account" includes reference to each Subaccount thereof to the extent the context requires); and
WHEREAS, FG-WL&A will serve as the depositor of the Accounts, each of which is registered as a unit investment trust investment company under the 1940 Act (or exempt therefrom), and the security interests deemed to be issued by the Accounts under the Contracts will be registered as securities under the 1933 Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations, FG-WL&A intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, GWL&A intends to utilize its NSCC member broker/dealer affiliate,
GWFS
Equities, Inc., ("GWFS") to transmit instructions for the purchase, redemption and transfer of Fund shares on behalf of the Account, and GWFS, alone, or with the assistance of a recordkeeping affiliate, to perform certain recordkeeping functions associated with the transfer of Fund shares into and out of the Account in order to recognize certain organizational economies; and
;
WHEREAS, AIM is a broker-dealer registered with the SEC under the 1934 Act and a member in good standing of the NASD;
NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY
AVIF will make Shares of each Fund available to FG-WL&A for purchase and redemption at net asset value and with no sales charges, subject to the terms and conditions of this Agreement. The Board of AVIF (the "Board") may refuse to sell Shares of any Fund to any person, or suspend or terminate the offering of Shares of any Fund (a) if such action is required by law or by regulatory authorities having jurisdiction, (b) if, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Fund, or (c) if such action is required by any policies that the Board has adopted and that apply to all Participating Insurance Companies.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS
The Parties hereto may agree, from time to time, to add other Funds to provide additional funding media for the Contracts, or to delete, combine, or modify existing Funds, by amending Schedule A hereto. Upon such amendment to Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall include a reference to any such additional Fund. Schedule A, as amended from time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC
AVIF represents and warrants that no Shares of any Fund have been or will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS
(a) AVIF or its designated agent will use its best efforts to provide FG-WL&A with the net asset value per Share for each Fund by 6:00 p.m. Central Time on each Business Day. As used herein, "Business Day" shall mean any day on which (i) the New York Stock Exchange is open for
regular trading, (ii) AVIF calculates the Fund's net asset value, and (iii) FG-WL&A is open for business.
(b) FG-WL&A will use the data provided by AVIF each Business Day pursuant to paragraph (a) immediately above to calculate Account unit values and to process transactions that receive that same Business Day's Account unit values. FG-WL&A will perform such Account processing the same Business Day, and will place corresponding orders to purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following Business Day; provided, however, that AVIF shall provide additional time to FG-WL&A in the event that AVIF is unable to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such additional time shall be equal to the additional time that AVIF takes to make the net asset values available to FG-WL&A.
(c) With respect to payment of the purchase price by FG-WL&A and of redemption proceeds by AVIF, FG-WL&A and AVIF shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information (as determined under SEC guidelines), FG-WL&A shall be entitled to an adjustment to the number of Shares purchased or redeemed to reflect the correct net asset value per Share. Any material error in the calculation or reporting of net asset value per Share, dividend or capital gain information shall be reported promptly upon discovery to FG-WL&A. Materiality and reprocessing cost reimbursement shall be determined in accordance with standards established by the Parties as provided in Schedule B, attached hereto and incorporated herein (except that for any money market fund, materiality shall be determined in a manner consistent with Rule 2a-7 under the 1940 Act).
2.2 TIMELY PAYMENTS
FG-WL&A will wire payment for net purchases to a custodial account designated by AVIF by 1:00 p.m. Central Time on the same day as the order for Shares is placed, to the extent practicable. AVIF will wire payment for net redemptions to an account designated by FG-WL&A by 1:00 p.m. Central Time on the same day as the Order is placed, to the extent practicable, but in any event within five (5) calendar days after the date the order is placed in order to enable FG-WL&A to pay redemption proceeds within the time specified in Section 22(e) of the 1940 Act or such shorter period of time as may be required by law.
2.3 APPLICABLE PRICE
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that FG-WL&A receives prior to the
close of regular trading on the New York Stock Exchange (or such other time set
by the Board for purposes of determining the current net asset value of a Fund
in accordance with Rule 22c-1 under the 1940 Act) on a Business Day will be
executed at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the orders. For purposes of this
Section 2.3(a), FG-WL&A shall be the designated agent of AVIF for receipt of
orders relating to Contract transactions, in accordance with Section 22(c) and
Rule 22c-1 under the 1940 Act, on each Business Day and receipt by such
designated agent shall constitute receipt by AVIF; provided that AVIF receives
notice of such orders
by 9:00 a.m. Central Time on the next following Business Day or such later time
as computed in accordance with Section 2.1(b) hereof. In connection with this
Section 2.3(a), FG-WL&A represents and warrants that it will not knowingly
submit any order for Shares or engage in any practice, nor will it knowingly
allow or suffer any person acting on its behalf to submit any order for Shares
or engage in any practice, that would violate or cause a violation of applicable
law or regulation including, without limitation Section 22 of the 1940 Act and
the rules thereunder.
(b) All other Share purchases and redemptions by FG-WL&A will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable.
(c) Without limiting the scope or effect of Section 1.1 hereof, pursuant to which the Board may reject a Share purchase order by or on behalf of FG-WL&A under the circumstances described therein, FG-WL&A and its designated affiliate agrees to cooperate with the Fund and AIM to prevent any person exercising, or purporting to exercise, rights or privileges under one or more Contracts (including, but not limited to Contract owners, annuitants, insureds or participants, as the case may be (collectively, "Participants")) from engaging in any trading practices in any Fund that the Board or AIM determines, in good faith and in their sole discretion, to be detrimental or potentially detrimental to the other shareholders of the Fund, or to be in contravention of any applicable law or regulation including, without limitation, Section 22 of the 1940 Act and the rules thereunder. Such cooperation may include, but shall not be limited to, identifying the person or persons engaging in such trading practices, facilitating the imposition of any applicable redemption fee on such person or persons, limiting the telephonic or electronic trading privileges of such person or persons, and taking such other remedial steps, all to the extent permitted or required by applicable law and the Funds' then current prospectus.
2.4 DIVIDENDS AND DISTRIBUTIONS
AVIF will furnish notice by wire or telephone (followed by written confirmation) on or prior to the payment date to FG-WL&A of any income dividends or capital gain distributions payable on the Shares of any Fund. FG-WL&A hereby elects to reinvest all dividends and capital gains distributions in additional Shares of the corresponding Fund at the ex-dividend date net asset values until FG-WL&A otherwise notifies AVIF in writing, it being agreed by the Parties that the ex-dividend date and the payment date with respect to any dividend or distribution will be the same Business Day. FG-WL&A reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash.
2.5 BOOK ENTRY
Issuance and transfer of AVIF Shares will be by book entry only. Stock certificates will not be issued to FG-WL&A. Shares ordered from AVIF will be recorded in an appropriate title for FG-WL&A, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL
Except as otherwise specifically provided in Schedule C, attached hereto and made a part hereof, each Party will bear, or arrange for others to bear, all expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE
Each Party agrees to cooperate with the others, as applicable, in arranging to print, mail and/or deliver, in a timely manner, combined or coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS
(a) AVIF represents and warrants that each Fund is currently qualified as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and represents that it will use its best efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF will notify FG-WL&A immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and to maintain each Fund's compliance with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will notify FG-WL&A immediately upon having a reasonable basis for believing that a Fund has ceased to so comply or that a Fund might not so comply in the future. In the event of a breach of this Section 4.1(b) by AVIF, it will take all reasonable steps to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Section 1.817-5 of the regulations under the Code.
(c) Notwithstanding any other provision of this Agreement, but without limiting the ability of AVIF and/or AIM to assume the defense of any action pursuant to Section 12.2(d) hereof, FG-WL&A agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of FG-WL&A or, to FG-WL&A's knowledge, of any Participants, that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or FG-WL&A otherwise becomes aware of any facts that could give rise to any claim against AVIF or its affiliates as a result of such a failure or alleged failure:
(i) FG-WL&A shall promptly notify AVIF of such assertion or potential claim (subject to the Confidentiality provisions of Section 18 as to any Participant);
(ii) FG-WL&A shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure;
(iii) FG-WL&A shall use all commercially reasonable efforts to minimize any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS that such failure was inadvertent;
(iv) FG-WL&A shall permit AVIF, its affiliates and their legal and accounting advisors to participate in any conferences, settlement discussions or other administrative or judicial proceeding or contests (including judicial appeals thereof) with the IRS, any Participant or any other claimant regarding any claims that could give rise to liability to AVIF or its affiliates as a result of such a failure or alleged failure; provided, however, that FG-WL&A will retain control of the conduct of such conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by FG-WL&A to the IRS, any Participant or any other claimant in connection with any of the foregoing proceedings or contests that would affect AIM, it affiliates and/or AVIF and/or AVIF's shareholders, (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)), (a) shall be provided by FG-WL&A to AVIF (together with any supporting information or analysis); subject to the confidentiality provisions of Section 18, at least ten (10) business days or such shorter period to which the Parties hereto agree prior to the day on which such proposed materials are to be submitted, and (b) shall not be submitted by FG-WL&A to any such person without the express written consent of AVIF which shall not be unreasonably withheld;
(vi) FG-WL&A shall provide AVIF or its affiliates and their accounting and legal advisors with such cooperation as AVIF shall reasonably request (including, without limitation, by permitting AVIF and its accounting and legal advisors to review the relevant books and records of FG-WL&A) in order to facilitate review by AVIF or its advisors of any written submissions provided to it pursuant to the preceding clause or its assessment of the validity or amount of any claim against its arising from such a failure or alleged failure;
(vii) FG-WL&A shall not with respect to any claim of the IRS or any Participant that would give rise to a claim against AVIF or its affiliates (a) compromise or settle any claim, (b) accept any adjustment on audit, or (c) forego any allowable administrative or judicial appeals, without the express written consent of AVIF or its affiliates, which shall not be unreasonably withheld, provided that FG-WL&A shall not be required, after exhausting all administrative remedies, to appeal any adverse judicial decision unless AVIF or its affiliates shall have provided an opinion of independent counsel to the effect that a reasonable basis exists for taking such appeal; and provided further that the costs of any such appeal shall be borne solely by AVIF.
Notwithstanding the foregoing, GWL&A agrees to share in fifty percent (50%) of the reasonable costs of appeal should the decision of the appellate court relieve GWL&A of any direct liability with respect to the claim appealed thereto; and
(viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if FG-WL&A fails to comply with any of the foregoing clauses (i) through (vii), and such failure could be shown to have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, FG-WL&A may,
in its discretion, authorize AVIF or its affiliates to act in the name of
FG-WL&A in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall FG-WL&A have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) FG-WL&A represents and warrants that the Contracts currently are and will be treated as annuity contracts or life insurance contracts under applicable provisions of the Code and that it will use its best efforts to maintain such treatment; FG-WL&A will notify AVIF immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future.
(e) FG-WL&A represents and warrants that each Account is a "segregated asset account" and that interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817 of the Code and the regulations thereunder. FG-WL&A will use its best efforts to continue to meet such definitional requirements, and it will notify AVIF immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS
(a) AVIF will use its best efforts to comply with any applicable state insurance laws or regulations, to the extent specifically requested in writing by FG-WL&A, which efforts shall include, without limitation, the furnishing of information that is not otherwise available to FG-WL&A and that is required by state insurance law to enable FG-WL&A to obtain the authority needed to issue the Contracts in any applicable state.
(b) FG-WL&A represents and warrants that (i) it is an insurance company duly organized, validly existing and in good standing under the laws of the State of New York and has full corporate power, authority and legal right to execute, deliver and perform its duties and comply with its obligations under this Agreement, and (ii) the Contracts comply in all material respects with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is lawfully organized, validly existing, and in good standing under the laws of the State of Delaware and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS
(a) FG-WL&A represents and warrants that (i) interests in each Account pursuant to the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act, (ii) the Contracts will be duly authorized for issuance and sold in compliance with all applicable federal and state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and the law(s) of FG-WL&A's state(s) of organization and domicile, (iii) each Account is and will remain registered under the 1940 Act, to the extent required by the 1940 Act, (iv) each Account does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, to the extent required, (v) each Account's 1933 Act registration statement relating to the Contracts, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder, (vi) FG-WL&A will amend the registration statement for its Contracts under the 1933 Act and for its Accounts under the 1940 Act from time to time as required in order to effect the continuous offering of its Contracts or as may otherwise be required by applicable law, and (vii) each Account Prospectus, Statement of Additional Information, and then-current stickers (collectively referred to herein as "Account Prospectus"), will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and duly authorized for issuance and sold in compliance with Delaware law, (ii) AVIF is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend the registration statement for its Shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its Shares, (iv) AVIF does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act registration statement, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and (vi) AVIF's Prospectus, Statement of Additional Information, and then-current stickers (collectively referred to herein as "AVIF Prospectus"), will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in accordance with the laws of any state or other jurisdiction if and to the extent reasonably deemed advisable by AVIF.
(d) AVIF represents and warrants that all of its trustees, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Fund are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES
(a) AVIF or AIM will immediately notify FG-WL&A of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to AVIF's registration statement under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such registration statement or AVIF Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of AVIF's Shares, or (iv) any other action or circumstances that may prevent the lawful offer or sale of Shares of any Fund in any state or jurisdiction, including, without limitation, any circumstances in which (a) such Shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law, or (b) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by FG-WL&A. AVIF and AIM will make every reasonable effort to prevent the issuance, with respect to any Fund, of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
(b) FG-WL&A or its designated underwriter affiliate will immediately notify AVIF of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to each Account's registration statement under the 1933 Act relating to the Contracts or each Account Prospectus, (ii) any request by the SEC for any amendment to such registration statement or Account Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of each Account's interests pursuant to the Contracts, or (iv) any other action or circumstances that may prevent the lawful offer or sale of said interests in any state or jurisdiction, including, without limitation, any circumstances in which said interests are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law. FG-WL&A and its designated underwriter affiliate will make every reasonable effort to prevent the issuance of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
4.5 FG-WL&A TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF
(a) FG-WL&A will provide to AVIF or its designated agent at least one (1) complete copy of all SEC registration statements, Account Prospectuses, reports, any preliminary and final voting instruction solicitation material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to each Account or the Contracts, contemporaneously with the filing of such document with the SEC or other regulatory authorities.
(b) FG-WL&A will provide to AVIF or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which AVIF or any of its affiliates is named, at least five (5) Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if AVIF or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. AVIF hereby designates AIM as the entity to receive such sales literature, until such time as AVIF appoints another designated agent by giving notice to FG-WL&A in the manner required by Section 9 hereof.
(c) Neither FG-WL&A nor any of its affiliates, will give any information or
make any representations or statements on behalf of or concerning AVIF or its
affiliates in connection with the sale of the Contracts other than (i) the
information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) FG-WL&A shall adopt and implement procedures reasonably designed to ensure that information concerning AVIF and its affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither GWL&A, AVIF nor any of their affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act, or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT FG-WL&A
(a) AVIF will provide to FG-WL&A at least one (1) complete copy of all SEC registration statements, AVIF Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to AVIF or the Shares of a Fund, contemporaneously with the filing of such document with the SEC or other regulatory authorities.
(b) AVIF will provide to FG-WL&A a camera ready copy of all AVIF prospectuses and printed copies, in an amount specified by FG-WL&A, of AVIF statements of additional information, proxy materials, periodic reports to shareholders and other materials required by law to be sent to Participants who have allocated any Contract value to a Fund. AVIF will provide such copies to FG-WL&A in a timely manner so as to enable FG-WL&A, as the case may be, to print and distribute such materials within the time required by law to be furnished to Participants.
(c) AVIF will provide to FG-WL&A or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which FG-WL&A, or any of its respective affiliates is named, or that refers to the Contracts, at least five (5) Business Days prior
to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if FG-WL&A or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. FG-WL&A shall receive all such sales literature until such time as it appoints a designated agent by giving notice to AVIF in the manner required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning FG-WL&A, each Account, or the Contracts other than (i) the information or representations contained in the registration statement, including each Account Prospectus contained therein, relating to the Contracts, as such registration statement and Account Prospectus may be amended from time to time; or (ii) in published reports for the Account or the Contracts that are in the public domain and approved by FG-WL&A for distribution; or (iii) in sales literature or other promotional material approved by FG-WL&A or its affiliates, except with the express written permission of FG-WL&A.
(e) AVIF shall cause its principal underwriter to adopt and implement procedures reasonably designed to ensure that information concerning FG-WL&A, and its respective affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither FG-WL&A, nor any of its respective affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act, or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL
The SEC has granted an order to AVIF exempting it from certain provisions of the 1940 Act and rules thereunder so that AVIF may be available for investment by certain other entities, including, without limitation, separate accounts funding variable annuity contracts or variable life insurance contracts, separate accounts of insurance companies unaffiliated with FG-WL&A, and trustees of qualified pension and retirement plans (collectively, "Mixed and Shared Funding"). The
Parties recognize that the SEC has imposed terms and conditions for such orders that are substantially identical to many of the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply pursuant to the exemptive order granted to AVIF. AVIF hereby notifies FG-WL&A that, in the event that AVIF implements Mixed and Shared Funding, it may be appropriate to include in the prospectus pursuant to which a Contract is offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED TRUSTEES
AVIF agrees that its Board shall at all times consist of trustees a majority of whom (the "Disinterested Trustees") are not interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the rules thereunder and as modified by any applicable orders of the SEC, except that if this condition is not met by reason of the death, disqualification, or bona fide resignation of any director, then the operation of this condition shall be suspended (a) for a period of forty-five (45) days if the vacancy or vacancies may be filled by the Board; (b) for a period of sixty (60) days if a vote of shareholders is required to fill the vacancy or vacancies or (c) for such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS
AVIF agrees that its Board will monitor for the existence of any material irreconcilable conflict between the interests of the Participants in all separate accounts of life insurance companies utilizing AVIF ("Participating Insurance Companies"), including each Account, and participants in all qualified retirement and pension plans investing in AVIF ("Participating Plans"). FG-WL&A agrees to inform the Board of AVIF of the existence of or any potential for any such material irreconcilable conflict of which it is aware. The concept of a "material irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may arise for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract and variable life insurance contract Participants or by Participants of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders of the type referred to in Section 5.1 hereof, FG-WL&A will assist the Board in carrying out its responsibilities by providing the Board with all information reasonably necessary for the Board to consider any issue raised, including information as to a decision by FG-WL&A to disregard voting instructions of Participants. FG-WL&A's responsibilities in connection with the foregoing shall be carried out with a view only to the interests of Participants.
5.4 CONFLICT REMEDIES
(a) It is agreed that if it is determined by a majority of the members of the Board or a majority of the Disinterested Trustees that a material irreconcilable conflict exists, FG-WL&A will, if it is a Participating Insurance Company for which a material irreconcilable conflict is relevant, at its own expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts from AVIF or any Fund and reinvesting such assets in a different investment medium, including another Fund of AVIF, or submitting the question whether such segregation should be implemented to a vote of all affected Participants and, as appropriate, segregating the assets of any particular group (e.g., annuity Participants, life insurance Participants or all Participants) that votes in favor of such segregation, or offering to the affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type defined as a "management company" in Section 4(3) of the 1940 Act or a new separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of FG-WL&A's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, FG-WL&A may be required, at AVIF's election, to withdraw each Account's investment in AVIF or any Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six (6) months after AVIF gives notice to FG-WL&A that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by FG-WL&A for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to FG-WL&A conflicts with the majority of other state regulators, then FG-WL&A will withdraw each Account's investment in AVIF within six (6) months after AVIF's Board informs FG-WL&A that it has determined that such decision has created a material irreconcilable conflict, and until such withdrawal AVIF shall continue to accept and implement
orders by FG-WL&A for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) FG-WL&A agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out at its expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will determine whether or not any proposed action adequately remedies any material irreconcilable conflict. In no event, however, will AVIF or any of its affiliates be required to establish a new funding medium for any Contracts. FG-WL&A will not be required by the terms hereof to establish a new funding medium for any Contracts if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict.
5.5 NOTICE TO FG-WL&A
AVIF will promptly make known in writing to FG-WL&A the Board's determination of the existence of a material irreconcilable conflict, a description of the facts that give rise to such conflict and the implications of such conflict.
5.6 INFORMATION REQUESTED BY BOARD
FG-WL&A and AVIF (or its investment adviser) will at least annually submit to the Board of AVIF such reports, materials or data as the Board may reasonably request so that the Board may fully carry out the obligations imposed upon it by the provisions hereof or any exemptive order granted by the SEC to permit Mixed and Shared Funding, and said reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board. All reports received by the Board of potential or existing conflicts, and all Board actions with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES
If, at any time during which AVIF is serving as an investment medium for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and conditions thereof and that the terms of this Section 5 shall be deemed modified if and only to the extent required in order also to comply with the terms and conditions of such exemptive relief that is afforded by any of said rules that are applicable.
5.8 OTHER REQUIREMENTS
AVIF will require that each Participating Insurance Company and Participating Plan enter into an agreement with AVIF that contains in substance the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the Fund, upon six (6) months advance written notice to the other parties, or, if later, upon receipt of any required exemptive relief from the SEC, unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against FG-WL&A or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding FG-WL&A's obligations under this Agreement or related to the sale of the Contracts, the operation of each Account, or the purchase of Shares, if, in each case, AVIF reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of FG-WL&A upon institution of formal proceedings against AVIF, its principal underwriter, or its investment adviser by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding AVIF's obligations under this Agreement or related to the operation or management of AVIF or the purchase of AVIF Shares, if, in each case, FG-WL&A reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on FG-WL&A, or the Subaccount corresponding to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are not registered and, in all material respects, issued and sold in accordance with any applicable federal or state law, or (ii) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by FG-WL&A; or
(e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of FG-WL&A if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if FG-WL&A reasonably believes that the Fund may fail to so qualify; or
(g) at the option of FG-WL&A if the Fund fails to comply with Section 817(h) of the Code or with successor or similar provisions, or if FG-WL&A reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by FG-WL&A cease to qualify as annuity contracts or life insurance contracts under the Code (other than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the Code) or if interests in an Account under the Contracts are not registered, where required, and, in all material respects, are not issued or sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION
No termination of this Agreement will be effective unless and until the Party terminating this Agreement gives prior written notice to the other Party to this Agreement of its intent to terminate, and such notice shall set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at least six (6) months in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at least ninety (90) days in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written notice shall be given as soon as possible within twenty-four (24) hours after the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE
Notwithstanding any termination of this Agreement by FG-WL&A, AVIF will, at
the option of FG-WL&A, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"), unless AIM or the Board determines that
doing so would not serve the best interests of the shareholders of the affected
Funds or would be inconsistent with applicable law or regulation. Specifically,
without limitation, the owners of the Existing Contracts will be permitted to
reallocate investments in the Fund (as in effect on such date), redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 6.3 will not apply to any (i) terminations under Section 5 and the
effect of such terminations will be governed by Section 5 of this Agreement or
(ii) any rejected purchase and/or redemption order as described in Section
2.3(c) hereof.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS
All warranties and indemnifications will survive the termination of this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES
If any Party terminates this Agreement with respect to any Fund pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this Agreement shall nevertheless continue in effect as to any Shares of that Fund that are outstanding as of the date of such termination (the "Initial Termination Date"). This continuation shall extend to the earlier of the date as of which an Account owns no Shares of the affected Fund or a date (the "Final Termination Date") six (6) months following the Initial Termination Date, except that FG-WL&A may, by written notice shorten said six (6) month period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one another in taking all necessary and appropriate steps for the purpose of ensuring that an Account owns no Shares of a Fund after the Final Termination Date with respect thereto, or, in the case of a termination pursuant to Section 6.1(a), the termination date specified in the notice of termination. Such steps may include combining the affected Account with another Account, substituting other mutual fund shares for those of the affected Fund, or otherwise terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written consent of each other Party. For purposes of this Agreement, the designation of an affiliate of a Party to perform some, or all, the duties and obligations hereto shall not be construed as an assignment. An affiliate is that entity which is controlled, either directly or indirectly by a Party and shall include any entity that conforms to such definition as of the effective date of the Agreement as well as any entity that conforms to the definition anytime thereafter.
SECTION 9. NOTICES
Notices and communications required or permitted will be given by means mutually acceptable to the Parties concerned. Each other notice or communication required or permitted by this Agreement will be given to the following persons at the following addresses and facsimile numbers, or such other persons, addresses or facsimile numbers as the Party receiving such notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Peter A. Davidson, Esq.
FIRST GREAT-WEST LIFE AND ANNUITY INSURANCE COMPANY
c/o Great-West Life And Annuity Insurance Company
8515 East Orchard Road
Greenwood Village, Colorado 80111
Attn: Vice President, Institutional Insurance
cc: Beverly A. Byrne, V.P. Counsel and Associate Secretary
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof, FG-WL&A will distribute all proxy material furnished by AVIF to Participants to whom pass-through voting privileges are required to be extended and will solicit voting instructions from Participants. FG-WL&A will vote Shares in accordance with timely instructions received from Participants. FG-WL&A will vote Shares that are (a) not attributable to Participants to whom pass-through voting privileges are extended, or (b) attributable to Participants, but for which no timely instructions have been received, in the same proportion as Shares for which said instructions have been received from Participants, so long as and to the extent that the SEC continues to interpret the 1940 Act to require pass through voting privileges for Participants. Neither FG-WL&A nor any of its affiliates will in any way recommend action in connection with or oppose or interfere with the solicitation of proxies for the Shares held for such Participants. FG-WL&A reserves the right to vote shares held in any Account in its own right, to the extent permitted by law. FG-WL&A shall be responsible for
assuring that each of its Accounts holding Shares calculates voting privileges
in a manner consistent with that of other Participating Insurance Companies or
in the manner required by the Mixed and Shared Funding exemptive order obtained
by AVIF. AVIF will notify FG-WL&A of any changes of interpretations or
amendments to Mixed and Shared Funding exemptive order it has obtained. AVIF
will comply with all provisions of the 1940 Act requiring voting by
shareholders, and in particular, AVIF either will provide for annual meetings
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of trustees and with whatever
rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with FG-WL&A concerning any decision to elect or not to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY FG-WL&A
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, FG-WL&A and its designated affiliates agree to indemnify and hold harmless AVIF, AIM, their affiliates, and each person, if any, who controls AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933 Act and each of their respective trustees and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of FG-WL&A or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to FG-WL&A or its designated affiliate by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, the
Contracts, or sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of FG-WL&A or their respective affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of FG-WL&A or their respective affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member," as that term is defined in paragraph (q) of Article I of the NASD's By-Laws), in connection with the sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to AVIF, AIM or their affiliates by or on behalf of FG-WL&A or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by FG-WL&A or its designated affiliates to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement, or any material breach of any representation and/or warranty made by FG-WL&A or its designated affiliates in this Agreement or arise out of or result from any other material breach of this Agreement by FG-WL&A or its designated affiliates; or
(v) arise as a result of failure by the Contracts issued by FG-WL&A to qualify as annuity contracts or life insurance contracts under the Code, otherwise than by reason of any Fund's failure to comply with Subchapter M or Section 817(h) of the Code.
(b) Neither FG-WL&A nor its designated affiliates shall be liable under this Section 12.1 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of that Indemnified Party's reckless disregard of obligations or duties (i) under this Agreement, or (ii) to AVIF or AIM.
(c) Neither FG-WL&A nor its designated affiliates shall be liable under
this Section 12.1 with respect to any action against an Indemnified Party unless
AVIF or AIM shall have notified FG-WL&A and its designated affiliates in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify FG-WL&A and its
designated affiliates of any such action shall not relieve FG-WL&A and its
designated affiliates from any liability which they may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
Section 12.1. Except as otherwise provided herein, in case any such action is
brought against an Indemnified Party, FG-WL&A and its designated affiliates
shall be entitled to participate, at their own expense, in the defense of such
action and also shall be entitled to assume the defense thereof, with counsel
approved by the Indemnified Party named in the action, which approval shall not
be unreasonably withheld. After notice from FG-WL&A or its designated affiliates
to such Indemnified Party of FG-WL&A's or its designated affiliates' election to
assume the defense thereof, the Indemnified Party will cooperate fully with
FG-WL&A and its designated affiliates and shall bear the fees and expenses of
any additional counsel retained by it, and neither LIFE COMPANY nor its
designated affiliates will be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
12.2 OF FG-WL&A BY AVIF AND AIM
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e), below, AVIF and AIM agree to indemnify and hold harmless FG-WL&A and its respective affiliates, and each person, if any, who controls FG-WL&A or its respective affiliates within the meaning of Section 15 of the 1933 Act and each of their respective trustees and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of AVIF and/or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law, or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus or sales literature or advertising of AVIF (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to AVIF or its affiliates by or on behalf of FG-WL&A, or its respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, or in sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising for the Contracts, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of AVIF, AIM or their affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF, AIM or their affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member" as that term is defined in Section (q) of Article I of the NASD By-Laws), in connection with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to FG-WL&A or its respective affiliates by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the obligations, provide the services and furnish the materials required of it under the terms of this Agreement, or any material breach of any representation and/or warranty made by AVIF in this Agreement or arise out of or result from any other material breach of this Agreement by AVIF.
(b) The parties agree that the foregoing indemnification by AVIF shall not apply to any acts or omissions of AIM. Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified Parties from and against any and all losses, claims, damages, liabilities (including amounts paid in settlement thereof with, the written consent of AVIF and/or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may become subject directly or indirectly under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions directly or indirectly result from or arise out of the failure of any Fund to operate as a regulated investment company in compliance with (i) Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of the Code and regulations thereunder, including, without limitation, any income taxes and related penalties, rescission charges, liability under state law to Participants asserting liability against FG-WL&A pursuant to the Contracts, the costs of any
ruling and closing agreement or other settlement with the IRS, and the cost of any substitution by FG-WL&A of Shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that FG-WL&A reasonably deems necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of such Indemnified Party's reckless disregard of its obligations and duties (i) under this Agreement, or (ii) to FG-WL&A, UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and AVIF
and AIM will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification provisions contained in this Agreement to any individual or entity, including, without limitation, FG-WL&A or any other Participating Insurance Company or any Participant, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from (i) a breach of any representation, warranty, and/or covenant made by FG-WL&A or its designated affiliates hereunder or by any other Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by FG-WL&A or any other Participating Insurance Company to maintain its segregated asset account (which invests in any Fund) as a legally and validly established segregated asset account under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by FG-WL&A or any other Participating Insurance Company to maintain its variable annuity or life insurance contracts (with respect to which any Fund serves as an underlying funding vehicle) as annuity contracts or life insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE
Any notice given by the indemnifying Party to an Indemnified Party referred to in Sections 12.1(c) or 12.2(d) above of participation in or control of any action by the indemnifying Party will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or responsibility, and the indemnifying Party will remain free to contest liability with respect to the claim among the Parties or otherwise.
12.4 SUCCESSORS
A successor by law of any Party shall be entitled to the benefits of the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted under and in accordance with Delaware law, without regard for that state's principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, that the Parties are entitled to under federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of FG-WL&A or any of
its affiliates (collectively, the "FG-WL&A Protected Parties" for purposes of
this Section 18), information maintained regarding those customers, and all
computer programs and procedures or other information developed by the FG-WL&A
Protected Parties or any of their employees or agents in connection with
FG-WL&A's performance of its duties under this Agreement are the valuable
property of the FG-WL&A Protected Parties. AVIF agrees that if it comes into
possession of any list or compilation of the identities of or other information
about the FG-WL&A Protected Parties' customers, or any other information or
property of the FG-WL&A Protected Parties, other than such information as may be
independently developed or compiled by AVIF from information supplied to it by
the FG-WL&A Protected Parties' customers who also maintain accounts separate
from those Accounts registered by FG-WL&A directly with AVIF, AVIF will hold
such information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with
FG-WL&A's prior written consent; or (b) as required by law or judicial process.
FG-WL&A acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. FG-WL&A agrees that if it comes into possession of any
list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by FG-WL&A from information supplied to it by the AVIF Protected
Parties' customers who also maintain accounts directly with FG-WL&A, FG-WL&A
will hold such information or property in confidence and refrain from using,
disclosing or distributing any of such information or other property except: (a)
with AVIF's prior written consent; or (b) as required by law or judicial
process. Each party acknowledges that any breach of the agreements in this
Section 18 would result in immediate and irreparable harm to the other parties
for which there would be no adequate remedy at law and agree that in the event
of such a breach, the other parties will be entitled to equitable relief by way
of temporary and permanent injunctions, as well as such other relief as any
court of competent jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) Except as may otherwise be provided in a License Agreement among A I M Management Group Inc., FG-WL&A or its designated affiliates, neither FG-WL&A nor its designated affiliates or any of their respective affiliates, shall use any trademark, trade name, service mark or logo of AVIF, AIM or any of their respective affiliates, or any variation of any such trademark, trade name, service mark or logo, without AVIF's or AIM's prior written consent, the granting of which shall be at AVIF's or AIM's sole option.
(b) Except as otherwise expressly provided in this Agreement, neither AVIF, its investment adviser, its principal underwriter, or any affiliates thereof shall use any trademark, trade
name, service mark or logo of FG-WL&A or any of its affiliates, or any variation of any such trademark, trade name, service mark or logo, without FG-WL&A's prior written consent, the granting of which shall be at FG-WL&A's sole option.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all appropriate governmental authorities (including, without limitation, the SEC, the NASD and state insurance regulators) and will permit each other and such authorities reasonable access to its books and records (including copies thereof) in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.
SECTION 21. AMENDMENTS; NEED FOR
No provision of this Agreement may be amended or modified in any manner except by mutual written agreement executed by all parties hereto. The Parties shall, from time to time, review this Agreement to determine the extent to which an amendment thereto may be necessary or appropriate to reflect changes in applicable law or regulation, and shall cooperate in implementing any such amendment in a timely manner, it being understood and agreed to that no such amendment shall take effect except upon mutual written agreement of all Parties as stated above.
SECTION 22. FORCE MAJEURE
Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for so long as, in any given case, the force or circumstances making performance impossible shall exist.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below.
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
FIRST GREAT-WEST LIFE & ANNUITY
INSURANCE COMPANY, as Underwriter and on
behalf of itself and its separate
accounts and its Affiliate
Attest: /s/ Ryan Logsdon By: /s/ Susan C. Gile
----------------------------- ------------------------------------
Name: Ryan Logsdon Name: V.P Susan Gile
Title: Sr. Associate Counsel Title: Vice President
|
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
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. 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. Premier Equity Fund
AIM V.I. Real Estate Fund
AIM V.I. Small Cap Equity Fund
INVESCO VIF - Core Equity Fund (name will be changed to AIM
V.I. Core Stock Fund on October 15, 2004)
INVESCO VIF - Dynamics Fund (name will be changed to AIM
V.I. Dynamics Fund on October 15, 2004)
INVESCO VIF - Financial Services Fund (name will be changed to AIM
V.I. Financial Services Fund on October 15, 2004)
INVESCO VIF - Health Sciences Fund (name will be changed to AIM
V.I. Health Sciences Fund on October 15, 2004)
INVESCO VIF - Leisure Fund (name will be changed to AIM
V.I. Leisure Fund on October 15, 2004)
INVESCO VIF - Small Company Growth Fund (name will be changed to AIM
V.I. Small Company Growth Fund on October 15, 2004)
INVESCO VIF - Technology Fund (name will be changed to AIM
V.I. Technology Fund on October 15, 2004)
INVESCO VIF - Total Return Fund (name will be changed to AIM
V.I. Total Return Fund on October 15, 2004)
INVESCO VIF - Utilities Fund (name will be changed to AIM
V.I. Utilities Fund on October 15, 2004)
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FORM NUMBERS --------- ------------ Charles Schwab & Co., Inc. J434 NY Schwab Variable Annuity |
SCHEDULE B
AIM'S PRICING ERROR POLICIES
Determination of Materiality
In the event that AIM discovers an error in the calculation of the Fund's net asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following thresholds are applied:
a. If the amount of the difference in the erroneous net asset value and the correct net asset value is less than .5% of the correct net asset value, AIM will reimburse the affected Fund to the extent of any loss resulting from the error. No other adjustments shall be made.
b. If the amount of the difference in the erroneous net asset value and the correct net asset value is .5% of the correct net asset value or greater, then AIM will determine the impact of the error to the affected Fund and shall reimburse such Fund (and/or FG-WL&A, as appropriate, such as in the event that the error was not discovered until after FG-WL&A processed transactions using the erroneous net asset value) to the extent of any loss resulting from the error. To the extent that an overstatement of net asset value per share is detected quickly and FG-WL&A has not mailed redemption checks to Participants, FG-WL&A and AIM agree to examine the extent of the error to determine the feasibility of reprocessing such redemption transaction (for purposes of reimbursing the Fund to the extent of any such overpayment). In no event shall FG-WL&A be liable to Participants for any such adjustments or underpayment amounts unless the error is due to FG-WL&A's own willful misfeasance, bad faith, or gross negligence. A pricing error within categories (a) or (b) above shall be deemed to be "materially incorrect" or constitute a "material error" for purposes of this Agreement.
Reprocessing Cost Reimbursement
To the extent a reprocessing of Participant transactions is required pursuant to paragraph (b), above, AIM shall reimburse FG-WL&A for FG-WL&A's reprocessing costs in an amount not to exceed $1.00 per contract affected by $10 or more.
SCHEDULE C
EXPENSE ALLOCATIONS
FG-WL&A AVIF / AIM
------- ----------
preparing and filing the Account's Preparing and filing the Fund's
registration statement registration statement
text composition for Account text composition for Fund prospectuses
prospectuses and supplements and supplements
text alterations of prospectuses text alterations of prospectuses (Fund)
(Account) and supplements (Account) and supplements (Fund)
printing Account and Fund a camera ready Fund prospectus
prospectuses and supplements
text composition and printing Account text composition and printing Fund SAIs
SAIs
mailing and distributing Account SAIs mailing and distributing Fund SAIs to
to policy owners upon request by policy owners upon request by policy
policy owners owners
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners
of record as required by Federal
Securities Laws and to prospective
purchasers
text composition (Account), printing, text composition of annual and
mailing, and distributing annual and semi-annual reports (Fund)
semi-annual reports for Account (Fund
and Account as, applicable)
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction statements and voting instruction
solicitation materials to policy solicitation materials to policy owners
owners with respect to proxies with respect to proxies related to the
related to the Account Fund
If required by G-WLA: preparation,
printing and distributing sales
material and advertising relating to
the Accounts, insofar as such
materials relate to the Contracts and
filing such materials with and
obtaining approval from, the SEC, the
NASD, any state insurance regulatory
authority, and any other appropriate
regulatory authority, to the extent
required
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AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated April 30, 2004, by and among AIM Variable Insurance Funds, a Delaware trust; A I M Distributors, Inc., a Delaware corporation, and GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY, a Colorado life insurance company ("G-WL&A"), on behalf of itself and each of its segregated asset accounts listed in Schedule A hereto, as the parties hereto may amend from time to time (each, an "Account," and collectively, the "Accounts"); and as the principal underwriter of the Contracts ("UNDERWRITER"), is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM V.I. Aggressive Growth Fund
AIM V.I. Basic 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. Demographic Trends Fund
AIM V.I. Diversified Income 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. Premier Equity Fund
AIM V.I. Real Estate Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Core Stock Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Health Care Fund
AIM V.I. Leisure Fund
AIM V.I. Small Company Growth Fund
AIM V.I. Technology Fund
AIM V.I. Total Return Fund
AIM V.I. Utilities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
CONTRACTS FORM NUMBERS
--------- ------------
Future Funds Series Account GTDAMF92 Vol
GTGAMF92 ER
GTMSG184-1
GTSAMF191
COLI VUL - 2 Series Account J355
COLI VUL - 7 Series Account J350
Charles Schwab & Co., Inc. J444MMFAPP
Schwab Variable Annuity J444SAAPP
J434VAROR
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All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Effective date: April 30, 2004
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
Attest: /s/ Ryan Logsdon By: /s/ Chris Bergeon
----------------------------- ------------------------------------
Name: Ryan Logsdon Name: Chris Bergeon
Title: Sr Associate Counsel Title: VP
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AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated as of April 30, 2004, by and among AIM Variable Insurance Funds, a Delaware trust, A I M Distributors, Inc., a Delaware corporation, and GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY, a Colorado life insurance company ("G-WL&A"), on behalf of itself and each of its segregated asset accounts listed in Schedule A hereto, as parties hereto may amend from time to time (each, an "Account," and collectively, the "Accounts"); and as the principal underwriter of the Contracts ("UNDERWRITER"), is hereby amended as follows:
The following is added under: "SECTION 2 PROCESSING AND TRANSACTIONS" before SECTION 2.1(A):
"Notwithstanding the provisions of paragraph (b) of this Section 2.1, the Parties agree to communicate, process and settle purchase and redemption transactions for Shares (collectively, "Share transactions") via the Fund/SERV and Networking systems of the National Securities Clearing Corporation (hereinafter, "NSCC"). G-WL&A and AIM each represents and warrants that it: (a) has entered into an agreement with NSCC, (b) has met and will continue to meet all of the requirements to participate in Fund/SERV and Networking, and (c) intends to remain at all times in compliance with the then current rules and procedures of NSCC, all to the extent necessary or appropriate to facilitate such communications, processing, and settlement of Share transactions. AIM agrees to provide G-WL&A with account positions and activity data relating to Share transactions via Networking. G-WL&A shall place trades with NSCC using Defined Contribution Clearance & Settlement (hereinafter, "DCC&S") indicators, no later than 8:00 a.m. Central Time, and G-WL&A shall pay for Shares by the scheduled close of federal funds transmissions on the same Business Day on which it places an order to purchase Shares in accordance with this section. Payment shall be in federal funds transmitted by wire from the designated NSCC Settling Bank (on behalf of G-WL&A).
For purposes of this Agreement, "Fund/SERV" shall mean NSCC's system for automated, centralized processing of mutual fund purchase and redemption orders, settlement, and account registration; "Networking" shall mean NSCC's (Level Zero) system that allows mutual funds and life insurance companies to exchange account level information electronically; "DCC&S" shall refer to an NSCC program that facilitates the automated processing and reporting of defined contribution transactions among asset managers, plan trustees, and plan administrators, including third-party administrators; and "Settling Bank" shall mean the entity appointed by AVIF to perform such settlement services on behalf of AVIF, which agrees to abide by NSCC's then current rules and procedures insofar as they relate to same day funds settlement. In all cases, processing and settlement of Share transactions shall be done in a manner consistent with applicable law.
In the event that any Party is prohibited from communicating, processing or settling Share transactions via Fund/SERV or Networking, such Party shall notify the other Parties by 9:00 a.m. Central Time. After all Parties have been notified, the provisions of paragraphs (b) and (c) of this Section 2.1 shall apply."
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Unless otherwise specified, all defined terms shall have the same meaning given to them in the Agreement.
Effective Date: August 1, 2006
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Philip A. Taylor
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY
Attest: By: /s/ George Webb
----------------------------- ------------------------------------
Name: Name: George Webb
-------------------------------
Title: Title: Senior Vice President
------------------------------
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PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS,
A I M DISTRIBUTORS, INC.,
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK
(EFFECTIVE JANUARY 1, 2005, JOHN HANCOCK LIFE
INSURANCE COMPANY OF NEW YORK),
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
MANULIFE FINANCIAL SERVICES, LLC
(EFFECTIVE JANUARY 1, 2005, JOHN HANCOCK DISTRIBUTORS, LLC)
TABLE OF CONTENTS
DESCRIPTION PAGE ----------- ---- SECTION 1. AVAILABLE FUNDS............................................... 4 1.1 Availability.................................................... 4 1.2 Addition, Deletion or Modification of Funds..................... 4 1.3 No Sales to the General Public.................................. 4 SECTION 2. PROCESSING TRANSACTIONS....................................... 5 2.1 Timely Pricing and Orders....................................... 5 2.2 Timely Payments................................................. 5 2.3 Applicable Price................................................ 6 2.4 Dividends and Distributions..................................... 6 2.5 Book Entry...................................................... 7 SECTION 3. COSTS AND EXPENSES............................................ 7 3.1 General......................................................... 7 3.2 Parties To Cooperate............................................ 7 SECTION 4. LEGAL COMPLIANCE.............................................. 7 4.1 Tax Laws........................................................ 7 4.2 Insurance and Certain Other Laws................................ 9 4.3 Securities Laws................................................. 10 4.4 Notice of Certain Proceedings and Other Circumstances........... 11 4.5 LIFE COMPANY To Provide Documents; Information About AVIF....... 11 4.6 AVIF To Provide Documents; Information About LIFE COMPANY....... 12 SECTION 5. MIXED AND SHARED FUNDING...................................... 13 5.1 General......................................................... 14 5.2 Disinterested Trustees.......................................... 14 5.3 Monitoring for Material Irreconcilable Conflicts................ 14 5.4 Conflict Remedies............................................... 15 5.5 Notice to LIFE COMPANY.......................................... 16 5.6 Information Requested by Board.................................. 16 5.7 Compliance with SEC Rules....................................... 16 5.8 Other Requirements.............................................. 17 SECTION 6. TERMINATION................................................... 17 6.1 Events of Termination........................................... 17 6.2 Notice Requirement for Termination.............................. 18 6.3 Funds To Remain Available....................................... 18 6.4 Survival of Warranties and Indemnifications..................... 18 6.5 Continuance of Agreement for Certain Purposes................... 19 SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION................... 19 SECTION 8. ASSIGNMENT.................................................... 19 SECTION 9. NOTICES....................................................... 19 SECTION 10. VOTING PROCEDURES............................................ 20 SECTION 11. FOREIGN TAX CREDITS.......................................... 20 |
SECTION 12. INDEMNIFICATION.............................................. 20 12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER................ 20 12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM................ 22 12.3 Effect of Notice............................................... 25 12.4 Successors..................................................... 25 SECTION 13. APPLICABLE LAW............................................... 25 SECTION 14. EXECUTION IN COUNTERPARTS.................................... 25 SECTION 15. SEVERABILITY................................................. 25 SECTION 16. RIGHTS CUMULATIVE............................................ 26 SECTION 17. HEADINGS..................................................... 26 SECTION 18. CONFIDENTIALITY.............................................. 26 SECTION 19. TRADEMARKS AND FUND NAMES.................................... 27 SECTION 20. PARTIES TO COOPERATE......................................... 27 SECTION 21. AMENDMENTS; NEED FOR......................................... 27 SECTION 22. FORCE MAJEURE................................................ 28 |
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th day of April, 2004
("Agreement"), by and among AIM VARIABLE INSURANCE FUNDS, a Delaware Trust
("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"), The
Manufacturers Life Insurance Company of New York (effective January 1, 2005,
John Hancock Life Insurance Company of New York) ("LIFE COMPANY"), a New York
life insurance company, on behalf of itself and each of its segregated asset
accounts listed in Schedule A hereto, as the parties hereto may amend from time
to time (each, an "Account," and collectively, the "Accounts"); and Manulife
Financial Securities, LLC (effective January 1, 2005, John Hancock Distributors,
LLC), an affiliate of LIFE COMPANY and the principal underwriter of the
Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of twenty-seven separate series ("Series"), shares ("Shares") each of which are registered under the Securities Act of 1933, as amended (the "1933 Act") and are currently sold to one or more separate accounts of life insurance companies to fund benefits under variable annuity contracts and variable life insurance contracts ("Participating Insurance Companies"); and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto as the Parties hereto may amend from time to time (each a "Fund"; reference herein to "AVIF" includes reference to each Fund, to the extent the context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity contracts and variable life insurance contracts ("Contracts") as set forth on Schedule A hereto, as the Parties hereto may amend from time to time, which Contracts (hereinafter collectively, the "Contracts"), if required by applicable law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of which may be divided into two or more subaccounts ("Subaccounts"; reference herein to an "Account" includes reference to each Subaccount thereof to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of which is registered as a unit investment trust investment company under the 1940 Act (or exempt therefrom), and the security interests deemed to be issued by the Accounts under the Contracts will be registered as securities under the 1933 Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, AIM is a broker-dealer registered with the SEC under the 1934 Act and a member in good standing of the NASD;
NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase and redemption at net asset value and with no sales charges, subject to the terms and conditions of this Agreement. The Board of AVIF (the "Board") may refuse to sell Shares of any Fund to any person, or suspend or terminate the offering of Shares of any Fund (a) if such action is required by law or by regulatory authorities having jurisdiction, (b) if, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Fund, or (c) if such action is required by any policies that the Board has adopted and that apply to all Participating Insurance Companies.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS
The Parties hereto may agree, from time to time, to add other Funds to provide additional funding media for the Contracts, or to delete, combine, or modify existing Funds, by amending Schedule A hereto. Upon such amendment to Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall include a reference to any such additional Fund. Schedule A, as amended from time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC
AVIF agrees that shares of the Funds will be sold only to Participating Insurance Companies, their separate accounts and/or their variable insurance funds that comply with Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations promulgated thereunder, qualified pension and retirement plans or such other persons as are permitted under section 817(h)(4) of the Code and the regulations promulgated thereunder, the sale to which will not impair the tax treatment currently afforded the Contracts. AVIF represents and warrants that no Shares of any Fund have been or will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS
(a) AVIF or its designated agent will use its best efforts to provide LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m. Central Time on each Business Day. As used herein, "Business Day" shall mean any day on which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF calculates the Fund's net asset value, and (iii) LIFE COMPANY is open for business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day pursuant to paragraph (a) immediately above to calculate Account unit values and to process transactions that receive that same Business Day's Account unit values. LIFE COMPANY will perform such Account processing the same Business Day, and will place corresponding orders to purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following Business Day; provided, however, that AVIF shall provide additional time to LIFE COMPANY in the event that AVIF is unable to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such additional time shall be equal to the additional time that AVIF takes to make the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information (as determined under SEC guidelines), LIFE COMPANY shall be entitled to an adjustment to the number of Shares purchased or redeemed to reflect the correct net asset value per Share. Any material error in the calculation or reporting of net asset value per Share, dividend or capital gain information shall be reported promptly upon discovery to LIFE COMPANY. Materiality and reprocessing cost reimbursement shall be determined in accordance with standards established by the Parties as provided in Schedule B, attached hereto and incorporated herein (except that for any money market fund, materiality shall be determined in a manner consistent with Rule 2a-7 under the 1940 Act).
2.2 TIMELY PAYMENTS
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that LIFE COMPANY receives prior to
the close of regular trading on the New York Stock Exchange (or such other time
set by the Board for purposes of determining the current net asset value of a
Fund in accordance with Rule 22c-1 under the 1940 Act) on a Business Day will be
executed at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the orders. For purposes of this
Section 2.3(a), LIFE COMPANY shall be the designated agent of AVIF for receipt
of orders relating to Contract transactions, , in accordance with Section 22(c)
and Rule 22c-1 under the 1940 Act, on each Business Day and receipt by such
designated agent shall constitute receipt by AVIF; provided that AVIF receives
notice of such orders by 9:00 a.m. Central Time on the next following Business
Day or such later time as computed in accordance with Section 2.1(b) hereof. In
connection with this Section 2.3(a), LIFE COMPANY represents and warrants that
it will not submit any order for Shares or engage in any practice, nor will it
allow or suffer any person acting on its behalf to submit any order for Shares
or engage in any practice, that would violate or cause a violation of applicable
law or regulation including, without limitation Section 22 of the 1940 Act and
the rules thereunder.
(b) All other Share purchases and redemptions by LIFE COMPANY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable.
(c) Without limiting the scope or effect of Section 1.1 hereof, pursuant to which the Board may reject a Share purchase order by or on behalf of LIFE COMPANY under the circumstances described therein, LIFE COMPANY and UNDERWRITER agree to cooperate with the Fund and AIM to prevent any person exercising, or purporting to exercise, rights or privileges under one or more Contracts (including, but not limited to Contract owners, annuitants, insureds or participants, as the case may be (collectively, "Participants")) from engaging in any trading practices in any Fund that the Board or AIM determines, in good faith and in their sole discretion, to be detrimental or potentially detrimental to the other shareholders of the Fund, or to be in contravention of any applicable law or regulation including, without limitation, Section 22 of the 1940 Act and the rules thereunder. Such cooperation may include, but shall not be limited to, identifying the person or persons engaging in such trading practices, facilitating the imposition of any applicable redemption fee on such person or persons, limiting the telephonic or electronic trading privileges of such person or persons, and taking such other remedial steps, all to the extent permitted or required by applicable law.
2.4 DIVIDENDS AND DISTRIBUTIONS
AVIF will furnish notice by wire or telephone (followed by written confirmation) on or prior to the payment date to LIFE COMPANY of any income dividends or capital gain distributions payable on the Shares of any Fund. LIFE COMPANY hereby elects to reinvest all dividends and capital gains distributions in additional Shares of the corresponding Fund at the ex-dividend date net asset values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by the Parties that the ex-dividend date and the payment date with respect to any dividend or distribution will be the same Business Day. LIFE COMPANY reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash.
2.5 BOOK ENTRY
Issuance and transfer of AVIF Shares will be by book entry only. Stock certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL
Except as otherwise specifically provided in Schedule C, attached hereto and made a part hereof, each Party will bear, or arrange for others to bear, all expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE
Each Party agrees to cooperate with the others, as applicable, in arranging to print, mail and/or deliver, in a timely manner, combined or coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS
(a) AVIF represents and warrants that each Fund is currently qualified as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and represents that it will use its best efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and to maintain each Fund's compliance with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for believing that a Fund has ceased to so comply or that a Fund might not so comply in the future. In the event of a breach of this Section 4.1(b) by AVIF, it will take all reasonable steps to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Section 1.817-5 of the regulations under the Code.
(c) Notwithstanding any other provision of this Agreement, but without limiting the ability of AVIF and/or AIM to assume the defense of any action pursuant to Section 12.2(d) hereof, LIFE COMPANY agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of LIFE COMPANY or, to LIFE COMPANY's knowledge, of any Participants, that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or LIFE COMPANY otherwise becomes aware of any
facts that could give rise to any claim against AVIF or its affiliates as a result of such a failure or alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal and accounting advisors to participate in any conferences, settlement discussions or other administrative or judicial proceeding or contests (including judicial appeals thereof) with the IRS, any Participant or any other claimant regarding any claims that could give rise to liability to AVIF or its affiliates as a result of such a failure or alleged failure; provided, however, that LIFE COMPANY will retain control of the conduct of such conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by LIFE COMPANY to the IRS, any Participant or any other claimant in connection with any of the foregoing proceedings or contests (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)), (a) shall be provided by LIFE COMPANY to AVIF (together with any supporting information or analysis); subject to the confidentiality provisions of Section 18, at least ten (10) business days or such shorter period to which the Parties hereto agree prior to the day on which such proposed materials are to be submitted, and (b) shall not be submitted by LIFE COMPANY to any such person without the express written consent of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their accounting and legal advisors with such cooperation as AVIF shall reasonably request (including, without limitation, by permitting AVIF and its accounting and legal advisors to review the relevant books and records of LIFE COMPANY) in order to facilitate review by AVIF or its advisors of any written submissions provided to it pursuant to the preceding clause or its assessment of the validity or amount of any claim against its arising from such a failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS or any Participant that would give rise to a claim against AVIF or its affiliates (a) compromise or settle any claim, (b) accept any adjustment on audit, or (c)
forego any allowable administrative or judicial appeals, without the express written consent of AVIF or its affiliates, which shall not be unreasonably withheld, provided that LIFE COMPANY shall not be required, after exhausting all administrative remedies, to appeal any adverse judicial decision unless AVIF or its affiliates shall have provided an opinion of independent counsel to the effect that a reasonable basis exists for taking such appeal; and provided further that the costs of any such appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if LIFE COMPANY fails to comply with any of the foregoing clauses (i) through (vii), and such failure could be shown to have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall LIFE COMPANY have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts currently are and will be treated as annuity contracts or life insurance contracts under applicable provisions of the Code and that it will use its best efforts to maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future.
(e) LIFE COMPANY represents and warrants that each Account is a "segregated asset account" and that interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817 of the Code and the regulations thereunder. LIFE COMPANY will use its best efforts to continue to meet such definitional requirements, and it will notify AVIF immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS
(a) AVIF will use its best efforts to comply with any applicable state insurance laws or regulations, to the extent specifically requested in writing by LIFE COMPANY, which efforts shall include, without limitation, the furnishing of information that is not otherwise available to LIFE COMPANY and that is required by state insurance law to enable LIFE COMPANY to obtain the authority needed to issue the Contracts in any applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance company duly organized, validly existing and in good standing under the laws of the State of New York and has
full corporate power, authority and legal right to execute, deliver and perform its duties and comply with its obligations under this Agreement, (ii) it has legally and validly established and maintains each Account as a segregated asset account under New York Insurance Law and the regulations thereunder, and (iii) the Contracts comply in all material respects with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is lawfully organized, validly existing, and in good standing under the laws of the State of Delaware and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS
(a) LIFE COMPANY represents and warrants that (i) interests in each Account pursuant to the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act, (ii) the Contracts will be duly authorized for issuance and sold in compliance with all applicable federal and state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and the law(s) of LIFE COMPANY's state(s) of organization and domicile, (iii) each Account is and will remain registered under the 1940 Act, to the extent required by the 1940 Act, (iv) each Account does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, to the extent required, (v) each Account's 1933 Act registration statement relating to the Contracts, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the registration statement for its Contracts under the 1933 Act and for its Accounts under the 1940 Act from time to time as required in order to effect the continuous offering of its Contracts or as may otherwise be required by applicable law, and (vii) each Account Prospectus, Statement of Additional Information, and then-current stickers (collectively referred to herein as "Account Prospectus"), will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and duly authorized for issuance and sold in compliance with Delaware law, (ii) AVIF is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend the registration statement for its Shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its Shares, (iv) AVIF does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act registration statement, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and (vi) AVIF's Prospectus, Statement of Additional Information, and then-current stickers (collectively referred to herein as "AVIF Prospectus"), will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in accordance with the laws of any state or other jurisdiction if and to the extent reasonably deemed advisable by AVIF.
(d) AVIF represents and warrants that all of its trustees, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Fund are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES
(a) AVIF or AIM will immediately notify LIFE COMPANY of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to AVIF's registration statement under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such registration statement or AVIF Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of AVIF's Shares, or (iv) any other action or circumstances that may prevent the lawful offer or sale of Shares of any Fund in any state or jurisdiction, including, without limitation, any circumstances in which (a) such Shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law, or (b) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF and AIM will make every reasonable effort to prevent the issuance, with respect to any Fund, of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
(b) LIFE COMPANY or UNDERWRITER will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. LIFE COMPANY and UNDERWRITER will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF
(a) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed to ensure that information concerning AVIF and its affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither AVIF nor any of its affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act, or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of all SEC registration statements, AVIF Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to AVIF or the Shares of a Fund, contemporaneously with the filing of such document with the SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY a camera ready copy of all AVIF prospectuses and printed copies, in an amount specified by LIFE COMPANY, of AVIF statements
of additional information, proxy materials, periodic reports to shareholders and other materials required by law to be sent to Participants who have allocated any Contract value to a Fund. AVIF will provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may be, to print and distribute such materials within the time required by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning LIFE COMPANY, each Account, or the Contracts other than (i) the information or representations contained in the registration statement, including each Account Prospectus contained therein, relating to the Contracts, as such registration statement and Account Prospectus may be amended from time to time; or (ii) in published reports for the Account or the Contracts that are in the public domain and approved by LIFE COMPANY for distribution; or (iii) in sales literature or other promotional material approved by LIFE COMPANY or its affiliates, except with the express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement procedures reasonably designed to ensure that information concerning LIFE COMPANY, and its respective affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither LIFE COMPANY, nor any of its respective affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act, or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL
The SEC has granted an order to AVIF exempting it from certain provisions of the 1940 Act and rules thereunder so that AVIF may be available for investment by certain other entities, including, without limitation, separate accounts funding variable annuity contracts or variable life insurance contracts, separate accounts of insurance companies unaffiliated with LIFE COMPANY, and trustees of qualified pension and retirement plans (collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC has imposed terms and conditions for such orders that are substantially identical to many of the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply pursuant to the exemptive order granted to AVIF. AVIF hereby notifies LIFE COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may be appropriate to include in the prospectus pursuant to which a Contract is offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED TRUSTEES
AVIF agrees that its Board shall at all times consist of trustees a majority of whom (the "Disinterested Trustees") are not interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the rules thereunder and as modified by any applicable orders of the SEC, except that if this condition is not met by reason of the death, disqualification, or bona fide resignation of any director, then the operation of this condition shall be suspended (a) for a period of forty-five (45) days if the vacancy or vacancies may be filled by the Board; (b) for a period of sixty (60) days if a vote of shareholders is required to fill the vacancy or vacancies or (c) for such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS
AVIF agrees that its Board will monitor for the existence of any material irreconcilable conflict between the interests of the Participants in all separate accounts of life insurance companies utilizing AVIF ("Participating Insurance Companies"), including each Account, and participants in all qualified retirement and pension plans investing in AVIF ("Participating Plans"). LIFE COMPANY agrees to inform the Board of AVIF of the existence of or any potential for any such material irreconcilable conflict of which it is aware. The concept of a "material irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may arise for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract and variable life insurance contract Participants or by Participants of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the Board in carrying out its responsibilities by providing the Board with all information reasonably necessary for the Board to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's responsibilities in connection with the foregoing shall be carried out with a view only to the interests of Participants.
5.4 CONFLICT REMEDIES
(a) It is agreed that if it is determined by a majority of the members of the Board or a majority of the Disinterested Trustees that a material irreconcilable conflict exists, LIFE COMPANY will, if it is a Participating Insurance Company for which a material irreconcilable conflict is relevant, at its own expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts from AVIF or any Fund and reinvesting such assets in a different investment medium, including another Fund of AVIF, or submitting the question whether such segregation should be implemented to a vote of all affected Participants and, as appropriate, segregating the assets of any particular group (e.g., annuity Participants, life insurance Participants or all Participants) that votes in favor of such segregation, or offering to the affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type defined as a "management company" in Section 4(3) of the 1940 Act or a new separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of LIFE COMPANY's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, LIFE COMPANY may be required, at AVIF's election, to withdraw each Account's investment in AVIF or any Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six (6) months after AVIF gives notice to LIFE COMPANY that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to LIFE COMPANY conflicts with the majority of other state regulators, then LIFE COMPANY will withdraw each Account's investment in AVIF within six (6)
months after AVIF's Board informs LIFE COMPANY that it has determined that such decision has created a material irreconcilable conflict, and until such withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out at its expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will determine whether or not any proposed action adequately remedies any material irreconcilable conflict. In no event, however, will AVIF or any of its affiliates be required to establish a new funding medium for any Contracts. LIFE COMPANY will not be required by the terms hereof to establish a new funding medium for any Contracts if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY
AVIF will promptly make known in writing to LIFE COMPANY the Board's determination of the existence of a material irreconcilable conflict, a description of the facts that give rise to such conflict and the implications of such conflict.
5.6 INFORMATION REQUESTED BY BOARD
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of AVIF such reports, materials or data as the Board may reasonably request so that the Board may fully carry out the obligations imposed upon it by the provisions hereof or any exemptive order granted by the SEC to permit Mixed and Shared Funding, and said reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board. All reports received by the Board of potential or existing conflicts, and all Board actions with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES
If, at any time during which AVIF is serving as an investment medium for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and conditions thereof and that the terms of this Section 5 shall be deemed modified if and only to the extent required in order also to comply with the terms and conditions of such exemptive relief that is afforded by any of said rules that are applicable.
5.8 OTHER REQUIREMENTS
AVIF will require that each Participating Insurance Company and Participating Plan enter into an agreement with AVIF that contains in substance the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the Fund, upon six (6) months advance written notice to the other parties, or, if later, upon receipt of any required exemptive relief from the SEC, unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding LIFE COMPANY's obligations under this Agreement or related to the sale of the Contracts, the operation of each Account, or the purchase of Shares, if, in each case, AVIF reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal proceedings against AVIF, its principal underwriter, or its investment adviser by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding AVIF's obligations under this Agreement or related to the operation or management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE COMPANY reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on LIFE COMPANY, or the Subaccount corresponding to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are not registered and, in all material respects, issued and sold in accordance with any applicable federal or state law, or (ii) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with Section 817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY cease to qualify as annuity contracts or life insurance contracts under the Code (other than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the Code) or if interests in an Account under the Contracts are not registered, where required, and, in all material respects, are not issued or sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION
No termination of this Agreement will be effective unless and until the Party terminating this Agreement gives prior written notice to the other Party to this Agreement of its intent to terminate, and such notice shall set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at least six (6) months in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at least ninety (90) days in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written notice shall be given as soon as possible within twenty-four (24) hours after the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE
Notwithstanding any termination of this Agreement by LIFE COMPANY, AVIF
will, at the option of LIFE COMPANY, continue to make available additional
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"), unless AIM or the Board
determines that doing so would not serve the best interests of the shareholders
of the affected Funds or would be inconsistent with applicable law or
regulation. Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in the Fund (as in effect
on such date), redeem investments in the Fund and/or invest in the Fund upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 6.3 will not apply to any (i) terminations under Section
5 and the effect of such terminations will be governed by Section 5 of this
Agreement or (ii) any rejected purchase and/or redemption order as described in
Section 2.3(c) hereof.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS
All warranties and indemnifications will survive the termination of this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES
If any Party terminates this Agreement with respect to any Fund pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this Agreement shall nevertheless continue in effect as to any Shares of that Fund that are outstanding as of the date of such termination (the "Initial Termination Date"). This continuation shall extend to the earlier of the date as of which an Account owns no Shares of the affected Fund or a date (the "Final Termination Date") six (6) months following the Initial Termination Date, except that LIFE COMPANY may, by written notice shorten said six (6) month period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one another in taking all necessary and appropriate steps for the purpose of ensuring that an Account owns no Shares of a Fund after the Final Termination Date with respect thereto, or, in the case of a termination pursuant to Section 6.1(a), the termination date specified in the notice of termination. Such steps may include combining the affected Account with another Account, substituting other mutual fund shares for those of the affected Fund, or otherwise terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted will be given by means mutually acceptable to the Parties concerned. Each other notice or communication required or permitted by this Agreement will be given to the following persons at the following addresses and facsimile numbers, or such other persons, addresses or facsimile numbers as the Party receiving such notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Peter A. Davidson, Esq.
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (EFFECTIVE
JANUARY 1, 2005, JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK)
601 Congress Street
Boston, MA 02210
Attn: Arnold Bergman, Esq.
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY
of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although AVIF is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, AVIF will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any decision to elect or not to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF, AIM, their affiliates, and each person, if any, who controls AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933 Act and each of their respective trustees and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of LIFE COMPANY and UNDERWRITER) or actions in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to LIFE COMPANY or UNDERWRITER by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of LIFE COMPANY, UNDERWRITER or their respective affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of LIFE COMPANY, UNDERWRITER or their respective affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member," as that term is defined in paragraph (q) of Article I of the NASD's By-Laws), in connection with the sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to AVIF, AIM or their affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or UNDERWRITER to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement, or any material breach of any representation and/or warranty made by LIFE COMPANY or UNDERWRITER in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued by LIFE COMPANY to qualify as annuity contracts or life insurance contracts under the Code, otherwise than by reason of any Fund's failure to comply with Subchapter M or Section 817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section 12.1 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of that Indemnified Party's reckless disregard of obligations or duties (i) under this Agreement, or (ii) to AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section 12.1 with respect to any action against an Indemnified Party unless AVIF or AIM shall have notified LIFE COMPANY and UNDERWRITER in writing within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify LIFE COMPANY and UNDERWRITER of any such action shall not relieve LIFE COMPANY and UNDERWRITER from any liability which they may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 12.1. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, LIFE COMPANY and UNDERWRITER shall be entitled to participate, at their own expense, in the defense of such action and also shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from LIFE COMPANY or UNDERWRITER to such Indemnified Party of LIFE COMPANY's or UNDERWRITER's election to assume the defense thereof, the Indemnified Party will cooperate fully with LIFE COMPANY and UNDERWRITER and shall bear the fees and expenses of any additional counsel retained by it, and neither LIFE COMPANY nor UNDERWRITER will be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation.
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective trustees and officers,
(collectively, the "Indemnified Parties" for purposes of this Section
12.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of AVIF and/or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law, or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus or sales literature or advertising of AVIF (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to AVIF or its affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, or in sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising for the Contracts, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of AVIF, AIM or their affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF, AIM or their affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member" as that term is defined in Section (q) of Article I of the NASD By-Laws), in connection with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to LIFE COMPANY, UNDERWRITER or their respective affiliates by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the obligations, provide the services and furnish the materials required of it under the terms of this Agreement, or any material breach of any representation and/or warranty made by AVIF in this Agreement or arise out of or result from any other material breach of this Agreement by AVIF.
(b) The parties agree that the foregoing indemnification by AVIF shall not apply to any acts or omissions of AIM. Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified Parties from and against any and all losses, claims, damages, liabilities (including amounts paid in settlement thereof with, the written consent of AVIF and/or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may become subject directly or indirectly under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions directly or indirectly result from or arise out of the failure of any Fund to operate as a regulated investment company in compliance with (i) Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of the Code and regulations thereunder, including, without limitation, any income taxes and related penalties, rescission charges, liability under state law to Participants asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of any ruling and closing agreement or other settlement with the IRS, and the cost of any substitution by LIFE COMPANY of Shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that LIFE COMPANY reasonably deems necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of such Indemnified Party's reckless disregard of its obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY, UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and AVIF
and AIM will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification provisions contained in this Agreement to any individual or entity, including, without limitation, LIFE COMPANY, UNDERWRITER or any other Participating Insurance Company or any Participant, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from (i) a breach of any representation, warranty, and/or covenant made by LIFE COMPANY or UNDERWRITER hereunder or by any other Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE COMPANY or any other Participating Insurance Company to maintain its segregated asset account (which invests in any Fund) as a legally and validly established segregated asset account under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or any other Participating Insurance Company to maintain its variable annuity or life insurance contracts (with respect to which any Fund serves as an underlying funding vehicle) as annuity contracts or life insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE
Any notice given by the indemnifying Party to an Indemnified Party referred to in Sections 12.1(c) or 12.2(d) above of participation in or control of any action by the indemnifying Party will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or responsibility, and the indemnifying Party will remain free to contest liability with respect to the claim among the Parties or otherwise.
12.4 SUCCESSORS
A successor by law of any Party shall be entitled to the benefits of the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted under and in accordance with Delaware law, without regard for that state's principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, that the Parties are entitled to under federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such
a breach, the other parties will be entitled to equitable relief by way of temporary and permanent injunctions, as well as such other relief as any court of competent jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) Except as may otherwise be provided in a License Agreement among A I M Management Group Inc., LIFE COMPANY and UNDERWRITER, neither LIFE COMPANY nor UNDERWRITER or any of their respective affiliates, shall use any trademark, trade name, service mark or logo of AVIF, AIM or any of their respective affiliates, or any variation of any such trademark, trade name, service mark or logo, without AVIF's or AIM's prior written consent, the granting of which shall be at AVIF's or AIM's sole option.
(b) Except as otherwise expressly provided in this Agreement, neither AVIF, its investment adviser, its principal underwriter, or any affiliates thereof shall use any trademark, trade name, service mark or logo of LIFE COMPANY, UNDERWRITER or any of their affiliates, or any variation of any such trademark, trade name, service mark or logo, without LIFE COMPANY's or UNDERWRITER's prior written consent, the granting of which shall be at LIFE COMPANY's or UNDERWRITER's sole option.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all appropriate governmental authorities (including, without limitation, the SEC, the NASD and state insurance regulators) and will permit each other and such authorities reasonable access to its books and records (including copies thereof) in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.
SECTION 21. AMENDMENTS; NEED FOR
No provision of this Agreement may be amended or modified in any manner except by mutual written agreement executed by all parties hereto. The Parties shall, from time to time, review this Agreement to determine the extent to which an amendment thereto may be necessary or appropriate to reflect changes in applicable law or regulation, and shall cooperate in implementing any such amendment in a timely manner, it being understood and agreed to that no such amendment shall take effect except upon mutual written agreement of all Parties as stated above.
SECTION 22. FORCE MAJEURE
Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for so long as, in any given case, the force or circumstances making performance impossible shall exist.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below.
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
THE MANUFACTUERERS LIFE INSURANCE
COMPANY OF NEW YORK (EFFECTIVE JANUARY
1, 2005, JOHN HANCOCK LIFE INSURANCE
COMPANY OF NEW YORK), on behalf of
itself and its separate accounts
Attest: /s/ Gustan C. Elzie By: /s/ James D. Gallagher
----------------------------- ------------------------------------
Name: Gustan C. Elzie Name: James D. Gallagher
Title: Legal Specialist Title: Chairman & President
|
MANULIFE FINANCIAL SERVICES, LLC
(EFFECTIVE JANUARY 1, 2005, JOHN HANCOCK
DISTRIBUTORS, LLC)
Attest: /s/ Gustan C. Elzie By: /s/ Kevin S. Hill
----------------------------- ------------------------------------
Name: Gustan C. Elzie Name: Kevin S. Hill
Title: Legal Specialist Title: Vice President
|
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM V.I. Utilities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
THE MANUFACTURERS LIFE INSURANCE COMPANY OF NEW YORK (EFFECTIVE JANUARY 1, 2005, JOHN HANCOCK LIFE INSURANCE COMPANY OF NEW YORK) SEPARATE ACCOUNT H
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
Scudder Wealthmark
Scudder Wealthmark ML3
SCHEDULE B
AIM'S PRICING ERROR POLICIES
Determination of Materiality
In the event that AIM discovers an error in the calculation of the Fund's net asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following thresholds are applied:
a. If the amount of the difference in the erroneous net asset value and the correct net asset value is less than .5% of the correct net asset value, AIM will reimburse the affected Fund to the extent of any loss resulting from the error. No other adjustments shall be made.
b. If the amount of the difference in the erroneous net asset value and the correct net asset value is .5% of the correct net asset value or greater, then AIM will determine the impact of the error to the affected Fund and shall reimburse such Fund (and/or LIFE COMPANY, as appropriate, such as in the event that the error was not discovered until after LIFE COMPANY processed transactions using the erroneous net asset value) to the extent of any loss resulting from the error. To the extent that an overstatement of net asset value per share is detected quickly and LIFE COMPANY has not mailed redemption checks to Participants, LIFE COMPANY and AIM agree to examine the extent of the error to determine the feasibility of reprocessing such redemption transaction (for purposes of reimbursing the Fund to the extent of any such overpayment).
Reprocessing Cost Reimbursement
To the extent a reprocessing of Participant transactions is required pursuant to paragraph (b), above, AIM shall reimburse LIFE COMPANY for LIFE COMPANY's reprocessing costs.
The Pricing Policies described herein may be modified by AVIF as approved by its
Board. AIM agrees to use its best efforts to notify LIFE COMPANY at least five
(5) days prior to any such meeting of the Board of AVIF to consider such
proposed changes.
SCHEDULE C
EXPENSE ALLOCATIONS
LIFE COMPANY AVIF / AIM
------------ ----------
preparing and filing the Account's Preparing and filing the Fund's
registration statement registration statement
text composition for Account text composition for Fund prospectuses
prospectuses and supplements and supplements
text alterations of prospectuses text alterations of prospectuses (Fund)
(Account) and supplements (Account) and supplements (Fund)
printing Account and Fund a camera ready Fund prospectus
prospectuses and supplements
text composition and printing Account text composition and printing Fund SAIs
SAIs
mailing and distributing Account SAIs mailing and distributing Fund SAIs to
to policy owners upon request by policy owners upon request by policy
policy owners owners
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners
of record as required by Federal
Securities Laws and to prospective
purchasers
text composition (Account), printing, text composition of annual and
mailing, and distributing annual and semi-annual reports (Fund)
semi-annual reports for Account (Fund
and Account as, applicable)
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction statements and voting instruction
solicitation materials to policy solicitation materials to policy owners
owners with respect to proxies with respect to proxies related to the
related to the Account Fund
preparation, printing and
distributing sales material and
advertising relating to the Funds,
insofar as such materials relate to
the Contracts and filing such
materials with and obtaining approval
from, the SEC, the NASD, any state
insurance regulatory authority, and
any other appropriate regulatory
authority, to the extent required
|
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS,
A I M DISTRIBUTORS, INC.,
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
(EFFECTIVE JANUARY 1, 2005, JOHN HANCOCK LIFE
INSURANCE COMPANY (U.S.A.)),
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
MANULIFE FINANCIAL SERVICES, LLC
(EFFECTIVE JANUARY 1, 2005, JOHN HANCOCK DISTRIBUTORS, LLC)
TABLE OF CONTENTS
DESCRIPTION PAGE ----------- ---- SECTION 1. AVAILABLE FUNDS............................................... 4 1.1 Availability.................................................... 4 1.2 Addition, Deletion or Modification of Funds..................... 4 1.3 No Sales to the General Public.................................. 4 SECTION 2. PROCESSING TRANSACTIONS....................................... 5 2.1 Timely Pricing and Orders....................................... 5 2.2 Timely Payments................................................. 5 2.3 Applicable Price................................................ 6 2.4 Dividends and Distributions..................................... 6 2.5 Book Entry...................................................... 7 SECTION 3. COSTS AND EXPENSES............................................ 7 3.1 General......................................................... 7 3.2 Parties To Cooperate............................................ 7 SECTION 4. LEGAL COMPLIANCE.............................................. 7 4.1 Tax Laws........................................................ 7 4.2 Insurance and Certain Other Laws................................ 9 4.3 Securities Laws................................................. 10 4.4 Notice of Certain Proceedings and Other Circumstances........... 11 4.5 LIFE COMPANY To Provide Documents; Information About AVIF....... 11 4.6 AVIF To Provide Documents; Information About LIFE COMPANY....... 12 SECTION 5. MIXED AND SHARED FUNDING...................................... 13 5.1 General......................................................... 14 5.2 Disinterested Trustees.......................................... 14 5.3 Monitoring for Material Irreconcilable Conflicts................ 14 5.4 Conflict Remedies............................................... 15 5.5 Notice to LIFE COMPANY.......................................... 16 5.6 Information Requested by Board.................................. 16 5.7 Compliance with SEC Rules....................................... 16 5.8 Other Requirements.............................................. 17 SECTION 6. TERMINATION................................................... 17 6.1 Events of Termination........................................... 17 6.2 Notice Requirement for Termination.............................. 18 6.3 Funds To Remain Available....................................... 18 6.4 Survival of Warranties and Indemnifications..................... 18 6.5 Continuance of Agreement for Certain Purposes................... 19 SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION................... 19 SECTION 8. ASSIGNMENT.................................................... 19 SECTION 9. NOTICES....................................................... 19 SECTION 10. VOTING PROCEDURES............................................ 20 SECTION 11. FOREIGN TAX CREDITS.......................................... 20 |
SECTION 12. INDEMNIFICATION.............................................. 20 12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER................ 20 12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM................ 22 12.3 Effect of Notice............................................... 25 12.4 Successors..................................................... 25 SECTION 13. APPLICABLE LAW............................................... 25 SECTION 14. EXECUTION IN COUNTERPARTS.................................... 25 SECTION 15. SEVERABILITY................................................. 25 SECTION 16. RIGHTS CUMULATIVE............................................ 26 SECTION 17. HEADINGS..................................................... 26 SECTION 18. CONFIDENTIALITY.............................................. 26 SECTION 19. TRADEMARKS AND FUND NAMES.................................... 27 SECTION 20. PARTIES TO COOPERATE......................................... 27 SECTION 21. AMENDMENTS; NEED FOR......................................... 27 SECTION 22. FORCE MAJEURE................................................ 28 |
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th day of April, 2004 ("Agreement"), by and among AIM VARIABLE INSURANCE FUNDS, a Delaware Trust ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"), The Manufacturers Life Insurance Company (U.S.A.) (effective January 1, 2005, John Hancock Life Insurance Company (USA)) ("LIFE COMPANY"), a Michigan life insurance company, on behalf of itself and each of its segregated asset accounts listed in Schedule A hereto, as the parties hereto may amend from time to time (each, an "Account," and collectively, the "Accounts"); and Manulife Financial Securities, LLC (effective January 1, 2005, John Hancock Distributors, LLC), an affiliate of LIFE COMPANY and the principal underwriter of the Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of twenty-seven separate series ("Series"), shares ("Shares") each of which are registered under the Securities Act of 1933, as amended (the "1933 Act") and are currently sold to one or more separate accounts of life insurance companies to fund benefits under variable annuity contracts and variable life insurance contracts ("Participating Insurance Companies"); and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto as the Parties hereto may amend from time to time (each a "Fund"; reference herein to "AVIF" includes reference to each Fund, to the extent the context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity contracts and variable life insurance contracts ("Contracts") as set forth on Schedule A hereto, as the Parties hereto may amend from time to time, which Contracts (hereinafter collectively, the "Contracts"), if required by applicable law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of which may be divided into two or more subaccounts ("Subaccounts"; reference herein to an "Account" includes reference to each Subaccount thereof to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of which is registered as a unit investment trust investment company under the 1940 Act (or exempt therefrom), and the security interests deemed to be issued by the Accounts under the Contracts will be registered as securities under the 1933 Act (or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, AIM is a broker-dealer registered with the SEC under the 1934 Act and a member in good standing of the NASD;
NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase and redemption at net asset value and with no sales charges, subject to the terms and conditions of this Agreement. The Board of AVIF (the "Board") may refuse to sell Shares of any Fund to any person, or suspend or terminate the offering of Shares of any Fund (a) if such action is required by law or by regulatory authorities having jurisdiction, (b) if, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Fund, or (c) if such action is required by any policies that the Board has adopted and that apply to all Participating Insurance Companies.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS
The Parties hereto may agree, from time to time, to add other Funds to provide additional funding media for the Contracts, or to delete, combine, or modify existing Funds, by amending Schedule A hereto. Upon such amendment to Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall include a reference to any such additional Fund. Schedule A, as amended from time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC
AVIF agrees that shares of the Funds will be sold only to Participating Insurance Companies, their separate accounts and/or their variable insurance funds that comply with Section 817(h) of the Internal Revenue Code of 1986, as amended (the "Code") and the regulations promulgated thereunder, qualified pension and retirement plans or such other persons as are permitted under section 817(h)(4) of the Code and the regulations promulgated thereunder, the sale to which will not impair the tax treatment currently afforded the Contracts. AVIF represents and warrants that no Shares of any Fund have been or will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS
(a) AVIF or its designated agent will use its best efforts to provide LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m. Central Time on each Business Day. As used herein, "Business Day" shall mean any day on which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF calculates the Fund's net asset value, and (iii) LIFE COMPANY is open for business.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day pursuant to paragraph (a) immediately above to calculate Account unit values and to process transactions that receive that same Business Day's Account unit values. LIFE COMPANY will perform such Account processing the same Business Day, and will place corresponding orders to purchase or redeem Shares with AVIF by 9:00 a.m. Central Time the following Business Day; provided, however, that AVIF shall provide additional time to LIFE COMPANY in the event that AVIF is unable to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such additional time shall be equal to the additional time that AVIF takes to make the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information (as determined under SEC guidelines), LIFE COMPANY shall be entitled to an adjustment to the number of Shares purchased or redeemed to reflect the correct net asset value per Share. Any material error in the calculation or reporting of net asset value per Share, dividend or capital gain information shall be reported promptly upon discovery to LIFE COMPANY. Materiality and reprocessing cost reimbursement shall be determined in accordance with standards established by the Parties as provided in Schedule B, attached hereto and incorporated herein (except that for any money market fund, materiality shall be determined in a manner consistent with Rule 2a-7 under the 1940 Act).
2.2 TIMELY PAYMENTS
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that LIFE COMPANY receives prior to
the close of regular trading on the New York Stock Exchange (or such other time
set by the Board for purposes of determining the current net asset value of a
Fund in accordance with Rule 22c-1 under the 1940 Act) on a Business Day will be
executed at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the orders. For purposes of this
Section 2.3(a), LIFE COMPANY shall be the designated agent of AVIF for receipt
of orders relating to Contract transactions, , in accordance with Section 22(c)
and Rule 22c-1 under the 1940 Act, on each Business Day and receipt by such
designated agent shall constitute receipt by AVIF; provided that AVIF receives
notice of such orders by 9:00 a.m. Central Time on the next following Business
Day or such later time as computed in accordance with Section 2.1(b) hereof. In
connection with this Section 2.3(a), LIFE COMPANY represents and warrants that
it will not submit any order for Shares or engage in any practice, nor will it
allow or suffer any person acting on its behalf to submit any order for Shares
or engage in any practice, that would violate or cause a violation of applicable
law or regulation including, without limitation Section 22 of the 1940 Act and
the rules thereunder.
(b) All other Share purchases and redemptions by LIFE COMPANY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable.
(c) Without limiting the scope or effect of Section 1.1 hereof, pursuant to which the Board may reject a Share purchase order by or on behalf of LIFE COMPANY under the circumstances described therein, LIFE COMPANY and UNDERWRITER agree to cooperate with the Fund and AIM to prevent any person exercising, or purporting to exercise, rights or privileges under one or more Contracts (including, but not limited to Contract owners, annuitants, insureds or participants, as the case may be (collectively, "Participants")) from engaging in any trading practices in any Fund that the Board or AIM determines, in good faith and in their sole discretion, to be detrimental or potentially detrimental to the other shareholders of the Fund, or to be in contravention of any applicable law or regulation including, without limitation, Section 22 of the 1940 Act and the rules thereunder. Such cooperation may include, but shall not be limited to, identifying the person or persons engaging in such trading practices, facilitating the imposition of any applicable redemption fee on such person or persons, limiting the telephonic or electronic trading privileges of such person or persons, and taking such other remedial steps, all to the extent permitted or required by applicable law.
2.4 DIVIDENDS AND DISTRIBUTIONS
AVIF will furnish notice by wire or telephone (followed by written confirmation) on or prior to the payment date to LIFE COMPANY of any income dividends or capital gain distributions payable on the Shares of any Fund. LIFE COMPANY hereby elects to reinvest all dividends and capital gains distributions in additional Shares of the corresponding Fund at the ex-dividend date net asset values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by the Parties that the ex-dividend date and the payment date with respect to any dividend or distribution will be the same Business Day. LIFE COMPANY reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash.
2.5 BOOK ENTRY
Issuance and transfer of AVIF Shares will be by book entry only. Stock certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL
Except as otherwise specifically provided in Schedule C, attached hereto and made a part hereof, each Party will bear, or arrange for others to bear, all expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE
Each Party agrees to cooperate with the others, as applicable, in arranging to print, mail and/or deliver, in a timely manner, combined or coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS
(a) AVIF represents and warrants that each Fund is currently qualified as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and represents that it will use its best efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and to maintain each Fund's compliance with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for believing that a Fund has ceased to so comply or that a Fund might not so comply in the future. In the event of a breach of this Section 4.1(b) by AVIF, it will take all reasonable steps to adequately diversify the Fund so as to achieve compliance within the grace period afforded by Section 1.817-5 of the regulations under the Code.
(c) Notwithstanding any other provision of this Agreement, but without limiting the ability of AVIF and/or AIM to assume the defense of any action pursuant to Section 12.2(d) hereof, LIFE COMPANY agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of LIFE COMPANY or, to LIFE COMPANY's knowledge, of any Participants, that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or LIFE COMPANY otherwise becomes aware of any
facts that could give rise to any claim against AVIF or its affiliates as a result of such a failure or alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of
Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal and accounting advisors to participate in any conferences, settlement discussions or other administrative or judicial proceeding or contests (including judicial appeals thereof) with the IRS, any Participant or any other claimant regarding any claims that could give rise to liability to AVIF or its affiliates as a result of such a failure or alleged failure; provided, however, that LIFE COMPANY will retain control of the conduct of such conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by LIFE COMPANY to the IRS, any Participant or any other claimant in connection with any of the foregoing proceedings or contests (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)), (a) shall be provided by LIFE COMPANY to AVIF (together with any supporting information or analysis); subject to the confidentiality provisions of Section 18, at least ten (10) business days or such shorter period to which the Parties hereto agree prior to the day on which such proposed materials are to be submitted, and (b) shall not be submitted by LIFE COMPANY to any such person without the express written consent of AVIF which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their accounting and legal advisors with such cooperation as AVIF shall reasonably request (including, without limitation, by permitting AVIF and its accounting and legal advisors to review the relevant books and records of LIFE COMPANY) in order to facilitate review by AVIF or its advisors of any written submissions provided to it pursuant to the preceding clause or its assessment of the validity or amount of any claim against its arising from such a failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS or any Participant that would give rise to a claim against AVIF or its affiliates (a) compromise or settle any claim, (b) accept any adjustment on audit, or (c)
forego any allowable administrative or judicial appeals, without the express written consent of AVIF or its affiliates, which shall not be unreasonably withheld, provided that LIFE COMPANY shall not be required, after exhausting all administrative remedies, to appeal any adverse judicial decision unless AVIF or its affiliates shall have provided an opinion of independent counsel to the effect that a reasonable basis exists for taking such appeal; and provided further that the costs of any such appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if LIFE COMPANY fails to comply with any of the foregoing clauses (i) through (vii), and such failure could be shown to have materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; provided, that in no event shall LIFE COMPANY have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts currently are and will be treated as annuity contracts or life insurance contracts under applicable provisions of the Code and that it will use its best efforts to maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the future.
(e) LIFE COMPANY represents and warrants that each Account is a "segregated asset account" and that interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817 of the Code and the regulations thereunder. LIFE COMPANY will use its best efforts to continue to meet such definitional requirements, and it will notify AVIF immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS
(a) AVIF will use its best efforts to comply with any applicable state insurance laws or regulations, to the extent specifically requested in writing by LIFE COMPANY, which efforts shall include, without limitation, the furnishing of information that is not otherwise available to LIFE COMPANY and that is required by state insurance law to enable LIFE COMPANY to obtain the authority needed to issue the Contracts in any applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance company duly organized, validly existing and in good standing under the laws of the State of Michigan and has full
corporate power, authority and legal right to execute, deliver and perform its duties and comply with its obligations under this Agreement, (ii) it has legally and validly established and maintains each Account as a segregated asset account under Michigan Insurance Law and the regulations thereunder, and (iii) the Contracts comply in all material respects with all other applicable federal and state laws and regulations.
(c) AVIF represents and warrants that it is lawfully organized, validly existing, and in good standing under the laws of the State of Delaware and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS
(a) LIFE COMPANY represents and warrants that (i) interests in each Account pursuant to the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act, (ii) the Contracts will be duly authorized for issuance and sold in compliance with all applicable federal and state laws, including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and the law(s) of LIFE COMPANY's state(s) of organization and domicile, (iii) each Account is and will remain registered under the 1940 Act, to the extent required by the 1940 Act, (iv) each Account does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, to the extent required, (v) each Account's 1933 Act registration statement relating to the Contracts, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the registration statement for its Contracts under the 1933 Act and for its Accounts under the 1940 Act from time to time as required in order to effect the continuous offering of its Contracts or as may otherwise be required by applicable law, and (vii) each Account Prospectus, Statement of Additional Information, and then-current stickers (collectively referred to herein as "Account Prospectus"), will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and duly authorized for issuance and sold in compliance with Delaware law, (ii) AVIF is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend the registration statement for its Shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its Shares, (iv) AVIF does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act registration statement, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and (vi) AVIF's Prospectus, Statement of Additional Information, and then-current stickers (collectively referred to herein as "AVIF Prospectus"), will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in accordance with the laws of any state or other jurisdiction if and to the extent reasonably deemed advisable by AVIF.
(d) AVIF represents and warrants that all of its trustees, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Fund are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES
(a) AVIF or AIM will immediately notify LIFE COMPANY of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to AVIF's registration statement under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such registration statement or AVIF Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of AVIF's Shares, or (iv) any other action or circumstances that may prevent the lawful offer or sale of Shares of any Fund in any state or jurisdiction, including, without limitation, any circumstances in which (a) such Shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law, or (b) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF and AIM will make every reasonable effort to prevent the issuance, with respect to any Fund, of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time.
(b) LIFE COMPANY or UNDERWRITER will immediately notify AVIF of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to each Account's registration
statement under the 1933 Act relating to the Contracts or each Account
Prospectus, (ii) any request by the SEC for any amendment to such registration
statement or Account Prospectus that may affect the offering of Shares of AVIF,
(iii) the initiation of any proceedings for that purpose or for any other
purpose relating to the registration or offering of each Account's interests
pursuant to the Contracts, or (iv) any other action or circumstances that may
prevent the lawful offer or sale of said interests in any state or jurisdiction,
including, without limitation, any circumstances in which said interests are not
registered and, in all material respects, issued and sold in accordance with
applicable state and federal law. LIFE COMPANY and UNDERWRITER will make every
reasonable effort to prevent the issuance of any such stop order, cease and
desist order or similar order and, if any such order is issued, to obtain the
lifting thereof at the earliest possible time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF
(a) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least five (5)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed to ensure that information concerning AVIF and its affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither AVIF nor any of its affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act, or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of all SEC registration statements, AVIF Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to AVIF or the Shares of a Fund, contemporaneously with the filing of such document with the SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY a camera ready copy of all AVIF prospectuses and printed copies, in an amount specified by LIFE COMPANY, of AVIF statements
of additional information, proxy materials, periodic reports to shareholders and other materials required by law to be sent to Participants who have allocated any Contract value to a Fund. AVIF will provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may be, to print and distribute such materials within the time required by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Contracts, at least five (5) Business Days prior to its use
or such shorter period as the Parties hereto may, from time to time, agree upon.
No such material shall be used if LIFE COMPANY or its designated agent objects
to such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning LIFE COMPANY, each Account, or the Contracts other than (i) the information or representations contained in the registration statement, including each Account Prospectus contained therein, relating to the Contracts, as such registration statement and Account Prospectus may be amended from time to time; or (ii) in published reports for the Account or the Contracts that are in the public domain and approved by LIFE COMPANY for distribution; or (iii) in sales literature or other promotional material approved by LIFE COMPANY or its affiliates, except with the express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement procedures reasonably designed to ensure that information concerning LIFE COMPANY, and its respective affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither LIFE COMPANY, nor any of its respective affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act, or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL
The SEC has granted an order to AVIF exempting it from certain provisions of the 1940 Act and rules thereunder so that AVIF may be available for investment by certain other entities, including, without limitation, separate accounts funding variable annuity contracts or variable life insurance contracts, separate accounts of insurance companies unaffiliated with LIFE COMPANY, and trustees of qualified pension and retirement plans (collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC has imposed terms and conditions for such orders that are substantially identical to many of the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply pursuant to the exemptive order granted to AVIF. AVIF hereby notifies LIFE COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may be appropriate to include in the prospectus pursuant to which a Contract is offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED TRUSTEES
AVIF agrees that its Board shall at all times consist of trustees a majority of whom (the "Disinterested Trustees") are not interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the rules thereunder and as modified by any applicable orders of the SEC, except that if this condition is not met by reason of the death, disqualification, or bona fide resignation of any director, then the operation of this condition shall be suspended (a) for a period of forty-five (45) days if the vacancy or vacancies may be filled by the Board; (b) for a period of sixty (60) days if a vote of shareholders is required to fill the vacancy or vacancies or (c) for such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS
AVIF agrees that its Board will monitor for the existence of any material irreconcilable conflict between the interests of the Participants in all separate accounts of life insurance companies utilizing AVIF ("Participating Insurance Companies"), including each Account, and participants in all qualified retirement and pension plans investing in AVIF ("Participating Plans"). LIFE COMPANY agrees to inform the Board of AVIF of the existence of or any potential for any such material irreconcilable conflict of which it is aware. The concept of a "material irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may arise for a variety of reasons, including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract and variable life insurance contract Participants or by Participants of different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the Board in carrying out its responsibilities by providing the Board with all information reasonably necessary for the Board to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's responsibilities in connection with the foregoing shall be carried out with a view only to the interests of Participants.
5.4 CONFLICT REMEDIES
(a) It is agreed that if it is determined by a majority of the members of the Board or a majority of the Disinterested Trustees that a material irreconcilable conflict exists, LIFE COMPANY will, if it is a Participating Insurance Company for which a material irreconcilable conflict is relevant, at its own expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts from AVIF or any Fund and reinvesting such assets in a different investment medium, including another Fund of AVIF, or submitting the question whether such segregation should be implemented to a vote of all affected Participants and, as appropriate, segregating the assets of any particular group (e.g., annuity Participants, life insurance Participants or all Participants) that votes in favor of such segregation, or offering to the affected Participants the option of making such a change; and
(ii) establishing a new registered investment company of the type defined as a "management company" in Section 4(3) of the 1940 Act or a new separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of LIFE COMPANY's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, LIFE COMPANY may be required, at AVIF's election, to withdraw each Account's investment in AVIF or any Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six (6) months after AVIF gives notice to LIFE COMPANY that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to LIFE COMPANY conflicts with the majority of other state regulators, then LIFE COMPANY will withdraw each Account's investment in AVIF within six (6)
months after AVIF's Board informs LIFE COMPANY that it has determined that such decision has created a material irreconcilable conflict, and until such withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out at its expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Trustees will determine whether or not any proposed action adequately remedies any material irreconcilable conflict. In no event, however, will AVIF or any of its affiliates be required to establish a new funding medium for any Contracts. LIFE COMPANY will not be required by the terms hereof to establish a new funding medium for any Contracts if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY
AVIF will promptly make known in writing to LIFE COMPANY the Board's determination of the existence of a material irreconcilable conflict, a description of the facts that give rise to such conflict and the implications of such conflict.
5.6 INFORMATION REQUESTED BY BOARD
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of AVIF such reports, materials or data as the Board may reasonably request so that the Board may fully carry out the obligations imposed upon it by the provisions hereof or any exemptive order granted by the SEC to permit Mixed and Shared Funding, and said reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board. All reports received by the Board of potential or existing conflicts, and all Board actions with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Plans of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULES
If, at any time during which AVIF is serving as an investment medium for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and conditions thereof and that the terms of this Section 5 shall be deemed modified if and only to the extent required in order also to comply with the terms and conditions of such exemptive relief that is afforded by any of said rules that are applicable.
5.8 OTHER REQUIREMENTS
AVIF will require that each Participating Insurance Company and Participating Plan enter into an agreement with AVIF that contains in substance the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the Fund, upon six (6) months advance written notice to the other parties, or, if later, upon receipt of any required exemptive relief from the SEC, unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding LIFE COMPANY's obligations under this Agreement or related to the sale of the Contracts, the operation of each Account, or the purchase of Shares, if, in each case, AVIF reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal proceedings against AVIF, its principal underwriter, or its investment adviser by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding AVIF's obligations under this Agreement or related to the operation or management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE COMPANY reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on LIFE COMPANY, or the Subaccount corresponding to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are not registered and, in all material respects, issued and sold in accordance with any applicable federal or state law, or (ii) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with Section 817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY cease to qualify as annuity contracts or life insurance contracts under the Code (other than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the Code) or if interests in an Account under the Contracts are not registered, where required, and, in all material respects, are not issued or sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION
No termination of this Agreement will be effective unless and until the Party terminating this Agreement gives prior written notice to the other Party to this Agreement of its intent to terminate, and such notice shall set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at least six (6) months in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at least ninety (90) days in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written notice shall be given as soon as possible within twenty-four (24) hours after the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE
Notwithstanding any termination of this Agreement by LIFE COMPANY, AVIF
will, at the option of LIFE COMPANY, continue to make available additional
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"), unless AIM or the Board
determines that doing so would not serve the best interests of the shareholders
of the affected Funds or would be inconsistent with applicable law or
regulation. Specifically, without limitation, the owners of the Existing
Contracts will be permitted to reallocate investments in the Fund (as in effect
on such date), redeem investments in the Fund and/or invest in the Fund upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 6.3 will not apply to any (i) terminations under Section
5 and the effect of such terminations will be governed by Section 5 of this
Agreement or (ii) any rejected purchase and/or redemption order as described in
Section 2.3(c) hereof.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS
All warranties and indemnifications will survive the termination of this Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES
If any Party terminates this Agreement with respect to any Fund pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this Agreement shall nevertheless continue in effect as to any Shares of that Fund that are outstanding as of the date of such termination (the "Initial Termination Date"). This continuation shall extend to the earlier of the date as of which an Account owns no Shares of the affected Fund or a date (the "Final Termination Date") six (6) months following the Initial Termination Date, except that LIFE COMPANY may, by written notice shorten said six (6) month period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one another in taking all necessary and appropriate steps for the purpose of ensuring that an Account owns no Shares of a Fund after the Final Termination Date with respect thereto, or, in the case of a termination pursuant to Section 6.1(a), the termination date specified in the notice of termination. Such steps may include combining the affected Account with another Account, substituting other mutual fund shares for those of the affected Fund, or otherwise terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted will be given by means mutually acceptable to the Parties concerned. Each other notice or communication required or permitted by this Agreement will be given to the following persons at the following addresses and facsimile numbers, or such other persons, addresses or facsimile numbers as the Party receiving such notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Peter A. Davidson, Esq.
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.)
EFFECTIVE JANUARY 1, 2005, JOHN HANCOCK LIFE INSURANCE
COMPANY (U.S.A.)),
601 Congress Street
Boston, MA 02210
Attn: Arnold Bergman, Esq.
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY
of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings (except insofar as the SEC may interpret Section 16
of the 1940 Act not to require such meetings) or will comply with Section 16(c)
of the 1940 Act (although AVIF is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, AVIF will act in accordance with the SEC's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any decision to elect or not to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF, AIM, their affiliates, and each person, if any, who controls AVIF, AIM, or their affiliates within the meaning of Section 15 of the 1933 Act and each of their respective trustees and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.1) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of LIFE COMPANY and UNDERWRITER) or actions in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising for the Contracts (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to LIFE COMPANY or UNDERWRITER by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, the Contracts, or sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of LIFE COMPANY, UNDERWRITER or their respective affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of LIFE COMPANY, UNDERWRITER or their respective affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member," as that term is defined in paragraph (q) of Article I of the NASD's By-Laws), in connection with the sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such a statement or omission was made in reliance upon and in conformity with information furnished to AVIF, AIM or their affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or UNDERWRITER to perform the obligations, provide the services and furnish the materials required of them under the terms of this Agreement, or any material breach of any representation and/or warranty made by LIFE COMPANY or UNDERWRITER in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued by LIFE COMPANY to qualify as annuity contracts or life insurance contracts under the Code, otherwise than by reason of any Fund's failure to comply with Subchapter M or Section 817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section 12.1 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of that Indemnified Party's reckless disregard of obligations or duties (i) under this Agreement, or (ii) to AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section 12.1 with respect to any action against an Indemnified Party unless AVIF or AIM shall have notified LIFE COMPANY and UNDERWRITER in writing within a reasonable time after the summons or other first legal process giving information of the nature of the action shall have been served upon such Indemnified Party (or after such Indemnified Party shall have received notice of such service on any designated agent), but failure to notify LIFE COMPANY and UNDERWRITER of any such action shall not relieve LIFE COMPANY and UNDERWRITER from any liability which they may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 12.1. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, LIFE COMPANY and UNDERWRITER shall be entitled to participate, at their own expense, in the defense of such action and also shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from LIFE COMPANY or UNDERWRITER to such Indemnified Party of LIFE COMPANY's or UNDERWRITER's election to assume the defense thereof, the Indemnified Party will cooperate fully with LIFE COMPANY and UNDERWRITER and shall bear the fees and expenses of any additional counsel retained by it, and neither LIFE COMPANY nor UNDERWRITER will be liable to such Indemnified Party under this Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation.
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective trustees and officers,
(collectively, the "Indemnified Parties" for purposes of this Section
12.2) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of AVIF and/or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses), to which the Indemnified Parties may become subject under any statute, regulation, at common law, or otherwise; provided, the Account owns shares of the Fund and insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus or sales literature or advertising of AVIF (or any amendment or supplement to any of the foregoing), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that this agreement to indemnify shall not apply as to any Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and in conformity with information furnished to AVIF or its affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, or in sales literature or advertising or otherwise for use in connection with the sale of Contracts or Shares (or any amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising for the Contracts, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of AVIF, AIM or their affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF, AIM or their affiliates or persons under their control (including, without limitation, their employees and "persons associated with a member" as that term is defined in Section (q) of Article I of the NASD By-Laws), in connection with the sale or distribution of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to LIFE COMPANY, UNDERWRITER or their respective affiliates by or on behalf of AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Contracts, or any amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the obligations, provide the services and furnish the materials required of it under the terms of this Agreement, or any material breach of any representation and/or warranty made by AVIF in this Agreement or arise out of or result from any other material breach of this Agreement by AVIF.
(b) The parties agree that the foregoing indemnification by AVIF shall not apply to any acts or omissions of AIM. Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified Parties from and against any and all losses, claims, damages, liabilities (including amounts paid in settlement thereof with, the written consent of AVIF and/or AIM) or actions in respect thereof (including, to the extent reasonable, legal and other expenses) to which the Indemnified Parties may become subject directly or indirectly under any statute, at common law or otherwise, insofar as such losses, claims, damages, liabilities or actions directly or indirectly result from or arise out of the failure of any Fund to operate as a regulated investment company in compliance with (i) Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of the Code and regulations thereunder, including, without limitation, any income taxes and related penalties, rescission charges, liability under state law to Participants asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of any ruling and closing agreement or other settlement with the IRS, and the cost of any substitution by LIFE COMPANY of Shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that LIFE COMPANY reasonably deems necessary or appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with respect to any losses, claims, damages, liabilities or actions to which an Indemnified Party would otherwise be subject by reason of willful misfeasance, bad faith, or gross negligence in the performance by that Indemnified Party of its duties or by reason of such Indemnified Party's reckless disregard of its obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY, UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and AVIF
and AIM will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such Indemnified Party independently in connection with the defense thereof, other than reasonable costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification provisions contained in this Agreement to any individual or entity, including, without limitation, LIFE COMPANY, UNDERWRITER or any other Participating Insurance Company or any Participant, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from (i) a breach of any representation, warranty, and/or covenant made by LIFE COMPANY or UNDERWRITER hereunder or by any other Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE COMPANY or any other Participating Insurance Company to maintain its segregated asset account (which invests in any Fund) as a legally and validly established segregated asset account under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by LIFE COMPANY or any other Participating Insurance Company to maintain its variable annuity or life insurance contracts (with respect to which any Fund serves as an underlying funding vehicle) as annuity contracts or life insurance contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE
Any notice given by the indemnifying Party to an Indemnified Party referred to in Sections 12.1(c) or 12.2(d) above of participation in or control of any action by the indemnifying Party will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or responsibility, and the indemnifying Party will remain free to contest liability with respect to the claim among the Parties or otherwise.
12.4 SUCCESSORS
A successor by law of any Party shall be entitled to the benefits of the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted under and in accordance with Delaware law, without regard for that state's principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, that the Parties are entitled to under federal and state laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such
a breach, the other parties will be entitled to equitable relief by way of temporary and permanent injunctions, as well as such other relief as any court of competent jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) Except as may otherwise be provided in a License Agreement among A I M Management Group Inc., LIFE COMPANY and UNDERWRITER, neither LIFE COMPANY nor UNDERWRITER or any of their respective affiliates, shall use any trademark, trade name, service mark or logo of AVIF, AIM or any of their respective affiliates, or any variation of any such trademark, trade name, service mark or logo, without AVIF's or AIM's prior written consent, the granting of which shall be at AVIF's or AIM's sole option.
(b) Except as otherwise expressly provided in this Agreement, neither AVIF, its investment adviser, its principal underwriter, or any affiliates thereof shall use any trademark, trade name, service mark or logo of LIFE COMPANY, UNDERWRITER or any of their affiliates, or any variation of any such trademark, trade name, service mark or logo, without LIFE COMPANY's or UNDERWRITER's prior written consent, the granting of which shall be at LIFE COMPANY's or UNDERWRITER's sole option.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all appropriate governmental authorities (including, without limitation, the SEC, the NASD and state insurance regulators) and will permit each other and such authorities reasonable access to its books and records (including copies thereof) in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby.
SECTION 21. AMENDMENTS; NEED FOR
No provision of this Agreement may be amended or modified in any manner except by mutual written agreement executed by all parties hereto. The Parties shall, from time to time, review this Agreement to determine the extent to which an amendment thereto may be necessary or appropriate to reflect changes in applicable law or regulation, and shall cooperate in implementing any such amendment in a timely manner, it being understood and agreed to that no such amendment shall take effect except upon mutual written agreement of all Parties as stated above.
SECTION 22. FORCE MAJEURE
Each Party shall be excused from the performance of any of its obligations to the other where such nonperformance is occasioned by any event beyond its control which shall include, without limitation, any applicable order, rule or regulation of any federal, state or local body, agency or instrumentality with jurisdiction, work stoppage, accident, natural disaster, war, acts of terrorism or civil disorder, provided that the Party so excused shall use all reasonable efforts to minimize its nonperformance and overcome, remedy, cure or remove such event as soon as is reasonably practicable, and such performance shall be excused only for so long as, in any given case, the force or circumstances making performance impossible shall exist.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below.
AIM VARIABLE INSURANCE FUNDS
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Name: Jim Coppedge Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ P. Michelle Grace By: /s/ Gene L. Needles
----------------------------- ------------------------------------
Name: P. Michelle Grace Name: Gene L. Needles
Title: Assistant Secretary Title: President
THE MANUFACTUERERS LIFE INSURANCE
COMPANY (USA) (EFFECTIVE JANUARY 1,
2005, JOHN HANCOCK LIFE INSURANCE
COMPANY (U.S.A.)), on behalf of itself
and its separate accounts
Attest: /s/ Gustan C. Elzie By: /s/ Hugh McHaffie
----------------------------- ------------------------------------
Name: Gustan C. Elzie Name: Hugh McHaffie
Title: Legal Specialist Title: Senior Vice President Variable
Annuities
|
MANULIFE FINANCIAL SERVICES, LLC
(EFFECTIVE JANUARY 1, 2005,
JOHN HANCOCK DISTRIBUTORS, LLC)
Attest: /s/ Gustan C. Elzie By: /s/ Kevin S. Hill
----------------------------- ------------------------------------
Name: Gustan C. Elzie Name: Kevin S. Hill
Title: Legal Specialist Title: Vice President
|
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM V.I. Utilities Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
THE MANUFACTURERS LIFE INSURANCE COMPANY (U.S.A.) (EFFECTIVE JANUARY 1, 2005, JOHN HANCOCK LIFE INSURANCE COMPANY (U.S.A.)) SEPARATE ACCOUNT H
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
Scudder Wealthmark
Scudder Wealthmark ML3
SCHEDULE B
AIM'S PRICING ERROR POLICIES
Determination of Materiality
In the event that AIM discovers an error in the calculation of the Fund's net asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following thresholds are applied:
a. If the amount of the difference in the erroneous net asset value and the correct net asset value is less than .5% of the correct net asset value, AIM will reimburse the affected Fund to the extent of any loss resulting from the error. No other adjustments shall be made.
b. If the amount of the difference in the erroneous net asset value and the correct net asset value is .5% of the correct net asset value or greater, then AIM will determine the impact of the error to the affected Fund and shall reimburse such Fund (and/or LIFE COMPANY, as appropriate, such as in the event that the error was not discovered until after LIFE COMPANY processed transactions using the erroneous net asset value) to the extent of any loss resulting from the error. To the extent that an overstatement of net asset value per share is detected quickly and LIFE COMPANY has not mailed redemption checks to Participants, LIFE COMPANY and AIM agree to examine the extent of the error to determine the feasibility of reprocessing such redemption transaction (for purposes of reimbursing the Fund to the extent of any such overpayment).
Reprocessing Cost Reimbursement
To the extent a reprocessing of Participant transactions is required pursuant to paragraph (b), above, AIM shall reimburse LIFE COMPANY for LIFE COMPANY's reprocessing costs.
The Pricing Policies described herein may be modified by AVIF as approved by its
Board. AIM agrees to use its best efforts to notify LIFE COMPANY at least five
(5) days prior to any such meeting of the Board of AVIF to consider such
proposed changes.
SCHEDULE C
EXPENSE ALLOCATIONS
LIFE COMPANY AVIF / AIM
------------ ----------
preparing and filing the Account's Preparing and filing the Fund's
registration statement registration statement
text composition for Account text composition for Fund prospectuses
prospectuses and supplements and supplements
text alterations of prospectuses text alterations of prospectuses
(Account) and supplements (Account) (Fund) and supplements (Fund)
printing Account and Fund prospectuses a camera ready Fund prospectus
and supplements
text composition and printing text composition and printing Fund
Account SAIs SAIs
mailing and distributing Account SAIs mailing and distributing Fund SAIs to
to policy owners upon request by policy owners upon request by policy
policy owners owners
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by Federal
Securities Laws and to prospective
purchasers
text composition (Account), printing, text composition of annual and
mailing, and distributing annual and semi-annual reports (Fund)
semi-annual reports for Account (Fund
and Account as, applicable)
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction statements and voting instruction
solicitation materials to policy owners solicitation materials to policy
with respect to proxies related to the owners with respect to proxies related
Account to the Fund
preparation, printing and distributing
sales material and advertising relating
to the Funds, insofar as such materials
relate to the Contracts and filing such
materials with and obtaining approval
from, the SEC, the NASD, any state
insurance regulatory authority, and any
other appropriate regulatory authority,
to the extent required
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THIRD AMENDED AND RESTATED
INTERFUND LOAN AGREEMENT
December 30, 2005
Third Amended and Restated Interfund Loan Agreement (the "Agreement"), dated as of the date first written above, by and among AIM Core Allocation Portfolio Series ("ACAPS"); AIM Counselor Series Trust ("ACST"); AIM Equity Funds ("AEF"); AIM Funds Group (AFG"); AIM Growth Series ("AGS"); AIM International Mutual Funds ("AIMF"); AIM Investment Funds ("AIF"); AIM Investment Securities Funds ("AISF"); AIM Sector Funds ("ASEF"); AIM Special Opportunities Funds ("ASOF"); AIM Stock Funds ("ASTF"); AIM Summit Fund ("Summit"); AIM Tax-Exempt Funds ("ATEF"); AIM Treasurer's Series Trust ("ATST"); AIM Variable Insurance Funds (AVIF"); Short-Term Investments Trust ("STIT"); and Tax-Free Investments Trust ("TFIT") (each, a "Fund" and collectively, the "Funds"), with respect to their series of shares shown on Annex A attached hereto (each, a "Portfolio" and collectively, the "Portfolios"), as the same may be amended from time to time, and A I M Advisors, Inc. (the "Advisor");
WHEREAS, each of the Funds is an open-end management company and each Portfolio is separately managed in accordance with its own investment objectives and restrictions;
WHEREAS, certain of the Portfolios listed on Annex A hereto, desire to borrow funds for temporary purposes to satisfy redemption requests or to cover Temporary Overdrafts (as defined below) (each such borrowing Portfolio is hereinafter referred to as a "Borrower");
WHEREAS, certain Portfolios are willing to lend funds to one or more Portfolios from time to time on the terms set forth below (each such lending Portfolio is hereinafter referred to as a "Lender");
NOW THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. As used herein, the following terms shall have meanings assigned to them below:
"1940 Act" means the Investment company Act of 1940, as amended.
"Bank" has the meaning ascribed to that term in the 1940 Act and the rules and regulations thereunder.
"Bank Loan Rate" means the rate calculated by the Advisor according to a formula established by the Trustees intended to approximate the lowest interest rate at which bank short-term loans would be available to the Funds.
"Borrowing Instructions" has the meaning specified in Section 3.1.
"Business Day" means a day on which the New York Stock Exchange, Inc. is open for the purpose of transacting business.
"Cash Management Team" means the Advisor money market investment professionals (including the portfolio manager for LAP) and personnel of the Advisor fund accounting department who are responsible for administering the interfund credit facility.
"Credit Arrangements" means the credit arrangements that a Fund may have with respect to a Portfolio for borrowing for temporary or emergency purposes in connection with net redemptions of the Portfolios or to cover Temporary Overdrafts.
"Custodian" means the entity which acts as the Borrower's custodian for purposes of Section 17(f) of the 1940 Act.
"Interest Rate" means a daily interest rate that is the average of the Repo Rate and the Bank Loan Rate.
"LAP" means the Institutional Class of Liquid Asset Portfolio, a series of Short-Term Investments Trust, or any successor thereto or, in the event such portfolio has terminated operations without its assets having been acquired by a successor, the general money market fund advised by the Advisor having the greatest amount of net assets or, in the event there is no such fund, the United States registered general money market fund advised by an entity controlling, controlled by or under common control with, the Advisor having the greatest amount of net assets.
"Lending Instructions" has the meaning specified in Section 3.1.1.
"Loan" has the meaning specified in Section 2.
"Loan Account" has the meaning specified in Section 3.5.
"Maximum Amount" has the meaning specified in Section 2.
"Money Market Funds" means AIM Money Market Fund, a portfolio of AISF; AIM Tax-Exempt Cash Fund, a portfolio of ATEF; AIM V.I. Money Market Fund, a portfolio of AVIF; Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, portfolios of ATST; Cash Assets Portfolio, Liquid Assets Portfolio, STIC Prime Portfolio, Treasury Portfolio, Government TaxAdvantage Portfolio and Government & Agency Portfolio, portfolios of STIT; Tax-Free Cash Reserve Portfolio, a portfolio of TFIT; and any future Portfolios that hold themselves out as money market funds.
"Obligations" means all of the obligations (whether direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising) of a Borrower to a Lender hereunder.
"Outstanding Secured Borrowing" means any loan advance made to a Portfolio either under this Agreement or under a Bank Credit Arrangement which is secured by assets of the Portfolio.
"Pledge Demand" has the meaning specified in Section 3.11.
"Prospectus" means with respect to each Borrower the prospectus required to be delivered by the Borrower to offerees of its securities pursuant to the Securities Act of 1933, as amended.
"Repo Rate" means the highest rate available to LAP from investments in overnight repurchase agreements.
"SEC" means the Securities and Exchange Commission.
"Secured Loan" has the meaning in Section 2(e).
"Statement of Additional Information" means with respect to each Borrower the Statement of Additional Information that must be provided by the Borrower to recipients of its Prospectus upon request pursuant to rules and regulations adopted by the SEC.
"Temporary Overdraft" means a temporary overdraft occurring when a sale of a security "fails" due to circumstances beyond the seller's control, such as a delay in the delivery of cash to the Fund's custodian or improper delivery instructions by the broker effecting the transaction.
"Trustees" means the Board of Trustees of a Fund.
"Unsecured Loan" means any Loan other than a Secured Loan.
Section 2. Lending Facility. Subject to the terms and conditions of this
Agreement, each Lender may from time to time in its discretion loan its funds
("Loan") to any Borrower. Each Loan shall be made for a term of the lesser of
(a) not less than one (1) and not more than seven (7) Business Days or (b) the
maturity of any outstanding loan or advance to the Borrower under its Credit
Arrangements. The maximum principal amount of all Loans outstanding with respect
to any Borrower at any time shall not exceed the Maximum Amount the Borrower is
permitted to borrow at such time under:
(a) applicable laws and regulations;
(b) the provisions of Section 5.2;
(c) agreements with federal, state, local or foreign governmental authorities or regulators applicable to the Borrower or limitations specified in the Order, all as amended and in effect from time to time;
(d) limitations on borrowing adopted by the Borrower in its Prospectus, Statement of Additional Information or elsewhere, as amended and in effect from time to time; and
(e) in the case of Loans for which the Borrower is required to provide collateral pursuant to Section 3.11 ("Secured Loans"), any limitations specified in the Security Agreement and limitations on the pledging of assets adopted by the Borrower in its Prospectus, Statement of Additional Information or elsewhere.
As used herein, the term "Maximum Account" means the maximum amount that the Borrower is permitted to borrow in accordance with the provisions of the preceding sentence.
Section 3. Loans.
Section 3.1. Procedural Requirements. All Loans shall be requested and funded in accordance with the procedures set forth herein and such other procedures as may be adopted from time to time by the Trustees of each Fund.
Section 3.1.1. Borrowing and Lending Instructions. The Portfolios, other than the Money Market Funds, shall provide the Cash Management Team with standing instructions as to their desire to act as a Borrower when and if such Portfolio has borrowing needs ("Borrowing Instructions") and/or as a Lender when such Portfolio has uninvested cash balances ("Lending Instructions"). The Money Market Funds shall provide daily Borrowing and/or Lending Instructions to the Cash Management Team as to the amount of cash, if any, any such Portfolio of such Fund desires to borrow or lend. The Portfolios may revoke or change Borrowing or Lending Instructions by notifying the Cash Management Team.
Section 3.1.2. Allocation Procedures. On each occasion that a Portfolio that has provided Borrowing Instructions to the Cash Management Team has borrowing needs, the Cash Management Team will seek to match the amount and term of the Portfolio's borrowing needs with the cash available from the Portfolios that have provided Lending Instructions in accordance with allocation and administrative procedures established by the Trustees.
No Loan may be allocated to a Lender with respect to a Portfolio unless the Interest Rate is higher than the Repo Rate and, if applicable, the yield on LAP, and lower than the Bank Loan Rate.
Section 3.1.3. Funding the Loans. If a Loan has been allocated to a Lender and Borrower pursuant to Section 3.1.2, and the Loan is otherwise in compliance with the requirements set forth in the Order, the Lender shall make such Loan to the Borrower. Each Loan made by the Lender to the Borrower shall be wired (or transferred if Borrower and Lender have the same Custodian) at the Borrower's expense in accordance with the wiring instructions for each Fund maintained by the Advisor, as in effect from time to time, to an account maintained on the Borrower's behalf by its Custodian for the Portfolio in respect of which such Loan is made.
Section 3.1.4. Obligations Arising from Loan. Each Loan made by the Lender to the Borrower shall;
(a) obligate the Borrower to borrow the principal amount of the Loan at the Interest Rate applicable thereto for the term thereof solely for use by the Borrower;
(b) constitute a representation and warranty by the Borrower to the
Lender that (i) the Loan requested thereby (A) is permitted under the Borrower's
most recent Prospectus and Statement of Additional Information, (B) is in
accordance with the requirements of any applicable SEC order of exemption
applicable to the Borrower, (C) will not, when made, cause the aggregate
indebtedness of the Borrower to exceed the Maximum Amount then in effect, and
(D) will be used by the Borrower only in accordance with the provisions of
Section 3.7 hereof, and (ii) all of the representations and warranties of the
Borrower contained in Section 4 hereof are true and correct as of the date of
such Loan as though made on and as of such dates; and
(c) constitute a representation and warranty by the Lender to the Borrower that the Loan thereby (i) is permitted under the Lender's most recent Prospectus and Statement of Additional Information, and (ii) is in accordance with the requirements of the Order.
Section 3.2. Repayment of Loans. The principal amount of each Loan shall be repaid by the Borrower from the assets of the Borrower upon the earlier of (a) one Business Day after demand by the Lender or (b) the expiration of the term of such Loan.
Section 3.3. Interest. The outstanding principal amount of each Loan
shall bear interest until maturity at the Interest Rate. Interest accrued on
each Loan shall be paid by the Borrower upon the earlier of (a) demand, or (b)
the maturity of such Loan. Amounts overdue hereunder (including, without
limitation, overdue principal, and, to the extent permitted by law, overdue
interest, fees, charges and expenses) shall bear interest until paid at a rate
equal to the sum of (a) the Interest Rate applicable to such Loan prior to its
maturity and (b) such additional amount not to exceed 2%, as may be determined
by an independent arbitrator of disputes previously approved by the Trustees of
both Borrower and Lender except that in the case of an Event of Default under
Section 6.2.2 such additional amount shall equal 2%.
Section 3.4. Prepayments. Loans may be prepaid without penalty prior to the date on which such Loan is due and payable.
Section 3.5. Loan Records Accounts. Promptly after a Loan has been made, the Cash Management Team shall note on its records for the Borrower and Lender, confirming (a) the principal amount of such Loan, (b) the Interest Rate applicable thereto and (c) the maturity thereof. The Cash Management Team will maintain a separate account on its books for each Lender and Borrower (a "Loan Account") on which will be recorded, in accordance with the Advisor's customary accounting practice, (a) all Loans made by a Lender to a Borrower, (b) all payments of such Loans made to a Lender and (c) all other charges and expenses properly chargeable to the Borrower. The debit balance of each Portfolio's Loan Account shall reflect the amount of the Borrower's indebtedness from time to time to the Lenders hereunder. Any written statement maintained by the Cash Management Team regarding the Loan shall, in the absence of manifest error, constitute conclusive evidence of the indebtedness of the Borrower to the Lender as of the date of such statement, provided, however, that the failure of the Cash Management Team to make such statement shall not impair the validity or binding nature of the Borrower's Obligations with respect to such Loan.
Section 3.6. Computations. All computations hereunder shall be computed on the basis of the actual number of days elapsed and either (a) a 360-day year or (b) the actual number of days in the year, as determined by the Cash Management Team when it sets the Interest Rate.
Section 3.7. Use of Proceeds. The proceeds of each Loan made hereunder with respect to any Portfolio shall be used only by such Portfolio for temporary or emergency purposes in accordance with its Prospectus and Statement of Additional Information to satisfy redemption requests or to cover Temporary Overdrafts.
Section 3.8. Discretionary Facility. It is acknowledged and agreed by each Borrower that each Lender has no obligation to make any Loan hereunder unless it has issued Lending Instructions, and that the decision whether or not to issue Lending Instructions under this Agreement is within the sole and exclusive discretion of each Lender. It is acknowledged and agreed by each Lender that no Borrower is obligated to borrow money hereunder unless it has issued Borrowing Instructions.
Section 3.9. Termination of Participation in Interfund Credit Facility. Each Lender and each Borrower may terminate its participation in this Agreement at any time by written notice to the Cash Management Team.
Section 3.10. Recourse to Assets. Loans made to any Portfolio shall be repaid solely from the assets of such Portfolio, and a Lender shall have no right of recourse or offset against the assets of any other Portfolio with respect to such Loans or any default in respect thereto. Each Lender's liability under this Agreement with respect to a Loan shall be solely
limited to the Lender's assets and each Borrower hereby waives any and all rights it may have against any other Portfolios with respect to such Loan or any default by Lender with respect thereto.
Section 3.11. Collateral Security for Loans. As a condition precedent to making any Loan to any Borrower or continuing any Loan made to any Borrower hereunder, (a) the Lender may require, by written notice to the Borrower or (b) the Lender shall require in the event that the Borrower's outstanding borrowings from all sources immediately after the Loan would exceed 10% of its total assets, or the Borrower has Outstanding Secured Borrowings, that the Borrower pledge stock or other securities as collateral for such Loan ("Pledge Demand"). The minimum market value of the stock and other portfolio securities of the Borrower required to be pledged to the Lender hereunder with respect to any Secured Loan shall be determined by the Lender in its discretion but, in all cases, shall be not less than the 102% of the outstanding principal value of the loan. Each pledge of collateral required pursuant to this Section 3.11 shall be made in accordance with and subject to the terms and conditions set forth in a security agreement in form satisfactory to Borrower and Lender, and shall be effected (a) in the case of any pledge required as a condition precedent to making any Secured Loan hereunder, prior to making such Secured Loans, and (b) in the case of any pledge required as a condition precedent to continuing any Loan hereunder, within 24 hours after delivery to the Borrower of the Pledge Demand therefor or the occurrence of the conditions specified in (b) above.
Section 3.12. Confirmation. The obligations of the Borrower to repay the unpaid principal amount of the Loan made to it by the Lender and to pay interest thereon shall be evidenced by the Lender's records as well as by a confirmation of loan in the form of Exhibit I, confirming the principal amount, the Interest Rate and the maturity date of the Loan.
Section 4. Representations and Warranties.
Each Borrower represents and warrants to each Lender and each Lender represents and warrants to each Borrower on the date hereof, and as to any Borrower or Lender on the date of any borrowing, as follows:
(a) It is a Portfolio of a Fund that is duly organized and validly existing under the laws of its jurisdiction of organization and is qualified to do business in every other jurisdiction where lack of such qualification would have a material adverse effect on the business, assets or condition (financial or otherwise) of the Fund.
(b) The Fund is registered as an open-end management investment company under the 1940 Act.
(c) The execution, delivery and performance by the Fund of this Agreement on behalf of itself and its Portfolios are (i) within its power, (ii) have been duly authorized by all necessary action, and (iii) will not (A) contribute to or result in a breach of or default under or
conflict with any existing law, order, regulation or ruling of any governmental or regulatory agency or authority, any order, writ, injunction or ruling of any court or other tribunal, or any indenture, lease agreement, instrument or other undertaking to which the Fund is a party or by which it or its property or assets may be bound or affected, or (B) result in the imposition of any liens or encumbrances on any property or assets of the Fund or (C) require any additional approval or consent of, or filling with, shareholders of such Fund or any governmental or regulatory agency or authority bearing on the validity of any borrowing pursuant to this Agreement, or (D) violate any provision of the Fund's organizational documents or bylaws, or any amendment thereof or any provision of its most recent Prospectus or Statement of Additional Information.
(d) This Agreement is a legally valid and binding obligation of the Fund, enforceable against the Fund in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws or equitable principles relating to or limiting the rights of creditors generally.
(e) No additional authorization, approval, or other action by, and no notice to or filing with, any shareholder of the Fund, creditor, or governmental or regulatory agency or authority is required for the due and valid execution, delivery and performance of this Agreement by the Fund or the exercise by the Fund of any rights and remedies under this Agreement.
Section 5. Covenants.
Section 5.1. Covenants in Effect Until Termination of Agreement. Until all of the obligations have been performed in full and its participation in the Lending Facility has been terminated as provided herein, each Borrower covenants as follows:
(a) At any time and from time to time, it will, at its own expense, promptly execute and deliver or file all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Lender may request, in order to perfect, protect, validate or preserve any security interest granted, or pledged to the Lender pursuant to Section 3.11 or to enable the Lender to exercise and enforce its rights and remedies thereunder with respect thereto.
(b) It will file all federal and other tax returns, reports and declarations required by all relevant jurisdictions on or before the due dates for such returns, reports and declarations and will pay all taxes and other governmental assessments and charges as and when they become due.
(c) It will comply with all of its investment policies and restrictions and all applicable laws, regulations and governmental or regulatory directives.
(d) It will promptly notify the Lender of any material change in its agreements with governmental authorities or regulators or its investment policies or restrictions.
(e) It will make available to the Lender upon request from time to time the most recent reports required by Section 30(d) of the 1940 Act.
(f) Upon request from the Lender from time to time, it will furnish to the Lender at reasonable times and intervals any information with respect to its financial standing and history or its property or business or prospects.
(g) Within 60 days after the date of this Agreement or such earlier time as may be necessary to comply with Section 3.11, the Borrower shall deliver an agreement, in a form satisfactory to each Lender duly executed by the Borrower and its Custodian, that establishes procedures for the making, maintaining and releasing each pledge of securities required by Section 3.11.
Section 5.2. Covenants in Effect While Loans are Outstanding. Each Borrower covenants that, so long as any principal of or interest on any Loan made to it is outstanding:
(a) It will not, as long as any Unsecured Loan is outstanding hereunder, create or permit to exist any encumbrance in favor of any person or entity other than the Lender upon any of the assets of the Borrower other than encumbrances created in connection with portfolio investments of the Borrower to the extent permitted by the provisions of its Prospectus and Statement of Additional Information applicable to such Portfolio (and not for the primary purpose of borrowing money) such as: (i) margin amounts on futures contracts and options on futures contracts, (ii) segregated assets to cover a call or to secure a put, or to cover short sales against the box or open positions under currency forward contracts, (iii) obligations to resell securities in connection with the purchase of such securities under repurchase agreements, and (iv) obligations to redeliver cash or securities in connection with pledges of such cash or securities in favor of the Borrower under securities lending agreements and master note agreements.
(b) It will not take out any Loan that (1) immediately after such loan would cause the total of such Portfolio's loans to exceed 33-1/3% of the Borrower's total assets (or such lesser percentage as provided in a Borrower's Prospectus and Statement of Additional Information), or (2) would cause such Portfolio's total loans to exceed 10% of such Portfolio's total assets unless any Loan hereunder is secured in accordance with Section 3.11.
(c) Unless the Fund has a policy that prevents it from borrowing for other than temporary or emergency purposes (and not for leveraging), it will not, as long as any Loan made with respect to the Portfolio is outstanding, allow the total amount of such Portfolio's Loans, as measured on the day when the most recent Loan was made, to exceed the greater of
125% of such Portfolio's total net cash redemptions and 102% of Temporary Overdrafts for the preceding seven (7) calendar days.
(d) It will notify Lender if it draws on its Credit Arrangements, borrows from other Lenders under the Agreement, or borrows from other parties.
(e) It will notify the Lender promptly of (i) any material change in
its method of business, Prospectus or Statement of Additional Information, and
(ii) the occurrence of any event which would make any of the representations and
warranties contained herein, or in any document, instrument or certificate
delivered in connection herewith, untrue or inaccurate in any material respect.
Section 6. Default.
Section 6.1. Events of Default. The occurrence of any one or more of the following events ("Events of Default") shall constitute an immediate Event of Default with respect to the Borrower (it being understood that an Event of Default with respect to one Borrower shall not constitute an Event of Default of any other Borrower):
(a) The Borrower shall fail to pay principal of, or interest on, any Loan as and when due, or the Borrower shall fail to perform any of its other Obligations; or
(b) There shall be a default by the Borrower under any Credit Arrangement, whether such Credit Arrangement now exists or shall hereafter be created, which default extends beyond any period of grace provided with respect thereto and which default relates to (i) the obligations to pay the principal of or interest on any such indebtedness under the Credit Arrangement or (ii) an obligation other than the obligation to pay the principal of or interest on any such indebtedness and the effect of such default is to cause, or to permit the lender under the Credit Arrangement to cause, with the giving of notice if required, such indebtedness to become due prior to its stated maturity.
(c) Any representation or warranty made by the Borrower in Section 4, or in connection with any Loan made to or pledge of pledged collateral made by the Borrower, shall prove to have been incorrect in any material respect when made; or
(d) The Borrower shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any governmental or public authority shall take over possession or control of a substantial part or the Borrower's business; or any of the Borrower's property shall become subject to attachment or other involuntary lien or levy; or any action or proceeding shall be commenced by the Borrower seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, seeking the entry of an order for relief or the appointment of a receiver, trustee, of similar official for it or for any substantial part of its property, or any such proceeding is commenced against it which results in the entry of an order for such relief or such proceeding is not dismissed or stayed for a period of 60 days following such commencement.
Section 6.2. Remedies.
Section 6.2.1. Arbitration. In the event an Event of Default has occurred and not been cured within two Business Days from the Loan's maturity or from the time the Lender makes a demand for payment (and none of the Events of Default specified in Section 6.1(b) or (d) has occurred), the Lender and the Borrower agree that such matter shall be submitted for binding arbitration to an independent arbitrator selected by the Trustees of the Lender and Borrower. Such arbitrator's decision shall be binding and conclusive between the Lender and the Borrower. Such arbitrator shall submit a written report of any dispute to the Trustees.
6.2.2. Other Rights and Remedies. If an Event of Default has occurred and has not been resolved pursuant to Section 6.2.1 or an Event of Default specified in Section 6.1 (b) or (d) has occurred, then the Lender shall be entitled to exercise any and all rights and remedies available to it at law or in equity, including without limitation any rights and remedies that may be available to it under the security agreement referred to in Section 3.11 with respect to the affected Borrower and the Borrower shall pay to the Lender all reasonable expenses and disbursements incurred by the Lender in connection with the enforcement of its rights and remedies under this Agreement including the reasonable fees and out-of-pocket expenses of counsel for the Lender with respect thereto.
Section 7. Notice. Except as otherwise expressly provided herein, all notices hereunder to any party shall be in writing and shall be delivered by hand, mailed by United States registered or certified first-class mail, postage prepaid or sent by telegraph, telex or telecopy, addressed to such party to the attention of the person specified in the following sentence at the address set forth for such party in Annex B hereto, or to such other person or address as such party may designate to the other party hereto by notice delivered in accordance with this Section 7. All notices to the Borrower shall be addressed to the Treasurer of the Borrower and all notices from the Borrower to the Lender shall be addressed to the Treasurer of the Lender.
Section 8. Amendments. Neither this Agreement nor any provision hereof may be amended in any respect except by a statement in writing executed by the parties hereto.
Section 9. Assignment. All of the terms of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns; provided, that the Borrower may not assign or transfer any of its rights or obligations hereunder without the prior written consent of the Lender.
Section 10. Section Heading. The descriptive section headings in this Agreement have been inserted for convenience of reference only and shall not be deemed to limit or otherwise affect the construction of any provision hereof.
Section 11. Counterparts. This Agreement and the documents contemplated hereby may be executed simultaneously in any number of counterparts each of which when so executed and delivered shall be an original; but all of which shall together constitute but one and the same document.
Section 12. Separability. If any of the provisions of this Agreement or any instrument delivered hereunder or the application thereof to any party hereto or to any person or circumstances is held invalid, the remainder of this Agreement or such instrument and the application thereof to any party hereto or to any other person or circumstances shall not be affected thereby.
Section 13. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.
Section 14. Entire Agreement. This Agreement and the other documents contemplated hereby and executed in connection herewith express the entire understanding of the parties with respect to the transactions contemplated hereby.
Section 15. Limitation of Liability of Trustees. This instrument is executed on behalf of the Trustees of the Funds that are Delaware statutory trusts as trustees and not individually and the obligations of this instrument are not binding upon any of the trustees or shareholders individually but are binding only upon the assets and property of the Fund in accordance with Section 3.10.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed as an instrument under seal by its duly authorized officer as of the date first written above.
On behalf of itself and on behalf of its Portfolios listed on Annex A hereto, as such Annex may be amended from time to time:
AIM CORE ALLOCATION PORTFOLIO SERIES
AIM COUNSELOR SERIES TRUST
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL MUTUAL FUNDS
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SECTOR FUNDS
AIM SPECIAL OPPORTUNITIES FUNDS
AIM STOCK FUNDS
AIM SUMMIT FUND
AIM TAX-EXEMPT FUNDS
AIM TREASURER'S SERIES TRUST
AIM VARIABLE INSURANCE FUNDS
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS TRUST
By: /s/ Robert H. Graham
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Name: Robert H. Graham
Title: President
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Accepted and Agreed to with respect to the specific obligations imposed on the undersigned by Sections 3.1.1, 3.1.2, 3.1.3, 3.5 and 3.6.
A I M ADVISORS, INC.
ANNEX A
PORTFOLIOS THAT MAY PARTICIPATE
AS BORROWERS AND LENDERS IN INTERFUND LENDING FACILITY
Fund Portfolio
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AIM CORE ALLOCATION
PORTFOLIO SERIES Series C
Series M
AIM COUNSELOR SERIES TRUST AIM Advantage Health Sciences Fund
AIM Floating Rate Fund
AIM Multi-Sector Fund
AIM Structured Core Fund
AIM Structured Growth Fund
AIM Structured Value Fund
AIM EQUITY FUNDS AIM Capital Development Fund
AIM Charter Fund
AIM Constellation Fund
AIM Diversified Dividend Fund
AIM Large Cap Basic Value Fund
AIM Large Cap Growth Fund
AIM Select Basic Value Fund
AIM FUNDS GROUP AIM Basic Balanced Fund
AIM European Small Company Fund
AIM Global Value Fund
AIM International Small Company Fund
AIM Mid Cap Basic Value Fund
AIM Select Equity Fund
AIM Small Cap Equity Fund
AIM GROWTH SERIES AIM Basic Value Fund
AIM Conservative Allocation Fund
AIM Global Equity Fund
AIM Growth Allocation Fund
AIM Income Allocation Fund
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AIM International Allocation Fund
AIM Mid Cap Core Equity Fund
AIM Moderate Allocation Fund
AIM Moderate Growth Allocation Fund
AIM Moderately Conservative Allocation Fund
AIM Small Cap Growth Fund
AIM INTERNATIONAL MUTUAL
FUNDS AIM Asia Pacific Growth Fund
AIM European Growth Fund
AIM Global Aggressive Growth Fund
AIM Global Growth Fund
AIM International Growth Fund
AIM International Core Equity Fund
AIM INVESTMENT FUNDS AIM China Fund
AIM Developing Markets Fund
AIM Enhanced Short Bond Fund
AIM Global Health Care Fund
AIM International Bond Fund
AIM Japan Fund
AIM Trimark Endeavor Fund
AIM Trimark Fund
AIM Trimark Small Companies Fund
AIM INVESTMENT SECURITIES
FUNDS AIM Global Real Estate Fund
AIM High Yield Fund
AIM Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
AIM Money Market Fund
AIM Municipal Bond Fund
AIM Real Estate Fund
AIM Short Term Bond Fund
AIM Total Return Bond Fund
AIM SECTOR FUNDS AIM Energy Fund
AIM Financial Services Fund
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AIM Gold & Precious Metals Fund
AIM Leisure Fund
AIM Technology Fund
AIM Utilities Fund
AIM SPECIAL OPPORTUNITIES
FUNDS AIM Opportunities I Fund
AIM Opportunities II Fund
AIM Opportunities III Fund
AIM STOCK FUNDS AIM Dynamics Fund
AIM S&P 500 Index Fund
AIM SUMMIT FUND AIM Summit Fund
AIM TAX-EXEMPT FUNDS AIM High Income Municipal Fund
AIM Tax-Exempt Cash Fund
AIM Tax-Free Intermediate Fund
AIM TREASURER'S SERIES TRUST Premier Portfolio
Premier Tax-Exempt Portfolio
Premier U.S. Government Money Portfolio
AIM VARIABLE INSURANCE FUNDS AIM V.I. Basic Balanced Fund
AIM V.I. Basic Value Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Core Equity Fund
AIM V.I. Demographic Trends Fund
AIM V.I. Diversified Dividend Fund
AIM V.I. Diversified Income Fund
AIM V.I. Dynamics Fund
AIM V.I. Financial Services Fund
AIM V.I. Global Equity Fund
|
AIM V.I. Global Health Care Fund
AIM V.I. Global Real Estate Fund
AIM V.I. Government Securities Fund
AIM V.I. High Yield Fund
AIM V.I. International Core Equity Fund
AIM V.I. International Growth Fund
AIM V.I. Large Cap Growth Fund
AIM V.I. Leisure Fund
AIM V.I. Mid Cap Core Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Small Cap Equity Fund
AIM V.I. Small Cap Growth Fund
AIM V.I. Technology Fund
AIM V.I. Utilities Fund
SHORT-TERM INVESTMENTS TRUST Cash Assets Portfolio
Government & Agency Portfolio
Government TaxAdvantage Portfolio
Liquid Assets Portfolio
STIC Prime Portfolio
Treasury Portfolio
TAX-FREE INVESTMENTS TRUST Tax-Free Cash Reserve Portfolio
|
ANNEX B
NOTICES
Notices to the Portfolios shall be delivered to the following address:
[name of Portfolio], [name of Fund]
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attention: Treasurer
Notices to A I M Advisors, Inc. shall be delivered to the following address:
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attention: President
with a copy to:
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Attention: General Counsel
EXHIBIT I
INTERFUND LOAN CONFIRMATION
[Name of Lending Portfolio], a portfolio of [Name of Fund] confirms that pursuant to the Interfund Loan Agreement by and among AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust, Tax-Free Investments Trust and A I M Advisors, Inc. dated ______________, 200_, it has today loaned to [name of Borrowing Portfolio], a portfolio of [name of Fund], $________________, which loan shall mature on __________, 200_ and shall bear interest on the principal balance payable on ____________at a rate equal to ______________ per annum.
SECOND AMENDED AND RESTATED
MEMORANDUM OF AGREEMENT
This Second Amended and Restated Memorandum of Agreement is entered into as of the dates indicated on Exhibit "A" between AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust (each a "Fund" and collectively, the "Funds"), on behalf of the portfolios listed on Exhibit "A" to this Memorandum of Agreement (the "Portfolios"), and A I M Advisors, Inc. ("AIM"). This Memorandum of Agreement restates the Memorandum of Agreement previously in effect prior to March 9, 2007 and entered into as of the effective dates indicated on Exhibit "A" between AIM Equity Funds, AIM Floating Rate Fund, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Select Real Estate Income Fund, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, on behalf of the portfolios listed on Exhibit "A" to this Memorandum of Agreement, and AIM.
For and in consideration of the mutual terms and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Funds and AIM agree as follows:
1. Each Fund, for itself and its Portfolios, and AIM agree that until the expiration date, if any, of the commitment set forth on the attached Exhibit "A" occurs, as such Exhibit "A" is amended from time to time, AIM will not charge any administrative fee under each Portfolio's advisory agreement in connection with securities lending activities.
2. Neither a Fund nor AIM may remove or amend the fee waivers to a Fund's detriment prior to requesting and receiving the approval of the Portfolio's Board to remove or amend such fee waiver as described on the attached Exhibit "A". AIM will not have any right to reimbursement of any amount so waived.
Unless a Fund, by vote of its Board of Trustees, or AIM terminates the fee waiver, or a Fund and AIM are unable to reach an agreement on the amount of the fee waiver to which the Fund and AIM desire to be bound, the fee waiver will continue indefinitely with respect to such Fund. Exhibit "A" will be amended to reflect the new date through which a Fund and AIM agree to be bound.
Nothing in this Memorandum of Agreement is intended to affect any other memorandum of agreement executed by any Fund or AIM with respect to any other fee waivers, expense reimbursements and/or expense limitations.
IN WITNESS WHEREOF, each Fund, on behalf of itself and its Portfolios listed in Exhibit "A" to this Memorandum of Agreement, and AIM have entered into this Memorandum of Agreement as of the dates indicated on Exhibit "A".
AIM COUNSELOR SERIES TRUST
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL MUTUAL FUNDS
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SECTOR FUNDS
AIM STOCK FUNDS
AIM SUMMIT FUND
AIM TAX-EXEMPT FUNDS
AIM VARIABLE INSURANCE FUNDS
By: /s/ John M. Zerr
------------------------------------
Title: Senior Vice President
|
AIM TREASURER'S SERIES TRUST
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS TRUST
By: /s/ Karen Dunn Kelley
------------------------------------
Title: President
|
A I M ADVISORS, INC.
By: /s/ John M. Zerr
------------------------------------
Title: Senior Vice President
|
EXHIBIT "A"
AIM COUNSELOR SERIES TRUST
PORTFOLIO EFFECTIVE DATE COMMITTED UNTIL* --------- ------------------ ---------------- AIM Advantage Health Sciences Fund November 25, 2003 AIM Floating Rate Fund April 14, 2006 AIM Multi-Sector Fund November 25, 2003 AIM Select Real Estate Income Fund March 9, 2007 AIM Structured Core Fund March 31, 2006 AIM Structured Growth Fund March 31, 2006 AIM Structured Value Fund March 31, 2006 |
AIM EQUITY FUNDS
PORTFOLIO EFFECTIVE DATE COMMITTED UNTIL* --------- ------------------ ---------------- AIM Capital Development Fund June 21, 2000 AIM Charter Fund June 21, 2000 AIM Constellation Fund June 21, 2000 AIM Diversified Dividend Fund December 28, 2001 AIM Large Cap Basic Value Fund June 21, 2000 AIM Large Cap Growth Fund June 21, 2000 |
AIM FUNDS GROUP
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM Basic Balanced Fund September 28, 2001 AIM European Small Company Fund August 30, 2000 AIM Global Value Fund December 27, 2000 AIM International Small Company Fund August 30, 2000 AIM Mid Cap Basic Value Fund December 27, 2001 AIM Select Equity Fund June 1, 2000 AIM Small Cap Equity Fund August 30, 2000 |
AIM GROWTH SERIES
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM Basic Value Fund June 5, 2000 AIM Global Equity Fund September 1, 2001 AIM Mid Cap Core Equity Fund September 1, 2001 AIM Small Cap Growth Fund September 11, 2000 |
* Committed until the Company or AIM requests and receives the approval of the Company's Board to remove or amend such fee waiver. Such commitments are evergreen until amended and apply to each Fund
** Effective March 9, 2007, AIM Select Real Estate Income Fund, formerly the sole series of AIM Select Real Estate Income Fund, was restructured as a series of AIM Counselor Series Trust.
AIM INTERNATIONAL MUTUAL FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM Asia Pacific Growth Fund June 21, 2000 AIM European Growth Fund June 21, 2000 AIM Global Aggressive Growth Fund June 21, 2000 AIM Global Growth Fund June 21, 2000 AIM International Growth Fund June 21, 2000 AIM International Core Equity Fund November 25, 2003 |
AIM INVESTMENT FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM China Fund March 31, 2006 AIM Developing Markets Fund September 1, 2001 AIM Global Health Care Fund September 1, 2001 AIM International Total Return Fund March 31, 2006 AIM Japan Fund March 31, 2006 AIM LIBOR Alpha Fund March 31, 2006 AIM Trimark Endeavor Fund November 4, 2003 AIM Trimark Fund November 4, 2003 AIM Trimark Small Companies Fund November 4, 2003 |
AIM INVESTMENT SECURITIES FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM Global Real Estate Fund April 29, 2005 AIM High Yield Fund June 1, 2000 AIM Income Fund June 1, 2000 AIM Intermediate Government Fund June 1, 2000 AIM Limited Maturity Treasury Fund June 1, 2000 AIM Money Market Fund June 1, 2000 AIM Municipal Bond Fund June 1, 2000 AIM Real Estate Fund September 11, 2000 AIM Short Term Bond Fund August 29, 2002 AIM Total Return Bond Fund December 28, 2001 |
* Committed until the Company or AIM requests and receives the approval of the Company's Board to remove or amend such fee waiver. Such commitments are evergreen until amended and apply to each Fund.
AIM SECTOR FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM Energy Fund November 25, 2003 AIM Financial Services Fund November 25, 2003 AIM Gold & Precious Metals Fund November 25, 2003 AIM Leisure Fund November 25, 2003 AIM Technology Fund November 25, 2003 AIM Utilities Fund November 25, 2003 |
AIM STOCK FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM Dynamics Fund November 25, 2003 AIM S&P 500 Index Fund November 25, 2003 |
AIM SUMMIT FUND
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM Summit Fund July 24, 2000 |
AIM TAX-EXEMPT FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM High Income Municipal Fund June 1, 2000 AIM Tax-Exempt Cash Fund June 1, 2000 AIM Tax-Free Intermediate Fund June 1, 2000 |
AIM TREASURER'S SERIES TRUST
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- Premier Portfolio November 25, 2003 Premier Tax-Exempt Portfolio November 25, 2003 Premier U.S. Government Money November 25, 2003 Portfolio |
* Committed until the Company or AIM requests and receives the approval of the Company's Board to remove or amend such fee waiver. Such commitments are evergreen until amended and apply to each Fund.
AIM VARIABLE INSURANCE FUNDS
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- AIM V.I. Basic Balanced Fund May 1, 2000 AIM V.I. Basic Value Fund September 10, 2001 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. Diversified Income Fund May 1, 2000 AIM V.I. Dynamics Fund April 30, 2004 AIM V.I. Financial Services Fund April 30, 2004 AIM V.I. Global Health Care Fund April 30, 2004 AIM V.I. Global Real Estate Fund April 30, 2004 AIM V.I. Government Securities 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. Leisure Fund April 30, 2004 AIM V.I. Mid Cap Core Equity Fund September 10, 2001 AIM V.I. Money Market Fund May 1, 2000 AIM V.I. Small Cap Equity Fund September 1, 2003 AIM V.I. Small Cap Growth Fund April 30, 2004 AIM V.I. Technology Fund April 30, 2004 AIM V.I. Utilities Fund April 30, 2004 |
SHORT-TERM INVESTMENTS TRUST
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- Government & Agency Portfolio June 1, 2000 Government TaxAdvantage Portfolio June 1, 2000 Treasury Portfolio June 1, 2000 Liquid Assets Portfolio June 1, 2000 STIC Prime Portfolio June 1, 2000 |
TAX-FREE INVESTMENTS TRUST
FUND EFFECTIVE DATE COMMITTED UNTIL* ---- ------------------ --------------- Tax-Free Cash Reserve Portfolio June 1, 2000 |
* Committed until the Company or AIM requests and receives the approval of the Company's Board to remove or amend such fee waiver. Such commitments are evergreen until amended and apply to each Fund.
MEMORANDUM OF AGREEMENT
(ADVISORY FEE WAIVERS)
This Memorandum of Agreement is entered into as of the effective date on the attached Exhibit (the "Exhibit"), between AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Treasurer's Series Trust and AIM Variable Insurance Funds (each a "Trust" or, collectively, the "Trusts"), on behalf of the funds listed on the Exhibit to this Memorandum of Agreement (the "Funds"), and A I M Advisors, Inc. ("AIM"). This Memorandum of Agreement restates the following: (i) Amended and Restated Memorandum of Agreement dated May 5, 2005, between AIM Combination Stock & Bond Funds, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Stock Funds, AIM Summit Fund, AIM Variable Insurance Funds and AIM; (ii) Memorandum of Agreement as of the dates indicated on Exhibit A between AIM Counselor Series Trust, AIM Special Opportunities Fund and AIM; and (iii) Memorandum of Agreement as of the dates indicated on Exhibit A between AIM Funds Group, AIM International Mutual Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds and AIM. AIM shall and hereby agrees to waive fees of the Funds, on behalf of their respective classes as applicable, severally and not jointly, as indicated in the attached Exhibit.
For and in consideration of the mutual terms and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Trusts and AIM agree that until at least the date set forth on Exhibit A (the "Expiration Date") and with respect to those Funds listed on the Exhibit, AIM will waive its advisory fees at the rate set forth on the attached Exhibit.
The Boards of Trustees and AIM may terminate or modify this Memorandum of Agreement prior to the Expiration Date only by mutual written consent. AIM will not have any right to reimbursement of any amount so waived or reimbursed.
Subject to the foregoing paragraphs, each of the Trusts and AIM agree to review the then-current waivers for each class of the Funds listed on the Exhibits on a date prior to the Expiration Date to determine whether such waivers should be amended, continued or terminated. The waivers will expire upon the Expiration Date unless the Trust and AIM have agreed to continue them. The Exhibits will be amended to reflect any such agreement.
It is expressly agreed that the obligations of each Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trusts personally, but shall only bind the assets and property of the Funds, as provided in each Trust's Agreement and Declaration of Trust. The execution and delivery of this Memorandum of Agreement have been authorized by the Trustees of the Trusts, and this Memorandum of Agreement has been executed and delivered by an authorized officer of the Trusts acting as such; neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Funds, as provided in each Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, each of the Trusts and AIM have entered into this Memorandum of Agreement as of the Effective Date on the attached Exhibits.
AIM COUNSELOR SERIES TRUST
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INTERNATIONAL MUTUAL FUNDS
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SECTOR FUNDS
AIM SPECIAL OPPORTUNITIES FUNDS
AIM STOCK FUNDS
AIM SUMMIT FUND
AIM TREASURER'S SERIES TRUST
AIM VARIABLE INSURANCE FUNDS
on behalf of the Funds listed in the
Exhibits to this Memorandum of Agreement
By: /s/ Robert H. Graham
------------------------------------
Title: President
|
A I M ADVISORS, INC.
By: /s/ Philip A. Taylor
------------------------------------
Title: President
|
EXHIBIT TO ADVISORY FEE MOA
EFFECTIVE EXPIRATION
AIM COUNSELOR SERIES TRUST WAIVER DESCRIPTION DATE DATE
-------------------------- -------------------------------------------- ---------- ----------
AIM Advantage Health AIM will waive advisory fees to the extent 7/1/2005 6/30/2007
Sciences Fund necessary so that advisory fees AIM receives
do not exceed an annual base management fee
of 1.25% of the Fund's average daily net
assets, subject to a maximum performance
adjustment upward or downward of 0.75%
annually. As a result, AIM may receive a
management net fee that ranges from 0.50% to
2.00% of average daily net assets, based on
the Fund's performance.
AIM Multi-Sector Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
EFFECTIVE EXPIRATION
AIM EQUITY FUNDS WAIVER DESCRIPTION DATE DATE
---------------- -------------------------------------------- ---------- ----------
AIM Capital Development Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM Charter Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $150M
0.615% of the next $4.85B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Constellation Fund AIM will waive advisory fees to the extent 3/27/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.615% of the next $4B
0.595% of the next $750M
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
EXHIBIT TO ADVISORY FEE MOA
EFFECTIVE EXPIRATION
AIM EQUITY FUNDS - CONTINUED WAIVER DESCRIPTION DATE DATE
---------------------------- -------------------------------------------- ---------- ----------
AIM Large Cap Growth Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Select Basic Value Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
EFFECTIVE EXPIRATION
AIM FUNDS GROUP WAIVER DESCRIPTION DATE DATE
--------------- -------------------------------------------- ---------- ----------
AIM Basic Balanced Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.62% of the first $250M
0.605% of the next $250M
0.59% of the next $500M
0.575% of the next $1.5B
0.56% of the next $2.5B
0.545% of the next $2.5B
0.53% of the next $2.5B
0.515% of the excess over $10B
AIM European Small Company AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.935% of the first $250M
0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM Global Value Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.80% of the first $250M
0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
|
EXHIBIT TO ADVISORY FEE MOA
EFFECTIVE EXPIRATION
AIM FUNDS GROUP - CONTINUED WAIVER DESCRIPTION DATE DATE
--------------------------- -------------------------------------------- ---------- ----------
AIM International Small AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
Company Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.935% of the first $250M
0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM Mid Cap Basic Value Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM Select Equity Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Small Cap Equity Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
EXHIBIT TO ADVISORY FEE MOA
EFFECTIVE EXPIRATION
AIM GROWTH SERIES WAIVER DESCRIPTION DATE DATE
----------------- -------------------------------------------- --------- ----------
AIM Basic Value Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM Global Equity Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.80% of the first $250M
0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
|
AIM INTERNATIONAL MUTUAL EFFECTIVE EXPIRATION
FUNDS WAIVER DESCRIPTION DATE DATE
------------------------ -------------------------------------------- --------- ----------
AIM Asia Pacific Growth Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.935% of the first $250M
0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM European Growth Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.935% of the first $250M
0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM Global Aggressive Growth AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.80% of the first $250M
0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
|
EXHIBIT TO ADVISORY FEE MOA
AIM INTERNATIONAL MUTUAL EFFECTIVE EXPIRATION
FUNDS - CONTINUED WAIVER DESCRIPTION DATE DATE
------------------------ -------------------------------------------- --------- ----------
AIM Global Growth Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.80% of the first $250M
0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
AIM International Growth AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.935% of the first $250M
0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
|
EFFECTIVE EXPIRATION
AIM INVESTMENT FUNDS WAIVER DESCRIPTION DATE DATE
-------------------- -------------------------------------------- --------- ----------
AIM Developing Markets Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.935% of the first $250M
0.91% of the next $250M
0.885% of the next $500M
0.86% of the next $1.5B
0.835% of the next $2.5B
0.81% of the next $2.5B
0.785% of the next $2.5B
0.76% of the excess over $10B
AIM Global Health Care Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
|
EXHIBIT TO ADVISORY FEE MOA
AIM INVESTMENT FUNDS - EFFECTIVE EXPIRATION
CONTINUED WAIVER DESCRIPTION DATE DATE
---------------------- -------------------------------------------- --------- ----------
AIM Trimark Endeavor Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM Trimark Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.80% of the first $250M
0.78% of the next $250M
0.76% of the next $500M
0.74% of the next $1.5B
0.72% of the next $2.5B
0.70% of the next $2.5B
0.68% of the next $2.5B
0.66% of the excess over $10B
AIM Trimark Small Companies AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
AIM INVESTMENT SECURITIES EFFECTIVE EXPIRATION
FUNDS WAIVER DESCRIPTION DATE DATE
------------------------- -------------------------------------------- --------- ----------
AIM Real Estate Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
|
EXHIBIT TO ADVISORY FEE MOA
EFFECTIVE EXPIRATION
AIM SECTOR FUNDS WAIVER DESCRIPTION DATE DATE
---------------- -------------------------------------------- ---------- ----------
AIM Energy Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Financial Services Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Gold & Precious Metals AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Leisure Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM Technology Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
|
EXHIBIT TO ADVISORY FEE MOA
EFFECTIVE EXPIRATION
AIM SECTOR FUNDS - CONTINUED WAIVER DESCRIPTION DATE DATE
---------------------------- -------------------------------------------- ---------- ----------
AIM Utilities Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
|
AIM SPECIAL OPPORTUNITIES EFFECTIVE EXPIRATION
FUNDS WAIVER DESCRIPTION DATE DATE
------------------------- -------------------------------------------- ---------- ----------
AIM Opportunities II Fund AIM will waive advisory fees to the extent 7/1/2006 6/30/2007
necessary so that advisory fees AIM receives
do not exceed an annual base management fee
of 1.00% of the Fund's average daily net
assets, subject to a maximum performance
adjustment upward or downward of 0.50%
annually. As a result, AIM may receive a
management net fee that ranges from 0.50% to
1.50% of average daily net assets, based on
the Fund's performance.
AIM Opportunities III Fund AIM will waive advisory fees to the extent 7/1/2006 6/30/2007
necessary so that advisory fees AIM receives
do not exceed an annual base management fee
of 1.00% of the Fund's average daily net
assets, subject to a maximum performance
adjustment upward or downward of 0.50%
annually. As a result, AIM may receive a
management net fee that ranges from 0.50% to
1.50% of average daily net assets, based on
the Fund's performance.
|
EFFECTIVE EXPIRATION
AIM STOCK FUNDS WAIVER DESCRIPTION DATE DATE
--------------- -------------------------------------------- ---------- ----------
AIM S&P 500 Index Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.25% of the first $250M
0.24% of the next $250M
0.23% of the next $500M
0.22% of the next $1.5B
0.21% of the next $2.5B
0.20% of the next $2.5B
0.19% of the next $2.5B
0.18% of the excess over $10B
|
EFFECTIVE EXPIRATION
AIM SUMMIT FUND WAIVER DESCRIPTION DATE DATE
--------------- -------------------------------------------- ---------- ----------
AIM Summit Fund AIM will waive advisory fees to the extent 1/1/2005 6/30/2007
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
|
EXHIBIT TO ADVISORY FEE MOA
EFFECTIVE EXPIRATION
AIM TREASURER'S SERIES TRUST WAIVER DESCRIPTION DATE DATE
---------------------------- -------------------------------------------- ---------- ----------
Premier Portfolio AIM will waive advisory fees in the amount of 2/25/2005 6/30/2007
0.08% of the Funds average daily net assets
Premier U.S. Government AIM will waive advisory fees in the amount of 2/25/2005 6/30/2007
Money Portfolio 0.08% of the Funds average daily net assets
|
EFFECTIVE EXPIRATION
AIM VARIABLE INSURANCE FUNDS WAIVER DESCRIPTION DATE DATE
---------------------------- -------------------------------------------- ---------- ----------
AIM V. I. Basic Balanced AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.62% of the first $150M
0.50% of the next $4.85B
0.475% of the next $5B
0.45% of the excess over $10B
AIM V. I. Basic Value Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Capital AIM will waive advisory fees to the extent 05/01/2006* 12/31/2009 *
Appreciation Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below. *
0.695% of the first $250M
0.625% of the next $750M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Capital AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
Development Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
* The waiver schedule, effective date and expiration date shown are those that will become effective upon the closing of the acquisition of AIM V.I. Aggressive Growth Fund and AIM V.I. Growth Fund.
EXHIBIT TO ADVISORY FEE MOA
AIM VARIABLE INSURANCE FUNDS EFFECTIVE EXPIRATION
- CONTINUED WAIVER DESCRIPTION DATE DATE
---------------------------- -------------------------------------------- ---------- ----------
AIM V. I. Core Equity Fund AIM will waive advisory fees to the extent 1/1/2005 12/31/2009 *
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Demographic Trends AIM will waive advisory fees to the extent 1/1/2005 12/31/2009
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Dynamics Fund AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM V. I. Financial Services AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM V. I. Global Healthcare AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
|
* The expiration date shown is the expiration date that will become effective upon the closing of the acquisition of AIM V.I. Core Stock Fund.
EXHIBIT TO ADVISORY FEE MOA
AIM VARIABLE INSURANCE FUNDS EFFECTIVE EXPIRATION
- CONTINUED WAIVER DESCRIPTION DATE DATE
---------------------------- -------------------------------------------- ---------- ----------
AIM V. I. Global Real Estate AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM V. I. Large Cap Growth AIM will waive advisory fees to the extent 06/12/2006* 12/31/2009*
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.695% of the first $250M
0.67% of the next $250M
0.645% of the next $500M
0.62% of the next $1.5B
0.595% of the next $2.5B
0.57% of the next $2.5B
0.545% of the next $2.5B
0.52% of the excess over $10B
AIM V. I. Leisure Fund AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
AIM V. I. Small Cap Equity AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
AIM V. I. Small Cap Growth AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
Fund necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.745% of the first $250M
0.73% of the next $250M
0.715% of the next $500M
0.70% of the next $1.5B
0.685% of the next $2.5B
0.67% of the next $2.5B
0.655% of the next $2.5B
0.64% of the excess over $10B
|
* The effective date and expiration date shown are those that will become effective upon the closing of the acquisition of AIM V.I. Blue Chip Fund.
EXHIBIT TO ADVISORY FEE MOA
AIM VARIABLE INSURANCE FUNDS EFFECTIVE EXPIRATION
- CONTINUED WAIVER DESCRIPTION DATE DATE
---------------------------- -------------------------------------------- ---------- ----------
AIM V. I. Technology Fund AIM will waive advisory fees to the extent 1/1/2005 4/30/2008
necessary so that advisory fees AIM receives
does not exceed the annualized rates listed
below.
0.75% of the first $250M
0.74% of the next $250M
0.73% of the next $500M
0.72% of the next $1.5B
0.71% of the next $2.5B
0.70% of the next $2.5B
0.69% of the next $2.5B
0.68% of the excess over $10B
|
MEMORANDUM OF AGREEMENT
(EXPENSE LIMITATIONS)
This Memorandum of Agreement is entered into as of the Effective Date on the attached exhibits (the "Exhibits"), between AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Stock Funds, AIM Tax-Exempt Funds, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust (each a "Trust" or, collectively, the "Trusts"), on behalf of the funds listed on the Exhibits to this Memorandum of Agreement (the "Funds"), and A I M Advisors, Inc. ("AIM"). This Memorandum of Agreement restates the Memorandum of Agreement dated January 31, 2007 between AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Stock Funds, AIM Tax-Exempt Funds, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust. AIM shall and hereby agrees to waive fees or reimburse expenses of each Fund, on behalf of its respective classes as applicable, severally and not jointly, as indicated in the attached Exhibits.
For and in consideration of the mutual terms and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Trusts and AIM agree as follows:
For the Contractual Limits (listed in Exhibits A - E), the Trusts and AIM
agree until at least the date set forth on the attached Exhibits A - E (the
"Expiration Date") that AIM will waive its fees or reimburse expenses to the
extent that expenses of a class of a Fund (excluding (i) interest; (ii) taxes;
(iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses
related to a merger or reorganization, as approved by the Funds' Board of
Trustees; and (vi) expenses that each Fund has incurred but did not actually pay
because of an expense offset arrangement, if applicable) exceed the rate, on an
annualized basis, set forth on the Exhibits of the average daily net assets
allocable to such class. With regard to the Contractual Limits, the Board of
Trustees and AIM may terminate or modify this Memorandum of Agreement prior to
the Expiration Date only by mutual written consent. AIM will not have any right
to reimbursement of any amount so waived or reimbursed.
For the Contractual Limits, each of the Trusts and AIM agree to review the then-current expense limitations for each class of each Fund listed on the Exhibits on a date prior to the Expiration Date to determine whether such limitations should be amended, continued or terminated. The expense limitations will expire upon the Expiration Date unless the Trust and AIM have agreed to continue them. The Exhibits will be amended to reflect any such agreement.
For the Voluntary Limits (listed in Exhibits A - E), the Trusts and AIM agree that these are not contractual in nature and that AIM may establish, amend and/or terminate such expense limitations at any time in its sole discretion after consultation with the Funds' Board of Trustees. Any delay or failure by AIM to update this Memorandum of Agreement with regards to the terminations, extensions, or expirations of the Voluntary Limits shall have no effect on the term of such Voluntary Limitations; the Voluntary Limitations are listed herein for informational purposes only.
It is expressly agreed that the obligations of each Trust hereunder shall not be binding upon any of the Trustees, shareholders, nominees, officers, agents or employees of the Trusts personally, but shall only bind the assets and property of each Fund, as provided in each Trust's Agreement and Declaration of Trust. The execution and delivery of this Memorandum of Agreement have been authorized by the Trustees of the Trusts, and this Memorandum of Agreement has been executed and delivered by an authorized officer of the Trusts acting as such; neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Funds, as provided in each Trust's Agreement and Declaration of Trust.
IN WITNESS WHEREOF, each of the Trusts and AIM have entered into this Memorandum of Agreement as of the Effective Date on the attached Exhibits.
AIM COUNSELOR SERIES TRUST
AIM EQUITY FUNDS
AIM FUNDS GROUP
AIM GROWTH SERIES
AIM INVESTMENT FUNDS
AIM INVESTMENT SECURITIES FUNDS
AIM SECTOR FUNDS
AIM STOCK FUNDS
AIM TAX-EXEMPT FUNDS
AIM VARIABLE INSURANCE FUNDS
on behalf of the Funds listed in the
Exhibits to this Memorandum of Agreement
By: /s/ John M. Zerr
------------------------------------
Title: Senior Vice President
|
SHORT-TERM INVESTMENTS TRUST
TAX-FREE INVESTMENTS TRUST
on behalf of the Funds listed in the
Exhibits to this Memorandum of Agreement
By: /s/ Karen Dunn Kelley
------------------------------------
Title: President
|
A I M Advisors, Inc.
By: /s/ John M. Zerr
------------------------------------
Title: Senior Vice President
|
as of April 1, 2007
EXHIBIT "A" - RETAIL FUNDS(1)
FUNDS WITH FISCAL YEAR END OF MARCH 31
AIM SECTOR FUNDS
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
AIM Energy Fund
Class A Shares Voluntary 1.55% July 1, 2005 N/A(2)
Class B Shares Voluntary 2.30% August 12, 2003 N/A(2)
Class C Shares Voluntary 2.30% August 12, 2003 N/A(2)
Investor Class Shares Voluntary 1.55% April 1, 2005 N/A(2)
Institutional Class Shares Voluntary 1.30% January 31, 2006 N/A(2)
AIM Financial Services Fund
Class A Shares Voluntary 1.30% July 1, 2005 N/A(2)
Class B Shares Voluntary 2.05% August 12, 2003 N/A(2)
Class C Shares Voluntary 2.05% April 1, 2005 N/A(2)
Investor Class Shares Voluntary 1.30% April 1, 2005 N/A(2)
AIM Leisure Fund
Class A Shares Voluntary 1.40% July 1, 2005 N/A(2)
Class B Shares Voluntary 2.15% August 12, 2003 N/A(2)
Class C Shares Voluntary 2.15% April 1, 2005 N/A(2)
Class R Shares Voluntary 1.65% October 25, 2005 N/A(2)
Investor Class Shares Voluntary 1.40% April 1, 2005 N/A(2)
AIM Technology Fund
Class A Shares Contractual 1.55% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.30% July 1, 2005 June 30, 2007
Class C Shares Contractual 2.30% July 1, 2005 June 30, 2007
Investor Class Shares Contractual 1.55% July 1, 2005 June 30, 2007
Institutional Class Shares Contractual 1.30% July 1, 2005 June 30, 2007
AIM Utilities Fund
Class A Shares Contractual 1.30% April 1, 2006 June 30, 2007
Class B Shares Contractual 2.05% April 1, 2006 June 30, 2007
Class C Shares Contractual 2.05% April 1, 2006 June 30, 2007
Investor Class Shares Contractual 1.30% April 1, 2006 June 30, 2007
Institutional Class Shares Contractual 1.05% April 1, 2006 June 30, 2007
|
AIM TAX-EXEMPT FUNDS
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
AIM High Income Municipal
Fund
Class A Shares Voluntary 0.70% April 1, 2007 N/A(2)
Class B Shares Voluntary 1.45% April 1, 2007 N/A(2)
Class C Shares Voluntary 1.45% April 1, 2007 N/A(2)
Institutional Class Shares Voluntary 0.45% April 1, 2007 N/A(2)
|
See page 8 for footnotes to Exhibit A.
as of April 1, 2007
FUNDS WITH FISCAL YEAR END OF JULY 31
AIM INVESTMENT SECURITIES FUNDS
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
AIM Global Real Estate Fund
Class A Shares Contractual 1.40% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.15% April 29, 2005 June 30, 2007
Class C Shares Contractual 2.15% April 29, 2005 June 30, 2007
Class R Shares Contractual 1.65% April 29, 2005 June 30, 2007
Institutional Class Shares Contractual 1.15% April 29, 2005 June 30, 2007
AIM Short Term Bond Fund
Class A Shares Contractual 0.85% July 1, 2005 June 30, 2007
Class C Shares Contractual 1.10%(3) February 1, 2006 June 30, 2007
Class R Shares Contractual 1.10% August 30, 2002 June 30, 2007
Institutional Class Shares Contractual 0.60% August 30, 2002 June 30, 2007
AIM Total Return Bond Fund
Class A Shares Contractual 1.15% July 1, 2005 June 30, 2007
Class B Shares Contractual 1.90% July 1, 2002 June 30, 2007
Class C Shares Contractual 1.90% July 1, 2002 June 30, 2007
Class R Shares Contractual 1.40% July 1, 2002 June 30, 2007
Institutional Class Shares Contractual 0.90% July 1, 2002 June 30, 2007
AIM Total Return Bond Fund
Class A Shares Voluntary 1.00% July 1, 2002 N/A(2)
Class B Shares Voluntary 1.75% July 1, 2002 N/A(2)
Class C Shares Voluntary 1.75% July 1, 2002 N/A(2)
Class R Shares Voluntary 1.25% April 30, 2004 N/A(2)
Institutional Class Shares Voluntary 0.75% April 30, 2004 N/A(2)
|
AIM STOCK FUNDS
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
AIM Dynamics Fund
Class A Shares Voluntary 1.20% July 1, 2005 N/A(2)
Class B Shares Voluntary 1.95% August 12, 2003 N/A(2)
Class C Shares Voluntary 1.95% August 12, 2003 N/A(2)
Class R Shares Voluntary 1.45% October 25, 2005 N/A(2)
Investor Class Shares Voluntary 1.20% August 12, 2003 N/A(2)
Institutional Class Shares Voluntary 0.95% August 12, 2003 N/A(2)
AIM S&P 500 Index Fund
Investor Class Shares Contractual 0.60% August 1, 2005 June 30, 2007
Institutional Class Shares Contractual 0.35% August 12, 2003 June 30, 2007
|
See page 8 for footnotes to Exhibit A.
as of April 1, 2007
FUNDS WITH FISCAL YEAR END OF AUGUST 31
AIM COUNSELOR SERIES TRUST
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
AIM Floating Rate Fund
Class A Shares Voluntary 1.50% April 14, 2006 N/A(2)
Class B1 Shares Voluntary 1.50% May 1, 1997 N/A(2)
Class C Shares Voluntary 2.00% April 14, 2006 N/A(2)
Class R Shares Voluntary 1.75% April 14, 2006 N/A(2)
Institutional Class Shares Voluntary 1.25% April 14, 2006 N/A(2)
AIM Structured Core Fund
Class A Contractual 1.00% March 31, 2006 June 30, 2007
Class B Contractual 1.75% March 31, 2006 June 30, 2007
Class C Contractual 1.75% March 31, 2006 June 30, 2007
Class R Contractual 1.25% March 31, 2006 June 30, 2007
Institutional Class Contractual 0.75% March 31, 2006 June 30, 2007
AIM Structured Growth Fund
Class A Contractual 1.00% March 31, 2006 June 30, 2007
Class B Contractual 1.75% March 31, 2006 June 30, 2007
Class C Contractual 1.75% March 31, 2006 June 30, 2007
Class R Contractual 1.25% March 31, 2006 June 30, 2007
Institutional Class Contractual 0.75% March 31, 2006 June 30, 2007
AIM Structured Value Fund
Class A Contractual 1.00% March 31, 2006 June 30, 2007
Class B Contractual 1.75% March 31, 2006 June 30, 2007
Class C Contractual 1.75% March 31, 2006 June 30, 2007
Class R Contractual 1.25% March 31, 2006 June 30, 2007
Institutional Class Contractual 0.75% March 31, 2006 June 30, 2007
|
FUNDS WITH FISCAL YEAR END OF OCTOBER 31
AIM EQUITY FUNDS
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
AIM Capital Development Fund
Class A Shares Voluntary 1.55% July 18, 2005 N/A(2)
Class B Shares Voluntary 2.30% July 18, 2005 N/A(2)
Class C Shares Voluntary 2.30% July 18, 2005 N/A(2)
Class R Shares Voluntary 1.80% July 18, 2005 N/A(2)
Investor Class Shares Voluntary 1.55% July 18, 2005 N/A(2)
Institutional Class Shares Voluntary 1.30% July 18, 2005 N/A(2)
AIM Diversified Dividend Fund
Class A Shares Contractual 1.40% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.15% May 2, 2003 June 30, 2007
Class C Shares Contractual 2.15% May 2, 2003 June 30, 2007
Class R Shares Contractual 1.65% October 25, 2005 June 30, 2007
Investor Class Shares Contractual 1.40% July 15, 2005 June 30, 2007
Institutional Class Shares Contractual 1.15% October 25, 2005 June 30, 2007
|
See page 8 for footnotes to Exhibit A.
as of April 1, 2007
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
AIM Diversified Dividend Fund
Class A Shares Voluntary 1.00% May 2, 2003 N/A(2)
Class B Shares Voluntary 1.65% May 2, 2003 N/A(2)
Class C Shares Voluntary 1.65% May 2, 2003 N/A(2)
Class R Shares Voluntary 1.25% October 25, 2005 N/A(2)
Investor Class Shares Voluntary 1.00% July 15, 2005 N/A(2)
Institutional Class Shares Voluntary 0.75% October 25, 2005 N/A(2)
AIM Large Cap Basic Value Fund
Class A Shares Contractual 1.22% July 1, 2005 June 30, 2007
Class B Shares Contractual 1.97% July 1, 2005 June 30, 2007
Class C Shares Contractual 1.97% July 1, 2005 June 30, 2007
Class R Shares Contractual 1.47% July 1, 2005 June 30, 2007
Investor Class Shares Contractual 1.22% July 1, 2005 June 30, 2007
Institutional Class Shares Contractual 0.97% July 1, 2005 June 30, 2007
AIM Large Cap Growth Fund
Class A Shares Contractual 1.32% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.07% July 1, 2005 June 30, 2007
Class C Shares Contractual 2.07% July 1, 2005 June 30, 2007
Class R Shares Contractual 1.57% July 1, 2005 June 30, 2007
Investor Class Shares Contractual 1.32% July 1, 2005 June 30, 2007
Institutional Class Shares Contractual 1.07% July 1, 2005 June 30, 2007
|
AIM INVESTMENT FUNDS
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
AIM China Fund
Class A Shares Contractual 2.05% March 31, 2006 June 30, 2007
Class B Shares Contractual 2.80% March 31, 2006 June 30, 2007
Class C Shares Contractual 2.80% March 31, 2006 June 30, 2007
Institutional Class Shares Contractual 1.80% March 31, 2006 June 30, 2007
|
See page 8 for footnotes to Exhibit A.
as of April 1, 2007
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ------------------ -------------
AIM Developing Markets Fund
Class A Shares Contractual 1.75% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.50% July 1, 2002 June 30, 2007
Class C Shares Contractual 2.50% July 1, 2002 June 30, 2007
Institutional Class Shares Contractual 1.50% October 25, 2005 June 30, 2007
AIM Global Health Care Fund
Class A Shares Voluntary 1.30% July 18, 2005 N/A(2)
Class B Shares Voluntary 2.05% July 18, 2005 N/A(2)
Class C Shares Voluntary 2.05% July 18, 2005 N/A(2)
Investor Class Shares Voluntary 1.30% July 18, 2005 N/A(2)
AIM International Total
Return Fund
Class A Shares Contractual 1.10% March 31, 2006 June 30, 2007
Class B Shares Contractual 1.85% March 31, 2006 June 30, 2007
Class C Shares Contractual 1.85% March 31, 2006 June 30, 2007
Institutional Class Shares Contractual 0.85% March 31, 2006 June 30, 2007
AIM Japan Fund
Class A Shares Contractual 1.70% March 31, 2006 June 30, 2007
Class B Shares Contractual 2.45% March 31, 2006 June 30, 2007
Class C Shares Contractual 2.45% March 31, 2006 June 30, 2007
Institutional Class Shares Contractual 1.45% March 31, 2006 June 30, 2007
AIM LIBOR Alpha Fund
Class A Shares Contractual 0.85% March 31, 2006 June 30, 2007
Class C Shares Contractual 1.10%(3) March 31, 2006 June 30, 2007
Class R Shares Contractual 1.10% March 31, 2006 June 30, 2007
Institutional Class Shares Contractual 0.60% March 31, 2006 June 30, 2007
AIM Trimark Endeavor Fund
Class A Shares Contractual 1.90% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.65% November 1, 2004 June 30, 2007
Class C Shares Contractual 2.65% November 1, 2004 June 30, 2007
Class R Shares Contractual 2.15% November 1, 2004 June 30, 2007
Institutional Class Shares Contractual 1.65% November 1, 2004 June 30, 2007
AIM Trimark Fund
Class A Shares Contractual 2.15% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.90% November 1, 2004 June 30, 2007
Class C Shares Contractual 2.90% November 1, 2004 June 30, 2007
Class R Shares Contractual 2.40% November 1, 2004 June 30, 2007
Institutional Class Shares Contractual 1.90% November 1, 2004 June 30, 2007
AIM Trimark Small Companies
Fund
Class A Shares Contractual 1.50% September 30, 2005 June 30, 2007
Class B Shares Contractual 2.25% September 30, 2005 June 30, 2007
Class C Shares Contractual 2.25% September 30, 2005 June 30, 2007
Class R Shares Contractual 1.75% September 30, 2005 June 30, 2007
Institutional Class Shares Contractual 1.25% September 30, 2005 June 30, 2007
|
See page 8 for footnotes to Exhibit A.
as of April 1, 2007
FUNDS WITH FISCAL YEAR END OF DECEMBER 31
AIM FUNDS GROUP
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ------------------ -------------
AIM Basic Balanced Fund
Class A Shares Voluntary 1.25% July 18, 2005 N/A(2)
Class B Shares Voluntary 2.00% July 18, 2005 N/A(2)
Class C Shares Voluntary 2.00% July 18, 2005 N/A(2)
Class R. Shares Voluntary 1.50% July 18, 2005 N/A(2)
Investor Class Shares Voluntary 1.25% July 18, 2005 N/A(2)
Institutional Class Shares Voluntary 1.00% July 18, 2005 N/A(2)
AIM European Small Company
Fund
Class A Shares Contractual 1.90% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.65% May 1, 2002 June 30, 2007
Class C Shares Contractual 2.65% May 1, 2002 June 30, 2007
AIM Global Value Fund
Class A Shares Contractual 1.90% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.65% May 1, 2002 June 30, 2007
Class C Shares Contractual 2.65% May 1, 2002 June 30, 2007
Institutional Class Shares Contractual 1.65% May 1, 2002 June 30, 2007
AIM Mid Cap Basic Value Fund
Class A Shares Voluntary 1.70% July 1, 2005 N/A(2)
Class B Shares Voluntary 2.45% December 31, 2001 N/A(2)
Class C Shares Voluntary 2.45% December 31, 2001 N/A(2)
Class R Shares Voluntary 1.95% December 31, 2001 N/A(2)
Institutional Class Shares Voluntary 1.45% December 31, 2001 N/A(2)
|
AIM GROWTH SERIES
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ------------------ -------------
AIM Small Cap Growth Fund
Class A Shares Voluntary 1.50% April 10, 2006 N/A(2)
Class B Shares Voluntary 2.25% April 10, 2006 N/A(2)
Class C Shares Voluntary 2.25% April 10, 2006 N/A(2)
Class R Shares Voluntary 1.75% April 10, 2006 N/A(2)
Investor Class Shares Voluntary 1.50% April 10, 2006 N/A(2)
Institutional Class Shares Voluntary 1.25% April 10, 2006 N/A(2)
AIM Global Equity Fund
Class A Shares Contractual 1.75% July 1, 2005 June 30, 2007
Class B Shares Contractual 2.50% August 27, 1999 June 30, 2007
Class C Shares Contractual 2.50% August 27, 1999 June 30, 2007
Class R Shares Contractual 2.00% August 27, 1999 June 30, 2007
Institutional Class Shares Contractual 1.50% August 27, 1999 June 30, 2007
|
(1) The total operating expenses of any class of shares established after the date of this Memorandum of Agreement will be limited to the amount established for Class A Shares plus the difference between the new class 12b-1 rate and the Class A 12b-1 rate.
(2) AIM may establish, amend or terminate voluntary waivers at any time in its sole discretion after consultation with the Trust.
(3) The expense limit shown is the expense limit after Rule 12b-1 fee waivers by A I M Distributors, Inc.
as of April 1, 2007
EXHIBIT "B" - ASSET ALLOCATION FUNDS(1)
AIM GROWTH SERIES
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION(2) CURRENT LIMIT DATE
---- ------------ -------------------------- ----------------- -------------
AIM Conservative Allocation
Fund
Class A Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.23% of average daily net
assets
Class B Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.23% of average daily net
assets
Class C Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.23% of average daily net
assets
Class R Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.23% of average daily net
assets
Institutional Class Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.23% of average daily net
assets
AIM Growth Allocation Fund
Class A Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.21% of average daily net
assets
Class B Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.21% of average daily net
assets
Class C Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.21% of average daily net
assets
Class R Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.21% of average daily net
assets
Institutional Class Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.21% of average daily net
assets
AIM Income Allocation Fund
Class A Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.03% of average daily net
assets
Class B Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.03% of average daily net
assets
Class C Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.03% of average daily net
assets
Class R Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.03% of average daily net
assets
Institutional Class Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.03% of average daily net
assets
|
See page 13 for footnotes to Exhibit B.
as of April 1, 2007
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION(2) CURRENT LIMIT DATE
---- ------------ -------------------------- ----------------- -------------
AIM Independence Now Fund
Class A Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.16% of average daily net
assets
Class B Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.16% of average daily net
assets
Class C Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.16% of average daily net
assets
Class R Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.16% of average daily net
assets
Institutional Class Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.16% of average daily net
assets
AIM Independence 2010 Fund
Class A Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.17% of average daily net
assets
Class B Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.17% of average daily net
assets
Class C Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.17% of average daily net
assets
Class R Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.17% of average daily net
assets
Institutional Class Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.17% of average daily net
assets
AIM Independence 2020 Fund
Class A Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
Class B Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
Class C Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
Class R Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
Institutional Class Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
|
See page 13 for footnotes to Exhibit B.
as of April 1, 2007
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION(2) CURRENT LIMIT DATE
---- ------------ -------------------------- ----------------- -------------
AIM Independence 2030 Fund
Class A Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
Class B Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
Class C Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
Class R Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
Institutional Class Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.24% of average daily net
assets
AIM Independence 2040 Fund
Class A Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
Class B Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
Class C Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
Class R Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
Institutional Class Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
AIM Independence 2050 Fund
Class A Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
Class B Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
Class C Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
Class R Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
Institutional Class Contractual Limit Other Expenses to January 31, 2007 June 30, 2008
0.28% of average daily net
assets
|
See page 13 for footnotes to Exhibit B.
as of April 1, 2007
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION(2) CURRENT LIMIT DATE
---- ------------ -------------------------- ----------------- -------------
AIM International Allocation
Fund
Class A Contractual Limit Other Expenses to October 31, 2005 June 30, 2007
0.18% of average daily net
assets
Class B Contractual Limit Other Expenses to October 31, 2005 June 30, 2007
0.18% of average daily net
assets
Class C Contractual Limit Other Expenses to October 31, 2005 June 30, 2007
0.18% of average daily net
assets
Class R Contractual Limit Other Expenses to October 31, 2005 June 30, 2007
0.18% of average daily net
assets
Institutional Class Contractual Limit Other Expenses to October 31, 2005 June 30, 2007
0.18% of average daily net
assets
AIM Moderate Allocation Fund
Class A Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.12% of average daily net
assets
Class B Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.12% of average daily net
assets
Class C Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.12% of average daily net
assets
Class R Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.12% of average daily net
assets
Institutional Class Shares Contractual Limit Other Expenses to January 1, 2006 June 30, 2007
0.12% of average daily net
assets
AIM Moderate Growth Allocation
Fund
Class A Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.12% of average daily net
assets
Class B Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.12% of average daily net
assets
Class C Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.12% of average daily net
assets
Class R Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.12% of average daily net
assets
Institutional Class Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.12% of average daily net
assets
|
See page 13 for footnotes to Exhibit B.
as of April 1, 2007
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION(2) CURRENT LIMIT DATE
---- ------------ -------------------------- ----------------- -------------
AIM Moderately Conservative
Allocation Fund
Class A Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.14% of average daily net
assets
Class B Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.14% of average daily net
assets
Class C Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.14% of average daily net
assets
Class R Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.14% of average daily net
assets
Institutional Class Shares Contractual Limit Other Expenses to April 29, 2005 June 30, 2007
0.14% of average daily net
assets
|
(1) Other expenses of any class of shares established after the date of this Memorandum of Agreement will be limited to the same amount established for Class A shares.
(2) Other Expenses are defined as all normal operating expenses of the fund, excluding management fees and 12b-1 expenses, if any. The expense limitation is subject to the exclusions as listed in the Memorandum of Agreement.
as of April 1, 2007
EXHIBIT "C" - INSTITUTIONAL MONEY MARKET FUNDS(1,2)
FUNDS WITH FISCAL YEAR END OF MARCH 31
TAX-FREE INVESTMENTS TRUST
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
Tax-Free Cash Reserve
Portfolio(3)
Cash Management Class Contractual 0.22% June 30, 2005 June 30, 2007
Corporate Class Contractual 0.22% June 30, 2005 June 30, 2007
Institutional Class Contractual 0.22% June 30, 2005 June 30, 2007
Personal Investment Class Contractual 0.22% June 30, 2005 June 30, 2007
Private Investment Class Contractual 0.22% June 30, 2005 June 30, 2007
Reserve Class Contractual 0.22% June 30, 2005 June 30, 2007
Resource Class Contractual 0.22% June 30, 2005 June 30, 2007
|
FUNDS WITH FISCAL YEAR END OF AUGUST 31
SHORT-TERM INVESTMENTS TRUST
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
Government & Agency Portfolio
Cash Management Class Contractual 0.12% June 30, 2005 June 30, 2007
Corporate Class Contractual 0.12% June 30, 2005 June 30, 2007
Institutional Class Contractual 0.12% June 30, 2005 June 30, 2007
Personal Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Private Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Reserve Class Contractual 0.12% June 30, 2005 June 30, 2007
Resource Class Contractual 0.12% June 30, 2005 June 30, 2007
Government TaxAdvantage
Portfolio
Cash Management Class Contractual 0.12% June 30, 2005 June 30, 2007
Corporate Class Contractual 0.12% June 30, 2005 June 30, 2007
Institutional Class Contractual 0.12% June 30, 2005 June 30, 2007
Personal Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Private Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Reserve Class Contractual 0.12% June 30, 2005 June 30, 2007
Resource Class Contractual 0.12% June 30, 2005 June 30, 2007
Liquid Assets Portfolio
Cash Management Class Contractual 0.12% June 30, 2005 June 30, 2007
Corporate Class Contractual 0.12% June 30, 2005 June 30, 2007
Institutional Class Contractual 0.12% June 30, 2005 June 30, 2007
Personal Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Private Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Reserve Class Contractual 0.12% June 30, 2005 June 30, 2007
Resource Class Contractual 0.12% June 30, 2005 June 30, 2007
|
See page 15 for footnotes to Exhibit C.
as of April 1, 2007
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ----------------- -------------
STIC Prime Portfolio
Cash Management Class Contractual 0.12% June 30, 2005 June 30, 2007
Corporate Class Contractual 0.12% June 30, 2005 June 30, 2007
Institutional Class Contractual 0.12% June 30, 2005 June 30, 2007
Personal Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Private Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Reserve Class Contractual 0.12% June 30, 2005 June 30, 2007
Resource Class Contractual 0.12% June 30, 2005 June 30, 2007
Treasury Portfolio
Cash Management Class Contractual 0.12% June 30, 2005 June 30, 2007
Corporate Class Contractual 0.12% June 30, 2005 June 30, 2007
Institutional Class Contractual 0.12% June 30, 2005 June 30, 2007
Personal Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Private Investment Class Contractual 0.12% June 30, 2005 June 30, 2007
Reserve Class Contractual 0.12% June 30, 2005 June 30, 2007
Resource Class Contractual 0.12% June 30, 2005 June 30, 2007
|
(1) The expense limit shown excludes Rule 12b-1 fees.
(2) The expense rate excluding 12b-1 fees of any class of shares established after the date of this Memorandum of Agreement will be the same as existing classes.
(3) The expense limitation also excludes Trustees' fees and federal registration expenses.
as of April 1, 2007
EXHIBIT "D" - VARIABLE INSURANCE FUNDS
AIM VARIABLE INSURANCE FUNDS
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ------------------ --------------
AIM V.I. Basic Balanced Fund
Series I Shares Contractual 0.91% July 1, 2005 April 30, 2008
Series II Shares Contractual 1.16% July 1, 2005 April 30, 2008
AIM V.I. Basic Value Fund
Series I Shares Contractual 1.30% January 1, 2005 April 30, 2008
Series II Shares Contractual 1.45% January 1, 2005 April 30, 2008
AIM V.I. Capital Appreciation
Fund
Series I Shares Contractual 1.30% January 1, 2005 April 30, 2008
Series II Shares Contractual 1.45% January 1, 2005 April 30, 2008
AIM V.I. Capital Development
Fund
Series I Shares Contractual 1.30% January 1, 2005 April 30, 2008
Series II Shares Contractual 1.45% January 1, 2005 April 30, 2008
AIM V.I. Core Equity Fund
Series I Shares Contractual 1.30% January 1, 2005 April 30, 2008
Series II Shares Contractual 1.45% January 1, 2005 April 30, 2008
AIM V.I. Diversified Income
Fund
Series I Shares Contractual 0.75% July 1, 2005 April 30, 2008
Series II Shares Contractual 1.00% July 1, 2005 April 30, 2008
AIM V.I. Dynamics Fund
Series I Shares Contractual 1.30% April 30, 2004 April 30, 2008
Series II Shares Contractual 1.45% April 30, 2004 April 30, 2008
AIM V.I. Financial Services
Fund
Series I Shares Contractual 1.30% April 30, 2004 April 30, 2008
Series II Shares Contractual 1.45% April 30, 2004 April 30, 2008
AIM V.I. Global Health Care
Fund
Series I Shares Contractual 1.30% April 30, 2004 April 30, 2008
Series II Shares Contractual 1.45% April 30, 2004 April 30, 2008
AIM V.I. Global Real Estate
Fund
Series I Shares Contractual 1.30% April 30, 2004 April 30, 2008
Series II Shares Contractual 1.45% April 30, 2004 April 30, 2008
AIM V.I. Government
Securities Fund
Series I Shares Contractual 0.73% July 1, 2005 April 30, 2008
Series II Shares Contractual 0.98% July 1, 2005 April 30, 2008
AIM V.I. High Yield Fund
Series I Shares Contractual 0.95% July 1, 2005 April 30, 2008
|
as of April 1, 2007
CONTRACTUAL/ EXPENSE EFFECTIVE DATE OF EXPIRATION
FUND VOLUNTARY LIMITATION CURRENT LIMIT DATE
---- ------------ ---------- ------------------ --------------
Series II Shares Contractual 1.20% April 30, 2004 April 30, 2008
AIM V.I. International Growth
Fund
Series I Shares Contractual 1.30% January 1, 2005 April 30, 2008
Series II Shares Contractual 1.45% January 1, 2005 April 30, 2008
AIM V.I. Large Cap Growth
Fund
Series I Shares Contractual 1.01% July 1, 2005 April 30, 2008
Series II Shares Contractual 1.26% July 1, 2005 April 30, 2008
AIM V.I. Leisure Fund
Series I Shares Contractual 1.01% April 30, 2004 April 30, 2008
Series II Shares Contractual 1.26% April 30, 2004 April 30, 2008
AIM V.I. Mid Cap Core Equity
Fund
Series I Shares Contractual 1.30% September 10, 2001 April 30, 2008
Series II Shares Contractual 1.45% September 10, 2001 April 30, 2008
AIM V.I. Money Market Fund
Series I Shares Contractual 1.30% January 1, 2005 April 30, 2008
Series II Shares Contractual 1.45% January 1, 2005 April 30, 2008
AIM V.I. Small Cap Equity
Fund
Series I Shares Contractual 1.15% July 1, 2005 April 30, 2008
Series II Shares Contractual 1.40% July 1, 2005 April 30, 2008
AIM V.I. Small Cap Growth
Fund
Series I Shares Contractual 1.20% July 1, 2005 April 30, 2008
Series II Shares Contractual 1.45% April 30, 2004 April 30, 2008
AIM V.I. Technology Fund
Series I Shares Contractual 1.30% April 30, 2004 April 30, 2008
Series II Shares Contractual 1.45% April 30, 2004 April 30, 2008
AIM V.I. Utilities Fund
Series I Shares Contractual 0.93% September 23, 2005 April 30, 2008
Series II Shares Contractual 1.18% September 23, 2005 April 30, 2008
|
CONSENT OF COUNSEL
AIM VARIABLE INSURANCE FUNDS
We hereby consent to the use of our name and to the reference to our firm under the caption "Investment Advisory and Other Services - Other Service Providers - Counsel to the Trust" in the Statement of Additional Information for the series portfolios of AIM Variable Insurance Funds, which is included in Post-Effective Amendment No. 33 to the Registration Statement under the Securities Act of 1933, as amended (No. 33-57340), and Amendment No. 32 to the Registration Statement under the Investment Company Act of 1940, as amended (No. 811-7452), on Form N-1A of AIM Variable Insurance Funds.
/s/ Ballard Spahr Andrews & Ingersoll, LLP
------------------------------------------
Ballard Spahr Andrews & Ingersoll, LLP
Philadelphia, Pennsylvania
April 26, 2007
|
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in this Registration Statement on Form N-1A of our reports dated February 14, 2007, relating to the financial statements and financial highlights which appears in the December 31, 2006 Annual Report to Shareholders of AIM V.I. Basic Balanced Fund, AIM V.I. Basic Value Fund, AIM V.I. Capital Appreciation, AIM V.I. Capital Development, AIM V.I. Core Equity Fund, AIM V.I. Diversified Income Fund, AIM V.I. Government Securities 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. Small Cap Equity Fund, AIM V.I. Dynamics Fund, AIM V.I. Financial Services Fund, AIM V.I. Global Health Care Fund, AIM V.I. Global Real Estate Fund, AIM V.I. Leisure Fund, AIM V.I. Technology Fund and AIM V.I. Utilities Fund, 20 of the funds constituting AIM Variable Insurance Funds, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights", "Other Service Providers", and "Examples of Persons to Whom AIM Provides Non-Public Portfolio Holdings on an Ongoing Basis" in such Registration Statement.
PricewaterhouseCoopers LLP
Houston, Texas
April 25, 2007
AMENDMENT NO. 8
TO
MASTER DISTRIBUTION PLAN
The Master Distribution Plan (the "Plan"), dated as of July 16, 2001, pursuant to Rule 12b-1, of AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to add AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund; and to remove AIM V.I. Aggressive Growth Fund, AIM V.I. Core Stock Fund, AIM V.I. Growth Fund and AIM V.I. Premier Equity Fund;
NOW THEREFORE, Schedule A of the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM VARIABLE INSURANCE FUNDS
(SERIES II SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) designated below, a Distribution Fee determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio.
DISTRIBUTION
PORTFOLIO: FEE:
---------- ------------
AIM V.I. Basic Balanced Fund 0.25%
AIM V.I. Basic Value Fund 0.25%
AIM V.I. Blue Chip Fund 0.25%
AIM V.I. Capital Appreciation Fund 0.25%
AIM V.I. Capital Development Fund 0.25%
AIM V.I. Core Equity Fund 0.25%
AIM V.I. Demographic Trends Fund 0.25%
AIM V.I. Diversified Dividend Fund 0.25%
AIM V.I. Diversified Income Fund 0.25%
AIM V.I. Dynamics Fund 0.25%
AIM V.I. Financial Services Fund 0.25%
AIM V.I. Global Equity Fund 0.25%
AIM V.I. Global Health Care Fund 0.25%
AIM V.I. Government Securities Fund 0.25%
AIM V.I. High Yield Fund 0.25%
AIM V.I. International Core Equity Fund 0.25%
AIM V.I. International Growth Fund 0.25%
AIM V.I. Large Cap Growth Fund 0.25%
AIM V.I. Leisure Fund 0.25%
AIM V.I. Mid Cap Core Equity Fund 0.25%
AIM V.I. Money Market Fund 0.25%
|
AIM V.I. Real Estate Fund 0.25% AIM V.I. Small Cap Equity Fund 0.25% AIM V.I. Small Company Growth Fund 0.25% AIM V.I. Technology Fund 0.25% AIM V.I. Utilities Fund 0.25%" |
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: May 1, 2006
AIM VARIABLE INSURANCE FUNDS
(on behalf of its Series II Shares)
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary President
|
AMENDMENT NO. 9
TO
MASTER DISTRIBUTION PLAN
The Master Distribution Plan (the "Plan"), dated as of July 16, 2001, pursuant to Rule 12b-1, of AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Blue Chip Fund;
NOW THEREFORE, Schedule A of the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM VARIABLE INSURANCE FUNDS
(SERIES II SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) designated below, a Distribution Fee determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio.
DISTRIBUTION
PORTFOLIO: FEE:
---------- ------------
AIM V.I. Basic Balanced Fund 0.25%
AIM V.I. Basic Value Fund 0.25%
AIM V.I. Capital Appreciation Fund 0.25%
AIM V.I. Capital Development Fund 0.25%
AIM V.I. Core Equity Fund 0.25%
AIM V.I. Demographic Trends Fund 0.25%
AIM V.I. Diversified Dividend Fund 0.25%
AIM V.I. Diversified Income Fund 0.25%
AIM V.I. Dynamics Fund 0.25%
AIM V.I. Financial Services Fund 0.25%
AIM V.I. Global Equity Fund 0.25%
AIM V.I. Global Health Care Fund 0.25%
AIM V.I. Government Securities Fund 0.25%
AIM V.I. High Yield Fund 0.25%
AIM V.I. International Core Equity Fund 0.25%
AIM V.I. International Growth Fund 0.25%
AIM V.I. Large Cap Growth Fund 0.25%
AIM V.I. Leisure Fund 0.25%
AIM V.I. Mid Cap Core Equity Fund 0.25%
AIM V.I. Money Market Fund 0.25%
AIM V.I. Real Estate Fund 0.25%
AIM V.I. Small Cap Equity Fund 0.25%
AIM V.I. Small Company Growth Fund 0.25%
AIM V.I. Technology Fund 0.25%
AIM V.I. Utilities Fund 0.25%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: June 12, 2006
AIM VARIABLE INSURANCE FUNDS
(on behalf of its Series II Shares)
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary President
|
AMENDMENT NO. 10
TO
MASTER DISTRIBUTION PLAN
The Master Distribution Plan (the "Plan"), dated as of July 16, 2001, pursuant to Rule 12b-1, of AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to change the name of AIM V.I. Real Estate Fund to AIM V.I. Global Real Estate Fund and AIM V.I. Small Company Growth Fund to AIM V.I. Small Cap Growth Fund;
NOW THEREFORE, Schedule A of the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM VARIABLE INSURANCE FUNDS
(SERIES II SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) designated below, a Distribution Fee determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio.
DISTRIBUTION
PORTFOLIO: FEE:
---------- ------------
AIM V.I. Basic Balanced Fund 0.25%
AIM V.I. Basic Value Fund 0.25%
AIM V.I. Capital Appreciation Fund 0.25%
AIM V.I. Capital Development Fund 0.25%
AIM V.I. Core Equity Fund 0.25%
AIM V.I. Demographic Trends Fund 0.25%
AIM V.I. Diversified Dividend Fund 0.25%
AIM V.I. Diversified Income Fund 0.25%
AIM V.I. Dynamics Fund 0.25%
AIM V.I. Financial Services Fund 0.25%
AIM V.I. Global Equity Fund 0.25%
AIM V.I. Global Health Care Fund 0.25%
AIM V.I. Global Real Estate Fund 0.25%
AIM V.I. Government Securities Fund 0.25%
AIM V.I. High Yield Fund 0.25%
AIM V.I. International Core Equity Fund 0.25%
AIM V.I. International Growth Fund 0.25%
AIM V.I. Large Cap Growth Fund 0.25%
AIM V.I. Leisure Fund 0.25%
AIM V.I. Mid Cap Core Equity Fund 0.25%
AIM V.I. Money Market Fund 0.25%
AIM V.I. Small Cap Equity Fund 0.25%
|
AIM V.I. Small Cap Growth Fund 0.25% AIM V.I. Technology Fund 0.25% AIM V.I. Utilities Fund 0.25%" |
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: July 3, 2006
AIM VARIABLE INSURANCE FUNDS
(on behalf of its Series II Shares)
Attest: /s/ Jim Coppedge By: /s/ Robert H. Graham
----------------------------- ------------------------------------
Assistant Secretary President
|
AMENDMENT NO. 11
TO
MASTER DISTRIBUTION PLAN
The Master Distribution Plan (the "Plan"), dated as of July 16, 2001, pursuant to Rule 12b-1, of AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Demographic Trends Fund;
NOW THEREFORE, Schedule A of the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM VARIABLE INSURANCE FUNDS
(SERIES II SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) designated below, a Distribution Fee determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio.
DISTRIBUTION
PORTFOLIO: FEE:
---------- ------------
AIM V.I. Basic Balanced Fund 0.25%
AIM V.I. Basic Value Fund 0.25%
AIM V.I. Capital Appreciation Fund 0.25%
AIM V.I. Capital Development Fund 0.25%
AIM V.I. Core Equity Fund 0.25%
AIM V.I. Diversified Dividend Fund 0.25%
AIM V.I. Diversified Income Fund 0.25%
AIM V.I. Dynamics Fund 0.25%
AIM V.I. Financial Services Fund 0.25%
AIM V.I. Global Equity Fund 0.25%
AIM V.I. Global Health Care Fund 0.25%
AIM V.I. Global Real Estate Fund 0.25%
AIM V.I. Government Securities Fund 0.25%
AIM V.I. High Yield Fund 0.25%
AIM V.I. International Core Equity Fund 0.25%
AIM V.I. International Growth Fund 0.25%
AIM V.I. Large Cap Growth Fund 0.25%
AIM V.I. Leisure Fund 0.25%
AIM V.I. Mid Cap Core Equity Fund 0.25%
AIM V.I. Money Market Fund 0.25%
AIM V.I. Small Cap Equity Fund 0.25%
AIM V.I. Small Cap Growth Fund 0.25%
AIM V.I. Technology Fund 0.25%
AIM V.I. Utilities Fund 0.25%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: November 6, 2006
AIM VARIABLE INSURANCE FUNDS
(on behalf of its Series II Shares)
Attest: /s/ Jim Coppedge By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
AMENDMENT NO. 12
TO
MASTER DISTRIBUTION PLAN
The Master Distribution Plan (the "Plan"), dated as of July 16, 2001, pursuant to Rule 12b-1, of AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Diversified Dividend Fund, AIM V.I. Global Equity Fund and AIM V.I. International Core Equity Fund;
NOW THEREFORE, Schedule A of the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM VARIABLE INSURANCE FUNDS
(SERIES II SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) designated below, a Distribution Fee determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio.
DISTRIBUTION
PORTFOLIO: FEE:
---------- ------------
AIM V.I. Basic Balanced Fund 0.25%
AIM V.I. Basic Value Fund 0.25%
AIM V.I. Capital Appreciation Fund 0.25%
AIM V.I. Capital Development Fund 0.25%
AIM V.I. Core Equity Fund 0.25%
AIM V.I. Diversified Income Fund 0.25%
AIM V.I. Dynamics Fund 0.25%
AIM V.I. Financial Services Fund 0.25%
AIM V.I. Global Health Care Fund 0.25%
AIM V.I. Global Real Estate Fund 0.25%
AIM V.I. Government Securities Fund 0.25%
AIM V.I. High Yield Fund 0.25%
AIM V.I. International Growth Fund 0.25%
AIM V.I. Large Cap Growth Fund 0.25%
AIM V.I. Leisure Fund 0.25%
AIM V.I. Mid Cap Core Equity Fund 0.25%
AIM V.I. Money Market Fund 0.25%
AIM V.I. Small Cap Equity Fund 0.25%
AIM V.I. Small Cap Growth Fund 0.25%
AIM V.I. Technology Fund 0.25%
AIM V.I. Utilities Fund 0.25%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: December 21, 2006
AIM VARIABLE INSURANCE FUNDS
(on behalf of its Series II Shares)
Attest: /s/ Stephen R. Rimes By: /s/ Philip A. Taylor
----------------------------- ------------------------------------
Assistant Secretary Philip A. Taylor
President
|
AMENDMENT NO. 13
TO
MASTER DISTRIBUTION PLAN
The Master Distribution Plan (the "Plan"), dated as of July 16, 2001, pursuant to Rule 12b-1, of AIM Variable Insurance Funds, a Delaware statutory trust, is hereby amended as follows:
WHEREAS, the parties desire to amend the Agreement to remove AIM V.I. Small Cap Growth Fund;
NOW THEREFORE, Schedule A of the Plan is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION PLAN
OF
AIM VARIABLE INSURANCE FUNDS
(SERIES II SHARES)
(DISTRIBUTION FEE)
The Fund shall pay the Distributor as full compensation for all services rendered and all facilities furnished under the Distribution Plan for each Portfolio (or Class thereof) designated below, a Distribution Fee determined by applying the annual rate set forth below as to each Portfolio (or Class thereof) to the average daily net assets of the Portfolio (or Class thereof) for the plan year, computed in a manner used for the determination of the offering price of shares of the Portfolio.
DISTRIBUTION
PORTFOLIO: FEE:
---------- ------------
AIM V.I. Basic Balanced Fund 0.25%
AIM V.I. Basic Value Fund 0.25%
AIM V.I. Capital Appreciation Fund 0.25%
AIM V.I. Capital Development Fund 0.25%
AIM V.I. Core Equity Fund 0.25%
AIM V.I. Diversified Income Fund 0.25%
AIM V.I. Dynamics Fund 0.25%
AIM V.I. Financial Services Fund 0.25%
AIM V.I. Global Health Care Fund 0.25%
AIM V.I. Global Real Estate Fund 0.25%
AIM V.I. Government Securities Fund 0.25%
AIM V.I. High Yield Fund 0.25%
AIM V.I. International Growth Fund 0.25%
AIM V.I. Large Cap Growth Fund 0.25%
AIM V.I. Leisure Fund 0.25%
AIM V.I. Mid Cap Core Equity Fund 0.25%
AIM V.I. Money Market Fund 0.25%
AIM V.I. Small Cap Equity Fund 0.25%
AIM V.I. Technology Fund 0.25%
AIM V.I. Utilities Fund 0.25%"
|
All other terms and provisions of the Plan not amended herein shall remain in full force and effect.
Dated: May 1, 2007
AIM VARIABLE INSURANCE FUNDS
(on behalf of its Series II Shares)
Attest: By:
----------------------------- ------------------------------------
Assistant Secretary John M. Zerr
Senior Vice President
|
AIM FUNDS
A I M MANAGEMENT GROUP INC.
CODE OF ETHICS
(ORIGINALLY ADOPTED MAY 1, 1981)
(AMENDED EFFECTIVE FEBRUARY 16, 2006)
A I M Management Group Inc., A I M Advisors, Inc., A I M Capital Management, Inc., AIM Private Asset Management, Inc. ("APAM"), A I M Distributors, Inc., Fund Management Company and all of their wholly owned and indirect subsidiaries (together, "AIM") have a fiduciary relationship with respect to each portfolio under management. The interests of Clients and of the shareholders of AIM's investment company Clients take precedence over the personal interests of Covered Persons (defined below). Capitalized terms used herein are defined at the end of this document.
This Code of Ethics ("the Code") applies to all:
- Employees of AIM;
- Employees of any AIM affiliates that, in connection with their duties, obtain or are determined by the Advisory Compliance Group to have access to any information concerning recommendations being made by any AIM entity to any of its Clients ("access persons"); and
- AIM Funds Trustees.
All individuals covered by the Code are referred to as "Covered Persons."
I. STATEMENT OF FIDUCIARY PRINCIPLES
The following fiduciary principles govern Covered Persons.
- the interests of Clients and shareholders of investment company Clients must be placed first at all times and Covered Persons must not take inappropriate advantage of their positions; and
- all personal securities transactions must be conducted consistent with this Code and in a manner to avoid any abuse of an individual's position of trust and responsibility. This Code is our effort to address conflicts of interest that may arise in the ordinary course of our business.
This Code does not attempt to identify all possible conflicts of interest or to ensure literal compliance with each of its specific provisions. It does not necessarily shield Covered Persons from liability for personal trading or other conduct that violates a fiduciary duty to Clients and shareholders of investment company Clients.
Section 5 of this Code generally addresses sanctions for violations of this Code; certain sections of this Code specifically address sanctions that apply to violations of those sections.
II. LIMITS ON PERSONAL INVESTING
A. PERSONAL INVESTING
1. Preclearance of Personal Security Transactions. All Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) must pre-clear all personal security transactions involving Covered Securities with the Advisory Compliance Group using the automated request system. Covered Securities include all investments that can be made by an AIM entity for its Clients, including stocks, bonds, municipal bonds, short sales, and any derivative such as options. Covered Securities do not include shares of money market funds, government securities, certificates of deposit or shares of mutual funds not advised by AIM. If you are unclear about whether a proposed transaction is a Covered Security, contact the Advisory Compliance Group via email at CodeofEthicsHouston@aiminvestments.com or phone prior to executing the transaction.
- ANY APPROVAL GRANTED TO A COVERED PERSON TO EXECUTE A PERSONAL SECURITY TRANSACTION IS VALID FOR THAT BUSINESS DAY ONLY.
The automated review system will review personal trade requests from Covered Persons based on the following considerations:
- BLACK-OUT PERIOD. AIM does not permit Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) to trade in a Covered Security if a Client has executed a transaction in the same security within the last two days or if there is an order currently with the trading desk. For example, if a Client trades on a Monday, Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) may not be cleared until Thursday.
- INVESTMENT PERSONNEL. Investment Personnel may not buy or sell a Covered Security seven days before or after a Client trades in that security.
- DEMINIMUS EXCEPTIONS. The Advisory Compliance Group will apply the following deminimis exceptions in granting preclearance when a Client has recently traded or is trading in a security involved in a Covered Person's proposed personal transaction:
- Equity deminimis exception. If you do not have knowledge of trading activity in a particular equity security, you may execute up to 500 shares of such security in a rolling 30 day period provided the issuer of such security is included in the Russell 1000 Index. The deminimis exemption is not available to Covered Persons that are assigned to the Investments, Portfolio Administration, Fund Administration, and IT departments.
- Fixed income deminimis exception. If you do not have knowledge of trading activity in a particular fixed income security you may execute up to $100,000 of par value of such security. The deminimis exemption is not available to Covered Persons that are assigned to the Investments, Portfolio Administration, Fund Administration, and IT departments.
The automated review system will confirm that there is no activity currently on the trading desk for the security involved in the proposed personal transaction and check the portfolio accounting system to verify that there have been no transactions for the requested security within the last two trading days. For IT and Portfolio Administration personnel, the Advisory Compliance Group will also check the trading activity of affiliates for which such personnel have access to information to verify that there have been no transactions for the requested security within the last two trading days. The Advisory Compliance Group will notify the Covered Person of the approval or denial of the proposed personal transaction. The approval of a personal securities transaction is only valid for that business day. If a Covered Person does not execute the proposed securities transaction on the date requested, the Covered Person must resubmit the request again the next day for approval.
Any failure to preclear transactions is a violation of the Code and will be subject to the following potential sanctions:
- A Letter of Education will be provided to any Covered Person whose failure to preclear is considered immaterial or inadvertent.
- Repeat violations may result in in-person training, probation, withdrawal of personal trading privileges or termination, depending on the nature and severity of the violations.
2. Prohibition on Short-Term Trading Profits. Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) are prohibited from trading in a Covered Security within 60 days at a profit. If a Covered Person (other than AIM Funds Independent Trustees without knowledge of investment activity) trades a Covered Security within the 60 day time frame, any profit from the trade will be disgorged to a charity of AIM's choice. AIM will issue a letter of education to the Covered Person for transactions within the 60 day period that do not generate a profit.
3. Initial Public Offerings. Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) are prohibited from acquiring any security in an equity Initial Public Offering. Exceptions will only be granted in unusual circumstances and must be recommended by the Advisory Compliance Group and approved by the Chief Compliance Officer or General Counsel (or designee) and the Chief Investment Officer.
4. Brokerage Accounts. Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) may only maintain brokerage accounts with
- discount broker-dealers that provide electronic feeds of confirms and monthly statements directly to the Advisory Compliance Group,
- AIM Broker-dealers, or
- full service broker-dealers.
As a result, Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) must move any existing brokerage accounts that do not comply with this provision as of the date of this amended Code to appropriate broker-dealers within six months of the date of this amended Code. Effective 6 months after the date of this amended Code, Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) may not own shares of AIM Funds that are held at a non-AIM Broker-dealer unless legally required. All Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) must arrange for their broker-dealers to forward to the Advisory Compliance Group on a timely basis, duplicate confirmations of all personal securities transactions and copies of periodic statements for all brokerage accounts, preferably in an electronic format.
5. Reporting Requirements.
a. INITIAL HOLDINGS REPORT. All Covered Persons (other than AIM Funds Independent Trustees) must provide to the Advisory Compliance Group an initial holdings report no later than 10 days after the person becomes a Covered Person (the information must be current within 45 days of the date the person becomes a Covered Person). The initial holdings report shall include the following information:
- The title, number of shares (for equities) and the principal amount (for debt securities) in which the person has direct or indirect Beneficial Ownership;
- The name of any broker-dealer or bank with which the person maintains an account in which any securities are held for the direct or indirect benefit of the person; and
- The date that the report is submitted by the person.
Independent Trustees of the AIM Funds do not need to make an initial holdings report.
b. QUARTERLY TRANSACTION REPORTS. All Covered Persons (other than AIM Funds Independent Trustees) must report, no later than 30 days after the end of each calendar quarter, the following information for all transactions in a Covered Security in which a Covered Person has a direct or indirect beneficial interest: This includes any Covered Securities held in a 401(k) or other retirement vehicle.
- The date of all transactions in that quarter, the security name, the number of shares (for equity securities); or the interest rate and maturity date (if applicable) and the principal amount (for debt securities) for each Covered Security;
- The nature of the transaction (buy, sell, etc.);
- The price of the Covered Security at which the transaction was executed;
- The name of the broker-dealer or bank executing the transaction; and
- The date that the report is submitted to the Advisory Compliance Group.
ALL COVERED PERSONS (OTHER THAN AIM FUNDS INDEPENDENT TRUSTEES) MUST SUBMIT A QUARTERLY REPORT REGARDLESS OF WHETHER THEY HAVE EXECUTED TRANSACTIONS DURING THE QUARTER OR NOT. If a Covered Person did not execute transactions subject to reporting requirements during a quarter, the report must include a representation to that effect. Covered Persons need not include transactions made through an Automatic Investment Plan in the quarterly transaction report.
Additionally, Covered Persons (other than AIM Funds Independent Trustees) must report information on any new brokerage account established by the Covered Person during the quarter for the direct or indirect benefit of the Covered Person (including Covered Securities held in a 401(k) or other retirement vehicle) including:
- The date the account was established;
- The name of the broker-dealer or bank; and
- The date that the report is submitted to the Advisory Compliance Group.
An Independent Trustee of an AIM Fund must report a transaction in a Covered Security in a quarterly transaction report if the trustee, at the time of that transaction, knew or, in the ordinary course of fulfilling his/her duties as a trustee of the AIM Fund, should have known that, during the 15-day period immediately before or after the date of the transaction by the trustee, the Covered Security was purchased or sold by the AIM Fund or was being considered by the AIM Fund or AIM for purchase or sale by the AIM Fund or another Client.
The Advisory Compliance Group may identify transactions by Covered Persons that technically comply with the Code for review based on any pattern of activity that has an appearance of a conflict of interest.
c. ANNUAL HOLDINGS REPORTS. All Covered Persons (other than AIM Funds Independent Trustees) must report annually the following information, which must
be current within 45 days of the date the report is submitted to the Advisory Compliance Group:
- The security and the number of shares (for equities) or the interest rate and maturity date (if applicable) and principal amount (for debt securities) for each Covered Security in which the Covered Person has any direct or indirect Beneficial Ownership;
- The name of the broker-dealer or bank with or through which the transaction was effected; and
- The date that the report is submitted by the Covered Person to the Advisory Compliance Group.
Managed Accounts. Covered Persons must make an annual report with respect to transactions held in an account over which the Covered Person has granted exclusive discretion to an external money manager. Covered Persons must receive approval from the Advisory Compliance Group to establish and maintain such an account. Covered Persons are not required to pre-clear transactions or submit quarterly reports for such managed accounts; however, Covered Persons with these types of accounts must provide an annual certification that they do not currently and have not in the past exercised direct or indirect Control over the managed accounts.
Annual Certification. All Covered Persons (other than AIM Funds Independent Trustees) must certify annually that they have read and understand the Code and recognize that they are subject to the Code. In addition, all Covered Persons must certify annually that they have complied with the requirements of the Code and that they have disclosed or reported all personal securities transactions required to be disclosed or reported under the Code. The AIM Funds Trustees, including the Independent Trustees, will review and approve the Code annually.
6. Private Securities Transactions. Covered Persons (other than AIM Funds Independent Trustees without knowledge of investment activity) may not engage in a Private Securities Transaction without first giving the Advisory Compliance Group a detailed written notification describing the transaction and indicating whether or not they will receive compensation and obtaining prior written permission from the Advisory Compliance Group. Investment Personnel who have been authorized to acquire securities of an issuer in a Private Securities Transaction must disclose that investment to the Advisory Compliance Group and the Chief Investment Officer of AIM when they are involved in a Client's subsequent consideration of an investment in the same issuer. The Client's decision to purchase such securities must be independently reviewed by Investment Personnel with no personal interest in that issuer.
7. Excessive Short Term Trading in Funds. Employees are prohibited from excessive short term trading of any mutual fund advised by AIM and are subject to various limitations on the number of transactions as indicated in the respective prospectus.
B. LIMITATIONS ON OTHER PERSONAL ACTIVITIES
1. Board of Directorships. Investment Personnel will not serve on the boards of directors of either a publicly traded company or any other entity without prior written permission from AIM's Advisory Compliance Group. If the directorship is authorized, the individual will be isolated from others making investment decisions concerning the particular company or entity as appropriate.
2. Gift Policy. AIM Employees may not give or accept gifts or invitations of entertainment that may be considered excessive either in dollar value or frequency to avoid the appearance of any potential conflict of interest. Under no circumstances may any Employees give or accept cash or any possible cash equivalent from a broker or vendor.
- INVITATIONS. AIM Employees must report entertainment with the Advisory Compliance Group on a monthly basis. The requirement to report monthly entertainment includes dinners or any other event with the broker or vendor in attendance.
Examples of invitations that may be excessive in value include Super Bowl tickets, tickets to All-Star games, hunting trips, or ski trips. An occasional ticket to a sporting event, golf outing or concert when accompanied by the broker or vendor may not be excessive. In all cases, entertainment must be reported to the Advisory Compliance Group.
Additionally, AIM Employees may not reimburse brokers or vendors for the cost of tickets that would be considered excessive or for travel related expenses without approval of the Advisory Compliance Group.
- GIFTS. AIM Employees are not required to pre-clear gifts. All gifts given or received must be reported to the Advisory Compliance Group on a monthly basis. AIM Employees are prohibited from accepting the following:
- single gifts valued in excess of $100; and
- gifts from one person or firm valued in excess of $100 during a calendar year period.
AIM Employees must report all entertainment (breakfast and lunches in the office need not be reported), including dinners with the broker/vendor in attendance, and gifts to the Advisory Compliance Group on a monthly basis.
III. REPORTING OF POTENTIAL COMPLIANCE ISSUES
AIM has created several channels for Employees to raise compliance issues and concerns on a confidential basis. An Employee should first discuss a compliance issue with their supervisor, department head or with anyone in the Legal and Compliance Department. Human Resources
matters should be directed to the Human Resources Department, an additional anonymous vehicle for reporting such concerns.
In the event that an Employee does not feel comfortable discussing compliance issues through normal channels, AIM has hired an Ombudsman to serve as a resource to Employees. Employees may convey concerns about business matters they believe implicate matters of ethics or questionable practices to the Ombudsman at 1-888-388-2095. Employees are encouraged to report these questionable practices so that AIM, the Ombudsman or the Compliance Department has an opportunity to address and resolve these issues before they become a more significant regulatory issue.
AMVESCAP PLC and the AIM Funds Boards of Trustees have set up a 1-800 number for Employees to raise any concerns on an anonymous basis. This 1-800 number, 1-866-297-3627, appears on AIM's website. An outside vendor transcribes the calls received on the 1-800 number and forwards the transcripts to the chairman of the Audit Committee of the AIM Funds Boards of Trustees, AIM's General Counsel, the Director of AIM's Fund Administration Group, and to AMVESCAP PLC.
IV. ADMINISTRATION OF THE CODE OF ETHICS
AIM will use reasonable due diligence and institute procedures reasonably necessary to prevent violations of this Code.
No less frequently than annually, AIM will furnish to the Boards of Trustees of the AIM Funds, or such committee as it may designate, a written report that:
- describes significant issues arising under the Code since the last report to the Boards of Trustees, including information about material violations of the Code and sanctions imposed in response to material violations; and
- certifies that the AIM Funds have adopted procedures reasonably designed to prevent Covered Persons from violating the Code.
V. SANCTIONS
Upon discovering a material violation of the Code, the Advisory Compliance Group will notify AIM's Chief Compliance Officer (CCO). The CCO will notify the Internal Compliance Controls Committee of any material violations at the next regularly scheduled meeting.
The Advisory Compliance Group will issue a letter of education to the Covered Persons involved in violations of the Code that are determined to be inadvertent or immaterial.
AIM may impose additional sanctions in the event of repeated violations or violations that are determined to be material or not inadvertent, including disgorgement of profits, a letter of censure or suspension, or termination of employment.
VI. EXCEPTIONS TO THE CODE
AIM's Chief Compliance Officer (or designee), together with either one of AIM's General Counsel, Chief Investment Officer, Chief Executive Officer or Chairman, may grant an exception to any provision in this Code and will report all such exceptions at the next Internal Controls Committee meeting.
VII. DEFINITIONS
- AIM Broker-dealer means either A I M Distributors, Inc. or Fund Management Company;
- Automatic Investment Plan means a program in which regular purchases or sales are made automatically in or from investment accounts in accordance with a predetermined schedule and allocation, including dividend reinvestment plans;
- Beneficial Ownership has the same meaning as Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended ("the '34 Act"). To have a beneficial interest, Covered Persons must have a "direct or indirect pecuniary interest," which is the opportunity to profit directly or indirectly from a transaction in securities. Thus a Covered Person may have Beneficial Ownership in securities held by members of their immediate family sharing the same household (i.e. a spouse and children) or by certain partnerships, trusts, corporations, or other arrangements;
- Client means any account for which AIM is either the adviser or sub-adviser;
- Control has the same meaning as under Section 2(a)(9) of the Investment Company Act, as amended (the "Investment Company Act");
- Covered Person means any full or part time Employee of AIM or the AIM Funds,; any full or part time Employee of any AIM affiliates that, in connection with his or her duties, obtains or has access to any information concerning recommendations being made by any AIM entity to any of its Clients ("access persons"); and any interested trustee or director of the AIM Funds;
- Covered Security has the same meaning as Section 2 (a)(36) of the Investment Company Act and includes any AIM Fund or other Client that is advised or sub-advised by AIM. An exchange traded funds (ETF) is considered a Covered Security. A Covered Security does not include the following:
- Direct obligations of the Government of the United States or its agencies;
- Bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements;
- Any open-end mutual fund not advised or sub-advised by AIM; and
- AMVESCAP PLC stock because it is subject to the provisions of AMVESCAP PLC's Code of Conduct.
- Employee means any full or part time Employee of AIM or the AIM Funds, including any consultant or contractor who AIM's Compliance Department determines to have access to information regarding AIM's trading activity;
- Investment Personnel means any Employee who, in connection with his/her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by the Client; and
- IT Personnel means any Employee that is designated to work in the Information Technology Department; and
- Fund Account Personnel means any Employee that is designated to work in either of the Fund Administration or Portfolio Administration Groups;
- Independent Trustee means a trustee of a fund who is not an "interested person" of the fund within the meaning of Section 2(a)(19) of the Investment Company Act;
- Initial Public Offering means an offering of securities registered under the Securities Act of 1933, as amended, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Section 13 or 15(d) of the '34 Act;
- Private Securities Transaction means any securities transaction outside the regular course, or scope, of an associated person's employment with a member, including, though not limited to, new offerings of securities which are not registered with the Securities and Exchange Commission, provided however that transactions subject to the notification requirements of Rule 3050 of the NASD's Conduct Rules, transactions among immediate family members (as defined in the interpretation of the Board of Governors on free-riding and withholding) for which no associated person receives any selling compensation, and personal transactions in investment company and variable annuity securities shall be excluded.
(INVESCO LOGO)
CODE OF ETHICS
May 19, 2006
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TABLE OF CONTENTS
INTRODUCTION............................................................... 2 DEFINITIONS................................................................ 2 REPORTING OF VIOLATIONS.................................................... 4 SELF-COMPLIANCE............................................................ 4 PRINCIPLES GOVERNING PERSONAL INVESTMENTS.................................. 4 INVESTMENT RESTRICTIONS.................................................... 5 - All Employees - Access Employees PRE-CLEARANCE OF TRADES.................................................... 7 - All Employees - Access Employees NEW HIRE HOLDINGS REPORT................................................... 9 - All Employees - Access Employees QUARTERLY SECURITIES TRANSACTION REPORT.................................... 10 - All Employees - Access Employees ANNUAL HOLDINGS REPORT..................................................... 11 - All Employees - Access Employees REPORTING OPENING/CLOSING OF ACCOUNTS...................................... 13 ADMINISTRATIVE PROCEDURES.................................................. 13 OUTSIDE ACTIVITIES......................................................... 15 GIFTS...................................................................... 15 AMVESCAP CODE OF CONDUCT................................................... 15 APPENDICES................................................................. 16 A. Pre-clearance Officers B. Self-Compliance Checklist C. AMVESCAP Pre-clearance Guide D. Pre-clearance Report E. New Hire Holdings/New Account Opening/Annual Holdings Report F. Quarterly Securities Transaction Report G. Compliance Questionnaire H. Outside Activities Report |
Code of Ethics
INTRODUCTION
INVESCO Institutional (N.A.), Inc., its subsidiaries, and INVESCO Global Asset Management (N.A.), Inc. ("INVESCO") understand that it is a privilege to manage client assets. As investment managers, we are fiduciaries to our clients. And, as fiduciaries, we must always seek to put our clients' best interests first, avoiding any appearance of impropriety arising from conflicts of interest.
The Code of Ethics ("Code") has been adopted by INVESCO North America's Risk Management Committee ("RMC") and applies to all directors, officers and employees of INVESCO. The Code covers personal securities Transactions by INVESCO directors, officers, employees, members of their immediate families, persons who reside with them and relatives who are supported by them.
Administration of the Code is the responsibility of our Compliance Officers. Enforcement of the Code is the responsibility of the RMC. Our Compliance Officers are responsible for reviewing and investigating any reported or suspected violations of the Code and reporting their findings to the RMC. If the investigation discloses that a violation has occurred, the RMC will determine appropriate actions and sanctions, which may include termination of employment.
The RMC believes that compliance with the Code will help prevent actual or perceived conflicts of interest caused by personal securities Transactions. The RMC also believes that the Code is reasonable and that it is not overly restrictive.
From time to time, the Code may be revised. If you have any questions regarding the Code, please contact one of our Compliance Officers.
DEFINITIONS
Whenever used in the Code, and unless the context indicates otherwise, the following terms have the following meanings:
1. "Employee" means every officer, director or person employed by INVESCO.
2. "Access Employees" include:
a. all INVESCO Employees with access to nonpublic information regarding any clients' purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any client, including "Reportable Mutual Funds," defined below.
b. all INVESCO Employees involved in making securities recommendations to clients, or who have access to such recommendations that are nonpublic.
c. all INVESCO directors and officers.
The Chief Compliance Officer shall have final authority to determine who is an Access Employee, Non-Access Employee, or Exempt Employee. Employees will be advised as to their status.
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3. "Non-Access Employees" include all Employees who are not Access Employees and are not Exempt Employees.
4. "Exempt Employees" include certain non-resident, temporary and part-time employees and consultants who are notified by a Compliance Officer that they are exempt from the Code.
5. "Pre-clearance Officer" means Employees designated by the Chief Compliance Officer to pre-clear personal securities Transactions (see Appendix A).
6. "Restricted List" means the list that the investment department provides to the Compliance Department, which includes those Securities that are being purchased or sold for client accounts and Securities that are prohibited from purchase or sale by client accounts or Employees for various reasons (e.g., large concentrated ownership positions or possession of material, non-public information).
7. "Reportable Mutual Fund" means any registered investment company (mutual
fund) that INVESCO advises or sub-advises. Reportable Mutual Funds will be
posted in the Legal and Compliance section of the INVESCO Website:
http://atlas.amvescap.com/usinst/reportable_mutual_funds.pdf .
8. "Exempt Securities." means the Securities listed below. "Security" or "non-exempt Security" means ALL Securities EXCEPT those listed below. Note that exchange traded funds (ETFs) are no longer classified as exempt securities.
a. shares of registered open-end investment companies (mutual funds) except for Reportable Mutual Funds (shown on the INVESCO Website);
b. direct obligations of the U.S. Government (but not its agencies or instrumentalities, e.g., FNMA or GNMA, etc.);
c. bankers' acceptances;
d. bank certificates of deposit;
e. commercial paper;
f. money market instruments, including repurchase agreements and other high-quality short-term debt instruments;
g. Shares issued by unit investment trusts that are invested exclusively in one or more open-end funds, none of which are Reportable Mutual Funds.
9. "Accounts," "Securities," "Investments," and "Transactions" refer to:
a. an Employee's own account, securities, investments or transactions;
b. an account, securities, investments, or transactions in which an Employee has a beneficial interest and can influence investment decisions;
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c. a personal account, security, investment, or transaction of a member of the Employee's household; or over which an Employee exercises investment discretion in a capacity other than as an Employee.
10. "Transactions" shall include transfers by gift.
REPORTING OF VIOLATIONS
All INVESCO employees are required to comply with applicable state and federal securities laws and regulations and this Code. Employees shall promptly report any violations of such laws or regulations or any provision of this Code of which they become aware to INVESCO's Chief Compliance Officer or his/her designee.
SELF-COMPLIANCE
SELF-COMPLIANCE CHECKLIST - ALL EMPLOYEES
Since many Transactions do not require pre-clearance through a Compliance Officer, Employees receive no advance warning or other compliance alert reminding them that a particular Transaction is prohibited or that other restrictions apply. Although Compliance Officers will monitor compliance after-the-fact, Employees are charged with responsibility for refraining from prohibited Transactions and for complying with the provisions described in this code. Employees will be held responsible for their own self-compliance with these restrictions. Employees should use the Self Compliance Checklist found at Appendix B before making personal trades and before recommending trades to clients that may involve conflicts of interest.
PRINCIPLES GOVERNING PERSONAL INVESTMENTS
CONFLICTS OF INTEREST - PRIORITY OF CLIENT INTERESTS
Employees must give priority to the interests of INVESCO clients over their own interests in making personal investments. No Employee may knowingly buy, sell or dispose of a personal Securities investment that would favor, or appear to favor his or her interests above the interests of INVESCO clients.
Unless the answer to the below questions is a confident "NO", an employee should not make an investment.
- "Will the investment cause my economic interest to conflict, or appear to conflict, with the interests of an INVESCO client either now or at some later time?"
- "Would I be embarrassed if The Wall Street Journal had an article regarding my personal investment?"
- "Would I be embarrassed to discuss the matter with my mother or father?"
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DISCLOSURE OF CONFLICTS
Before an Employee engages in a personal transaction involving a potential conflict of interest with a client, such Access Employee will disclose to a Compliance Officer all relevant details of the possible conflict or appearance of conflict. Likewise, before an Access Employee recommends, directs, executes or otherwise participates in recommending or executing any Security transaction involving an INVESCO client, such Access Employee will disclose to a Compliance Officer all relevant details concerning any possible conflict, or appearance of conflict, between his or her previously existing personal investments and the interests of an INVESCO client.
For example, the capitalization and trading volume of a Security owned by an Access Employee may be relevant in determining whether there is a possible conflict of interest if that Access Employee participates in a decision to buy or sell that Security for an INVESCO client. Moreover, an Access Employee is expected to use common sense and professional judgment to determine if he or she should disclose personal information as a possible basis for conflict of interest.
USE OF INVESCO INFLUENCE OR MATERIAL NON-PUBLIC INFORMATION
No Employee will use the influence of his or her position to obtain a personal trading advantage. Likewise, no Employee will trade or recommend trading in Securities on the basis of material non-public information. Employees are subject to the provisions of INVESCO's Policies and Procedures regarding Insider Trading Activity.
NO RECOMMENDATIONS TO CLIENTS OF PRIVATE PLACEMENTS PERSONALLY OWNED
In the event that an Employee is granted permission to make a personal investment in a non-public Security or Securities obtained pursuant to a private placement, that Employee will not participate in the consideration of whether clients should invest in that issuer's public or non-public Securities. Such consideration will be subject to independent review by investment personnel with no personal investment in that issuer.
INVESTMENT RESTRICTIONS
ALL EMPLOYEES
INITIAL PUBLIC OFFERINGS
No Employee will purchase any Security in an initial public offering.
AMVESCAP SECURITIES
No employee may effect short sales of AMVESCAP Securities.
Transactions in AMVESCAP Securities are subject to pre-clearance regardless of the size of the Transaction, and are subject to "black-out" periods established by AMVESCAP and holding
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periods prescribed under the terms of the agreement or program under which they were received. See Appendix C.
PARALLEL INVESTING NOT RESTRICTED
Subject to the provisions of this Code, Employees may own the same Securities as those acquired by INVESCO for its clients.
ACCESS EMPLOYEES
BLACK-OUT PERIOD - CERTAIN ACCESS EMPLOYEES
Access Employees who are portfolio managers, and analysts supporting the portfolio manager are prohibited from knowingly buying or selling a Security within seven (7) calendar days before and seven (7) calendar days after a client that he or she manages trades in that Security. However, in the case of a Program Trade or Blind Principal Bid, which is determined to have resulted from an event rather than a discretionary decision, the portfolio manager and analysts supporting the portfolio manager whose clients purchased or sold Securities in the Program Trade or Blind Principal Bid are not restricted to the seven (7) calendar day prohibition mentioned above, but are restricted from buying within one (1) calendar day before and one (1) calendar day after a client.
SHORT SALES - ALL ACCESS EMPLOYEES
Access Employees may not effect short sales of Securities in their personal accounts if the clients for whom funds they manage are long these Securities.
SHORT-TERM TRADING - ALL ACCESS EMPLOYEES
The RMC believes that Access Employees should not profit in the purchase and sale, or short sale and cover of the same Security within 60 calendar days. While the RMC recognizes that short term trading strategies are generally well within the parameters of existing legal requirements, a general prohibition on short term trading profits (i.e., the purchase and sale, or short sale and cover of the same or equivalent Securities within 60 calendar days) can serve as an important safeguard device against allegations of conflicts of interest (e.g., front running client transactions). Accordingly, the prohibition against short term trading profits is designed to minimize the possibility that Access Employees will capitalize inappropriately on the market impact of trades involving client transactions to which they may be privy.
The RMC believes that this policy will help to reduce allegations of conflicts of interest. In certain circumstances, and as determined on a case-by-case basis, exceptions may be allowed at the discretion of the Chief Compliance Officer when no abuse is involved and the fairness of the situation strongly supports an exemption.
Access Employees who breach the above policies may be subject to certain sanctions including, but not limited to, reprimand, disgorgement of profits, suspension and termination of employment.
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Short-term trading profits obtained in an Account from the exercise of employee stock options and the subsequent sale of the underlying stock are exempt from this prohibition and are, instead, viewed as a form of employee compensation.
RESTRICTED LIST SECURITIES - ALL ACCESS EMPLOYEES
Access Employees requesting pre-clearance to buy or sell a security on the Restricted List may be restricted from executing the trade because of potential conflicts of interest.
PRE-CLEARANCE OF TRADES
ALL EMPLOYEES
AMVESCAP SHARES
Access and Non-access employees shall pre-clear purchases, sales, or other acquisition or disposal of AMVESCAP shares. Charitable contributions and any other transactions in AMVESCAP shares by gift must be pre-cleared. See Appendix C.
PRIVATE PLACEMENTS
Access and Non-access employees shall pre-clear purchases, sales, or other acquisition or disposal of Private Placement Units.
CHARITABLE CONTRIBUTIONS AND GIFTS
The pre-clearance provisions described in the "Pre-clearance of Trades" section of this Code apply to charitable contributions of Securities and other Securities Transactions by gift the same as if such transactions were purchases and sales.
EXCEPTIONS TO PRE-CLEARANCE REQUIREMENTS
It is not necessary to obtain pre-clearance for the following investments:
- Transactions in Exempt Securities
- Transactions in Reportable Mutual Funds
- Transactions made by an independent fiduciary (i.e., a discretionary account managed by persons who are not Access Employees) for an Account.
- Securities PURCHASED through an automatic deduction program where someone other than the Access Employee controls the timing of purchases. (However, SALES of these Securities are subject to the pre-clearance procedures)
- PURCHASES that are part of an automatic dividend reinvestment plan, and purchases effected upon the exercise of rights issued by an issuer pro-rata to all holders of a class of its
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Securities, to the extent such rights were acquired from such issuer. (However, SALES of these Securities are subject to the pre-clearance procedures)
ACCESS EMPLOYEES
SECURITIES TRANSACTIONS EXCEEDING $100,000
Access Employees are required to pre-clear all Transactions exceeding $100,000 involving equity and fixed income Securities, options, or futures.
TWO OR MORE SECURITIES TRANSACTIONS WITHIN FIVE BUSINESS DAYS
Access Employees effecting Transactions in the same equity or fixed income Security within five business days of the last transaction in that Security must obtain pre-clearance approval regardless of the size of the transaction. Likewise, Access Employees effecting Transactions in the same issue, whether in a stock, or a derivative of that stock, such as an option or a future on that specific stock, within five business days of the last transaction in that same stock, future or option must obtain pre-clearance approval regardless of the size of the transaction.
RECAP: PRE-CLEAR OPTIONS AND FUTURES EXCEEDING $100,000
Access Employees are required to pre-clear all Transactions exceeding $100,000 of notional value involving options or futures.
OTHER PRE-CLEARANCE ISSUES
RECAP: WHEN NO DE MINIMUS APPLIES
Pre-clearance is required regardless of the size of the transaction:
- for investments in AMVESCAP
- for Transactions in non-public securities or private placements
- for Access Persons making two or more Transactions in the same stock (or in a derivative of the same stock, such as options or futures on such stocks) within five business days of one another.
EVALUATION AND RESPONSE TO REQUEST FOR PRE-CLEARANCE
A Pre-clearance Officer will evaluate a request for pre-clearance and consider whether the transaction would violate any provisions of the Code. A Pre-clearance Officer's response to the request for pre-clearance will include:
- Making a telephone call to or advising the Employee by email that his or her request is approved or denied, and
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- Filing a copy of the pre-clearance form with the Compliance Department (a sample copy of which is included as Appendix D).
TIME FOR WHICH A TRANSACTION IS APPROVED
An Employee who is required to obtain pre-clearance may authorize his or her broker to execute a transaction only on the day on which approval for that transaction is given. If the transaction is not completed on that day, the Employee must again obtain pre-clearance for the transaction on each day that the Employee would like to effect the transaction.
NEW HIRE HOLDINGS REPORT
ALL EMPLOYEES
REPORTING AMVESCAP SECURITIES
Access and Non-Access Employees must submit a New Hire Holdings Report if they own AMVESCAP securities. Time periods, and report forms described below for Access Employees apply for reporting these Transactions.
REPORTING PRIVATE PLACEMENTS
Access and Non-Access Employees must submit a New Hire Holdings Report if they own non-public securities. Time periods, and report forms described below for Access Employees apply for reporting these Transactions.
ACCESS EMPLOYEES
GENERALLY
Within ten (10) calendar days of their employment start date, Access Employees must complete and submit the New Hire Holdings Report (see Appendix E) which describes brokerage account information and all Securities holdings as of any date within forty-five (45) days prior to the date of hire. Exempt Securities need not be included on the New Hire Holdings Report. Access Employees who fail to submit the report within ten (10) calendar days of their employment start date will be prohibited from engaging in any personal Securities Transactions until such report is submitted.
REPORTING SECURITIES HOLDINGS NOT SHOWN ON PRIMARY BROKERAGE ACCOUNT STATEMENTS
If an Access Employee has Securities holdings that are not shown on brokerage confirmations and statements, the Access Employee must manually report these holdings on the New Hire Holdings Report (Appendix E). Examples of Securities holdings not necessarily included in the Access Employees primary brokerage statements include Securities purchased directly from an issuer, Securities granted by a prior employer, or Securities holdings where the Access Employee holds physical stock or bond certificates.
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REPORTING CERTAIN MUTUAL FUND HOLDINGS
If an Access Employee holds mutual funds defined as Reportable Mutual Funds, the
Access Employee must manually report these Securities holdings on the New Hire
Holdings Report (Appendix E). Reportable Mutual Funds include only mutual funds
that INVESCO advises or sub-advises. Reportable Mutual Funds will be posted in
the Legal and Compliance section of the INVESCO Website, as follows:
http://atlas.amvescap.com/usinst/reportable_mutual_funds.pdf .
QUARTERLY SECURITIES TRANSACTION REPORT
ALL EMPLOYEES
REPORTING TRANSACTIONS IN AMVESCAP SECURITIES
Access and Non-Access Employees must include Transactions in AMVESCAP securities on their Quarterly Securities Transactions Reports (Appendix F). Time periods, and report forms described below for Access Employees apply for all Access and Non-Access Employees reporting these Transactions. Charitable contributions and any other transactions in AMVESCAP shares by gift must be pre-cleared. See Appendix C.
REPORTING TRANSACTIONS IN PRIVATE PLACEMENTS
Access and Non-Access Employees must include Transactions in private placements on their Quarterly Securities Transactions Reports (Appendix F). Time periods, and report forms described below for Access Employees apply for all Access and Non-Access Employees reporting these Transactions.
CHARITABLE CONTRIBUTIONS AND GIFTS
The reporting provisions described in the "Quarterly Transaction Reporting" section of this Code apply to charitable contributions of Securities and other Securities Transactions by gift the same as if such transactions were purchases and sales.
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ACCESS EMPLOYEES
GENERALLY
Within thirty (30) days of the end of each calendar quarter, Access Employees shall submit the Quarterly Securities Transactions Report (see Appendix F) which describes all Securities Transactions made during the previous quarter.
In lieu of submitting this report, Access Employees may arrange to have duplicate copies of their confirmations and statements forwarded directly to the Compliance Department by the broker-dealers or banks where their Accounts are maintained.
At the close of each calendar quarter, the Compliance Department will send a reminder to Access Employees who have not made arrangements to have duplicate copies of confirmations and statements forwarded to the Compliance Department.
STOCK TRANSACTIONS NOT SHOWN ON PRIMARY BROKERAGE STATEMENTS
If an Access Employee has Transactions in any Securities that are not shown on the brokerage duplicate confirmations and statements routinely provided by the broker to the Compliance Department, the Access Employee must manually report these Transactions on Quarterly Transactions Reports (Appendix F), or attach other documents containing the required information. Examples of such Transactions include sales of Securities purchased directly from an issuer, Securities granted by a prior employer, or Securities where the Access Employee holds physical certificates.
MUTUAL FUND TRANSACTIONS
If an Access Employee has Transactions in mutual funds that have been defined in this code as Reportable Mutual Funds, they must manually report them on the Quarterly Transactions Report (Appendix F), or arrange for duplicate copies of mutual fund confirmations and statements to be sent directly to the Compliance Department. Reportable Mutual Funds include only mutual funds that INVESCO advises or sub-advises. Those mutual funds considered Reportable Mutual Funds will be posted in the Legal and Compliance section of the INVESCO Website, as follows: http://atlas.amvescap.com/usinst/reportable_mutual_funds.pdf.
ANNUAL HOLDINGS REPORT
ALL EMPLOYEES
REPORTING AMVESCAP SECURITIES
Access and Non-Access Employees must submit an Annual Holdings Report if they own AMVESCAP securities. Time periods, and report forms described below for Access Employees apply for reporting these holdings.
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REPORTING PRIVATE PLACEMENTS
Access and Non-Access Employees must submit an Annual Holdings Report if they own non-public securities. Time periods, and report forms described below for Access Employees apply for reporting these holdings.
ACCESS EMPLOYEES
GENERALLY
At the close of each calendar year, the Compliance Department will forward a copy of the annual Securities Holdings Report (see Appendix E) to Access Employees. Within forty-five (45) calendar days of the end of each calendar year, Access Employees must complete and return to the Compliance Department the Annual Securities Holdings Report, which describes all Securities accounts and Securities holdings as of December 31 of the year reported.
Access Employees shall complete the annual Securities Holdings Report with the required information even if the Compliance Department is already receiving monthly statements directly from their broker, bank or custodian.
REPORTING SECURITIES HOLDINGS NOT SHOWN ON PRIMARY BROKERAGE ACCOUNT STATEMENTS
If an Access Employee has Securities holdings that are not shown on the brokerage duplicate statements routinely provided by the broker to the Compliance Department, the Access Employee must manually report these holdings on the Annual Securities Holdings Report (Appendix E). Examples of Securities holdings not necessarily included in an Access Employee's primary brokerage statements include Securities purchased directly from an issuer, Securities granted by a prior employer, or Securities holdings where the Access Employee holds physical stock or bond certificates.
MUTUAL FUND HOLDINGS
If an Access Employee holds mutual funds defined as Reportable Mutual Funds, and
even if the Access Employee has arranged to have duplicate mutual fund
confirmations and statements sent to the Compliance Department, the Access
Employee must manually report these Securities holdings on the Annual Holdings
Report (Appendix E). Reportable Mutual Funds include only mutual funds that
INVESCO advises or sub-advises. Reportable Mutual Funds will be posted in the
Legal and Compliance section of the INVESCO Website, as follows:
http://atlas.amvescap.com/usinst/reportable_mutual_funds.pdf.
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REPORTING OPENING AND CLOSING OF
BROKERAGE OR REPORTABLE MUTUAL FUND ACCOUNTS
ACCESS EMPLOYEES
OPENING NEW BROKERAGE ACCOUNTS
Within ten (10) days of opening a new brokerage account, Access Employees shall submit a New Brokerage Account Report (see Appendix E) providing all required information about the new account, and reporting the holdings in the new account, if any.
REPORTING INITIAL INVESTMENTS IN REPORTABLE MUTUAL FUNDS
Within ten (10) days of investing for the first time in a mutual fund that is
considered a Reportable Mutual Fund, Access Employees shall submit a Securities
Holdings Report (see Appendix E) providing all required information. Reportable
Mutual Funds include only mutual funds that INVESCO advises or sub-advises.
Reportable Mutual Funds will be posted in the Legal and Compliance section of
the INVESCO Website, as follows:
http://atlas.amvescap.com/usinst/reportable_mutual_funds.pdf.
ATTACHING CONFIRMATIONS
Access Employees may report Securities holdings in the new account by completing Appendix E and, if available, attaching a copy of the opening investment confirmations provided to them by the broker or mutual fund.
ARRANGING FOR DUPLICATE CONFIRMATIONS AND STATEMENTS TO BE SENT TO THE COMPLIANCE DEPARTMENT
Access Employees who do not want to manually record quarterly transactions on Quarterly Securities Transactions Reports should arrange to have duplicate copies of their confirmations and statements forwarded directly to the Compliance Department.
REPORTING CLOSING OF ACCOUNTS
Access Employees should report closing of brokerage or Reportable Mutual Fund accounts at the time they are closed.
ADMINISTRATIVE PROCEDURES
COMPLIANCE OFFICER DISCRETION TO MAKE EXCEPTIONS
Because all fact situations cannot be contemplated, INVESCO's Chief Compliance Officer retains the authority to permit exceptions to the above policies and procedures when to do so is not inconsistent with the interests of INVESCO and its clients.
Code of Ethics
COMPLIANCE DEPARTMENT ADMINISTRATION AND REVIEW
In order to ensure observance of these policies and procedures relating to personal investments, INVESCO's Chief Compliance Officer and the Compliance Department will:
- Provide Employees with a link to where the Web site for the INVESCO Code of Ethics can be found;
- Obtain certifications from employees that they have read and understood the policies and procedures contained in the INVESCO Code of Ethics and AMVESCAP Code of Conduct (see Appendix G), annually, and when an Employee is first hired;
- Obtain answers to Questionnaires from employees (see Appendix G), annually, and when an Employee is first hired;
- Obtain outside activity reports from employees (see Appendix H), annually, and when an Employee is first hired;
- Provide educational programs to familiarize Employees with relevant policies and procedures;
- Reconcile pre-clearance approvals with Quarterly Report and Annual Holding Reports;
- Take appropriate actions to ensure compliance with the policies and procedures of the Code; and
- Maintain and review records related to personal Securities Transactions and compares personal Transactions with INVESCO client transactions and holdings.
- Review the Code on a regular basis and update as necessary.
RISK MANAGEMENT COMMITTEE ENFORCEMENT
The RMC will:
- Set an example by their personal actions of compliance with the letter and spirit of the Code;
- Require observance of the Code and, if such policies and procedures are violated, determine the appropriate sanction for the offender, which may include termination of employment;
Code of Ethics
CONFIDENTIALITY
All information submitted to the INVESCO Compliance Department pursuant to pre-clearance and post execution reporting procedures will be treated as confidential information. It may, however, be made available to governmental and Securities industry self-regulatory agencies with regulatory authority over INVESCO as well as to INVESCO's auditors and legal advisors, if appropriate.
OUTSIDE ACTIVITIES
Absent prior approval of the Compliance Department and the RMC, Employees may not serve as directors, officers or employees of unaffiliated public or private companies, whether for profit, or non-profit.
Employees shall submit an Outside Activities Report (Appendix H) prior to participating in outside activities, when hired, and annually when requested to by the Compliance Department.
GIFTS
No Employee may receive or give any gift of more than de minimus value ($100) from any person or entity that does business with INVESCO. Employees who receive or would like to give a gift or other thing of more than de minimus value from any person or entity that does business with INVESCO should immediately contact a Compliance Officer to determine the proper disposition of such gift or whether giving such gift should be allowed.
AMVESCAP CODE OF CONDUCT
All Employees are subject to the AMVESCAP Code of Conduct and must abide by all
its requirements.
http://www.amvescap.com/amvescap/about/code.of.conduct.2004.pdf.
Code of Ethics
(INVESCO LOGO)
APPENDIX A
PRE-CLEARANCE OFFICERS
KATIE BAEZ 404-439-3286
CHRISTINE MCBROOM 404-439-3027
DAVID OSUNKWO 404-439-3157
JODI PERELMAN 404-439-3169
GWEN TYLER 404-439-3496
ALFONSO VISBAL 404-439-9418
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Code of Ethics
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APPENDIX B
SELF-COMPLIANCE CHECKLIST
QUIZ
Q: I am not an access person. Does that mean that no restrictions apply to me?
A: No. See Introduction and "All Employees" below.
Q: My trades are always under $100,000. Does that mean that no restrictions apply to me?
A: No. See Complete Checklist below.
INTRODUCTION
It is your responsibility to know what transactions are prohibited under the Code of Ethics, and refrain from engaging in such transactions. Access and Non-Access Employees will be held responsible for their own self-compliance with the Code's restrictions. Consult the Code of Ethics and this checklist before making personal trades.
ALL EMPLOYEES - PRINCIPLES GOVERNING PERSONAL INVESTMENTS
- No Transactions that favor the Employee over the client.
- No use of influence or position to obtain a personal trading advantage.
- No trades or recommendations based on material non-public information.
- No recommendations to clients regarding private placements personally owned.
- Access Employees: disclose conflicts of interest to a Compliance officer:
- Before making a personal trade involving a possible conflict of interests.
- Before recommending a client transaction involving a possible conflict.
ALL EMPLOYEES - INVESTMENT RESTRICTIONS & REPORTS
- No investments in any initial public offerings.
- No short sales of AMVESCAP Securities.
- Pre-clear all transactions in AMVESCAP Securities regardless of size (also subject to "black-out" periods established by AMVESCAP and holding periods prescribed under the terms of the agreement or program under which they were received.) (Appendix D).
- Pre-clear all transactions in private placements regardless of size. (Appendix D).
- Submit a Quarterly Report of any Transactions in AMVESCAP securities. (Appendix F).
- Submit a Quarterly Report of any Transactions in private placements. (Appendix F).
- Charitable Contributions and Gifts: All provisions apply to charitable contributions of Securities and other Securities Transactions by gift the same as if such transactions were purchases and sales.
ACCESS EMPLOYEES - INVESTMENT RESTRICTIONS & REPORTS
- no short sales if the clients your group manages are long the same Securities.
- no profit in the buy and sale, or short sale and cover of the same Security within 60 calendar days.
- Pre-clear transactions exceeding $100,000
- Pre-clear transactions regardless of size, if two trades are made in the same security within five business days of one another. (Appendix D).
- Report opening or closing of any brokerage or other custodial account (Appendix E).
- 7 calendar day black-out on personal transactions before or after a client trade in the same security if you are the portfolio manager for the client or security, or an analyst supporting the portfolio manager (Blackout reduced to 1 day if program-trade or blind principal bid, with trade resulting from an event rather than a discretionary decision).
- Submit a Quarterly Report of any Transactions in securities for which Compliance receives no quarterly statements. (Appendix F).
- Submit a Quarterly Report of any Transactions in Reportable Mutual Funds. (Appendix F).
Code of Ethics
(INVESCO LOGO)
APPENDIX C
AMVESCAP STOCK TRANSACTION PRE-CLEARANCE GUIDE AND RESTRICTIONS
FOR ALL EMPLOYEES OF INVESCO
PRE BASIS FOR QUARTERLY REPORTING ANNUAL REPORT OF
TYPE OF TRANSACTION IN AMVESCAP CLEARANCE APPROVAL OF TRANSACTIONS HOLDINGS
------------------------------- --------------- ----------------- ------------------- ------------------
- OPEN MARKET PURCHASES & SALES Yes Not permitted in Yes Yes
blackout periods.
- TRANSACTIONS IN 401(K) PLAN
Pre-clearance Atlanta Compliance Atlanta Compliance
Officer Department Department
RECEIPT OF EMPLOYEE STOCK OPTIONS OR GRANTS No N/A No No
EXERCISE OF EMPLOYEE STOCK OPTIONS WHEN SAME DAY Yes Not permitted in Yes n/a
SALE blackout periods.
- REC'D WHEN MERGED W/ INVESCO Atlanta Option holding Atlanta Compliance
Compliance period must be Department
- OPTIONS FOR STOCK GRANTS Department satisfied.
AND
- OPTIONS FOR GLOBAL STOCK PLANS AVZ Company
Secretarial in
- OPTIONS FOR RESTRICTED STKAWARDS London (Michael
Perman's
office)
SALE OF STOCKS ON A DATE SUBSEQUENT TO THE DATE Yes Not permitted in Yes Yes
THE OPTIONS WERE EXERCISED blackout periods.
Pre-clearance Stock holding Atlanta Compliance Atlanta Compliance
Officer period must be Department Department
satisfied.
SAME DAY SALE OF STOCK PURCHASED THROUGH Yes Not permitted in Yes N/A
SHARESAVE blackout periods.
Pre-clearance Atlanta Compliance
Officer Department
SALE OF STOCK PURCHASED THROUGH SHARESAVE ON A Yes Not permitted in Yes Yes
DATE SUBSEQUENT TO DATE OF PURCHASE. blackout periods.
Pre-clearance Atlanta Compliance Atlanta Compliance
Officer Department Department
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Code of Ethics
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APPENDIX D
PRE-CLEARANCE FORM
INSTRUCTIONS
WHERE DO I SEND THIS FORM?
- Attach the document to an E-mail addressed to: #II- Personal Trade Permission. If you do not have access to E-mail, then fax to 404-439-4990, ATTN: Compliance.
WHAT TRANSACTIONS ARE PROHIBITED?
- Review Self-Compliance Checklist at Appendix B to the Code of Ethics.
ALL EMPLOYEES: WHAT DO I NEED TO PRE-CLEAR?
- All Employees pre-clear all investments or disposals in AMVESCAP regardless of size.
- All Employees pre-clear Transactions in non-public securities or private placements regardless of size.
- No Employee is required to pre-clear transactions in any mutual funds. (But Access Persons should see Appendix F to the Code of Ethics regarding quarterly reports.)
ACCESS PERSONS: WHAT ADDITIONAL TRANSACTIONS DO I NEED TO PRE-CLEAR?
- Access Persons pre-clear transactions exceeding $100,000
- Access Persons making two or more Transactions in the same stock (or in a derivative of the same stock, such as options or futures on such stocks) within five business days of one another, pre-clear the subsequent (after initial) transactions regardless of size.
REQUEST
BUY/ INVESTMENT NAME + TICKER OR CUSIP (include interest # OF CURRENT PRINCIPAL SELL rate and maturity date, if applicable) SHARES PRICE AMOUNT CUSTODIAN + ACCOUNT # ---- --------------------------------------------------- ------ ------- --------- --------------------- |
I request permission to buy, sell, gift, or receive (by gift) the securities above for my own account(s) or other account(s) in which I have beneficial ownership. By signing this form, I represent the following:
- This transaction is not based on material non-public information and is not prohibited by the Code Of Ethics or the INVESCO Institutional Insider Trading Policies and Personal Securities Trading Rules; and
- I have disclosed the brokerage account in which this transaction is being conducted and the compliance department is receiving duplicates on the account; and
- To my knowledge, none of the accounts managed or serviced by INVESCO has purchased or sold the security listed above during the last seven days; and
- To my knowledge, the security is not being considered for purchase or sale by any accounts managed and/or serviced by me; and
- This transaction will not result in a profit if it is an opposite transaction within the last 60 days; and
- The proposed purchase of the above listed security, together with my current holdings, will not result in my having a beneficial interest in more than 5% of the outstanding voting securities of the company.
------------------------------------- ----------------- -------------------- Employee Signature Date Printed Name ------------------------------------- ----------------- Employee Position Investment Center ------------------------------------- ----------------- Pre-clearance Officer Date |
Code of Ethics
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APPENDIX E - PAGE 1
NEW HIRE HOLDINGS REPORT
NEW BROKERAGE ACCOUNT REPORT
____NEW HIRE HOLDINGS REPORT Due w/in 10 days of hire, and may not be more than 45 days old.
____NEW BROKERAGE ACCOUNT REPORT Due within 10 days of opening the account.
APPENDIX E - PAGE 2 MUST BE SIGNED BY ALL EMPLOYEES
Print Name ________________ ____ No Holdings to Report (Check if Applicable)
SECTION 1 - ACCOUNTS
List all brokerage accounts you currently maintain for yourself, your spouse,
any immediate family member who shares the same household, or over which you
maintain trading authorization or discretion. Also list any accounts you
maintain for Reportable Mutual Funds. Reportable Funds can be found on the
following Web Site:
http://atlas.amvescap.com/usinst/reportable_mutual_funds.pdf. No other mutual
fund accounts/holdings need to be reported. If you have more than 2 accounts,
please make multiple copies of this page.
EMPLOYEE ACCOUNT #1 EMPLOYEE ACCOUNT #2
------------------- -------------------
BROKERAGE FIRM OR
CUSTODIAN'S NAME
A/C #
ACCOUNT TITLE
HAS TRADING AUTHORIZATION BEEN
LEGALLY OR PROFESSIONALLY
ASSIGNED TO SOMEONE OTHER THAN
THE ACCOUNT OWNER, CUSTODIAN,
TRUSTEE OR YOU? IS THIS A
PROFESSIONALLY MANAGED
ACCOUNT, FOR WHICH YOU CAN
PROVIDE DOCUMENTATION OF THE
AGREEMENT OR AUTHORIZATION
FORMS? ANSWER "YES" IF YOU OR
THE ACCOUNT OWNER HAS TURNED
OVER ALL BUY/SELL DECISION
AUTHORITY (DISCRETION) TO AN
INVESTMENT MANAGER, TRUSTEE,
ADVISOR OR OTHER FIDUCIARY.
DOES COMPLIANCE RECEIVE
DUPLICATE STATEMENTS
AND CONFIRMS? IF "YES",
PROCEED TO PAGE 2.
IF "NO", PLEASE COMPLETE THE
BELOW SECTIONS.
CONTACT PERSON AT BROKER OR
CUSTODIAN
BROKER OR CUSTODIAN'S ADDRESS
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Code of Ethics
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APPENDIX E- PAGE 2
THIS PAGE MUST BE SIGNED BY ALL EMPLOYEES
HOLDINGS REPORT
HOLDINGS MUST BE WITHIN 10 DAYS OF HIRE OR ACCOUNT OPENING,
AND NOT MORE THAN 45 DAYS OLD
SECTION 2 - HOLDINGS
WHAT IF I HAVE NO QUARTERLY ACCOUNT STATEMENTS?
If you have investments that are not shown on quarterly statements, please list those securities in the table below. Examples are Securities purchased directly from an issuer, Securities granted by a prior employer, Private placements, and Securities holdings where the Access Employee holds physical stock or bond certificates.
WHAT IF DUPLICATE STATEMENTS ARE AUTOMATICALLY SENT TO COMPLIANCE?
You must still fill in the required information in the Holdings Report even if the Compliance Department receives account statements and/or confirmations for your accounts. New Hires and existing employees who open new brokerage accounts should fill in the required information below, and attach account statements if available.
WHAT MUTUAL FUND HOLDINGS MUST BE REPORTED?
Mutual Funds Reportable by Access Persons are shown on the following Web Site:
http://atlas.amvescap.com/usinst/reportable_mutual_funds.pdf. Fill in the
information below if you own funds shown on that site. No other mutual fund
holdings need to be reported.
INVESTMENT NAME & TYPE OF # OF PRINCIPAL TICKER OR CUSIP SECURITY SHARES PRICE AMOUNT BROKER OR CUSTODIAN ----------------- -------- ------ ----- --------- ------------------- |
SECTION 3 - CERTIFICATIONS
I certify that I have disclosed on this form, or attached, all personal securities Transactions, holdings, and accounts required to be disclosed. This form is not an admission of any direct or indirect ownership in the Securities described. I hereby authorize INVESCO to download or make other disclosure to service providers, all transaction data I provide during my employment, as necessary to aid INVESCO's efficient implementation of the Code of Ethics.
PLEASE FORWARD TO THE COMPLIANCE DEPARTMENT, ATLANTA.
Code of Ethics
(INVESCO LOGO)
APPENDIX F
QUARTERLY SECURITIES TRANSACTIONS REPORT
(Due 30 days after the end of the calendar quarter.)
THIS FORM IS ONLY REQUIRED FOR TRANSACTIONS NOT ALREADY REPORTED TO COMPLIANCE
ON DUPLICATE STATEMENTS SENT TO INVESCO BY YOUR BROKER
FOR QUARTER ENDING _________________ PRINT NAME ________________________
Please note that, Access Persons are not required to report all Transactions in mutual funds. They are only required to report Transactions in mutual fund that INVESCO advises or sub-advises, listed at http://atlas.amvescap.com/usinst/reportable_mutual_funds.pdf. (Non-Access Persons need not report any mutual fund holdings.) For transactions already reported to Compliance on duplicate confirmation statements sent by the custodian, you need not fill in the information below, nor attach any statement.
INVESTMENT NAME + TICKER OR
BUY/ CUSIP (include interest rate # OF PRINCIPAL
DATE SELL and maturity date, if applicable) SHARES PRICE AMOUNT CUSTODIAN AND ACCOUNT #
---- ---- --------------------------------- ------ ----- --------- -----------------------
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If you have acquired or disposed of a Security in a transaction other than a purchase or sale (e.g., by gift), please describe the nature of the transaction, below:
PLEASE FORWARD TO THE COMPLIANCE DEPARTMENT, ATLANTA.
Code of Ethics
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APPENDIX G - PAGE 1
COMPLIANCE QUESTIONNAIRE AND CERTIFICATION
This Questionnaire is designed to elicit information required to assure compliance with SEC and NASD Regulations. It is extremely important that you exercise great care in completing this questionnaire.
YES NO
--- ---
A. (1) Do you currently have any securities (NASD or state)
licenses that have not been reported to Compliance? ...... [ ] [ ]
(2) If so, please notify Atlanta's Compliance Department at
404-439-3157.
(3) Do you have any Outside Activities that have not
previously been reported to Compliance? If so, notify
Atlanta's Compliance Dept ................................ [ ] [ ]
B. (1) Have you made any political or charitable contributions on
behalf of INVESCO and/or for which you were reimbursed by
INVESCO in the past 12 months? ........................... [ ] [ ]
(2) If so, to whom: __________________________________________
(3) Have you made any political contributions to individuals
running for office in the State of Connecticut? .......... [ ] [ ]
(4) If so, to whom: __________________________________________
C. Have you been convicted of or plead guilty or nolo contendere
("no contest") in a domestic, foreign, or military court to:
(1) a felony or misdemeanor involving: investments or any
securities business, commodities business, or other
investment-related business? ............................. [ ] [ ]
(2) a felony or misdemeanor involving: fraud, false statements
or omissions, wrongful taking of property, or bribery,
forgery, counterfeiting or extortion?, or a conspiracy to
commit any of these offenses? ............................ [ ] [ ]
(3) gambling? ................................................ [ ] [ ]
(4) any other felony? (such conviction may be relevant if job
related, but does not bar you from employment) ........... [ ] [ ]
D. Have you, or an organization over which you exercised
management or policy control, ever been charged with any felony
or charged with a misdemeanor specified in question F(1) or (2)
in a domestic or foreign court? ............................... [ ] [ ]
E. Has any domestic or foreign court ever:
(1) enjoined you in connection with any activity in any
securities business, commodities business, or other
investment-related business? ............................. [ ] [ ]
(2) found that you were involved in a violation of
investment-related statutes or regulations? .............. [ ] [ ]
(3) ever dismissed, pursuant to a settlement agreement, an
investment-related civil action brought against you by a
state or foreign financial regulatory authority? ......... [ ] [ ]
F. Has the U.S. Securities and Exchange Commission or the
Commodity Futures Trading Commission ever:
(1) found you to have made a false statement or omission? .... [ ] [ ]
(2) found you to have been involved in a violation of
investment-related regulations or statutes? .............. [ ] [ ]
(3) found you to have been a cause of an investment-related
business having its authorization to do business denied,
suspended, revoked, or restricted? ....................... [ ] [ ]
(4) entered an order denying, suspending or revoking your
registration or disciplined you by restricting your
activities? .............................................. [ ] [ ]
(5) imposed a civil money penalty on you, or ordered you to
cease and desist from any activity? ...................... [ ] [ ]
G. Has any other Federal regulatory agency or any state regulatory
agency or foreign financial regulatory authority ever:
(1) found you to have made a false statement or omission or
been dishonest, unfair or unethical? ..................... [ ] [ ]
(2) found you to have been involved in a violation of
investment regulations or statutes? ...................... [ ] [ ]
(3) found you to have been a cause of any investment-related
business having its authorization to do business denied,
suspended, revoked, or restricted? ....................... [ ] [ ]
(4) entered an order against you in connection with
investment-related activity? ............................. [ ] [ ]
(5) denied, suspended, or revoked your registration or license
or otherwise prevented you from associating with an
investment-related business, or disciplined you by
restricting your activities? ............................. [ ] [ ]
(6) revoked or suspended your license as an attorney,
accountant or federal contractor? ........................ [ ] [ ]
(7) denied licensing or registration privileges? ............. [ ] [ ]
H. Has the CFA Institute ever:
(1) found you to have made a false statement or omission or
been dishonest, unfair or unethical? ..................... [ ] [ ]
(2) found you to have been involved in a violation of the Code
of Ethics or Performance Presentation Standards? ......... [ ] [ ]
(3) found you to have been a cause of any investment-related
business having its authorization to do business denied,
suspended, revoked, or restricted? ....................... [ ] [ ]
(4) entered a complaint against you in connection with
investment-related activity? ............................. [ ] [ ]
(5) denied, suspended, or revoked your charter or otherwise
prevented you from associating with an investment-related
business, or disciplined you by restricting your
activities? .............................................. [ ] [ ]
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Code of Ethics
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APPENDIX G - PAGE 2
COMPLIANCE QUESTIONNAIRE AND CERTIFICATION
YES NO
--- ---
I. Has any self-regulatory organization or commodities exchange:
(1) found you to have made a false statement or omission? .... [ ] [ ]
(2) found you to have been involved in a violation of its
rules? ................................................... [ ] [ ]
(3) found you to have been the cause of an investment-related
business having its authorization to do business denied,
suspended, revoked or restricted? ........................ [ ] [ ]
(4) disciplined you by expelling or suspending you from
membership, barring or suspending your association with
its members, or restricting your activities? ............. [ ] [ ]
J. Has any foreign government ever entered an order against you
related to investments or fraud? .............................. [ ] [ ]
K. Have you ever been the subject of an investment-related,
consumer-initiated complaint or proceeding that:
(1) alleged compensatory damages of $10,000 or more, fraud, or
wrongful taking of property? ............................. [ ] [ ]
(2) was settled or decided against you for $5,000 or more, or
found fraud or the wrongful taking of property? .......... [ ] [ ]
L. Are you now the subject of any complaint, investigation, or
proceeding that could result in a "yes" answer to parts F-N of
this item? .................................................... [ ] [ ]
M. Has a bonding company denied, paid out on, or revoked a bond
for you? ...................................................... [ ] [ ]
N. Do you have any unsatisfied judgments or liens against you? ... [ ] [ ]
O. Have you or a firm that you exercised management or policy
control over, or owned 10% or more of the securities of, failed
in business made a compromise with creditors, filed a
bankruptcy petition or been declared bankrupt? ................ [ ] [ ]
P. Has a broker or dealer firm that you exercised management or
policy control over, or owned 10% or more of the securities of,
been declared bankrupt, had a trustee appointed under the
Securities Investor Protection Act, or had a direct payment
procedure initiated? .......................................... [ ] [ ]
Q. Have you been discharged or permitted to resign because you
were accused of:
(1) violating investment-related statutes, regulations, rules,
or industry standards of conduct? ........................ [ ] [ ]
(2) fraud or the wrongful taking of property? ................ [ ] [ ]
(3) failure to supervise in connection with investment-related
statutes, regulations, rules or industry standards of
conduct? ................................................. [ ] [ ]
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I acknowledge that I have read the questions on this form, and I affirm that my answers (including attachments) are true and complete to the best of my knowledge.
I certify that I have read and understand the INVESCO Code of Ethics, INVESCO
Anti-Money Laundering Policy, INVESCO Record Keeping Guidelines (all found in
the INVESCO Compliance Manual:
http://atlas.amvescap.com/usinst/ops/compman_pdf.html ) and the AMVESCAP Code of
Conduct ( See Atlas Web Site:
http://www.amvescap.com/amvescap/about/code.of.conduct.2004.pdf. ). I
acknowledge that I am subject to and have complied with and will continue to
comply with the policies and procedures contained therein. I will report all
personal securities Transactions required to be disclosed.
CHECK THE APPLICABLE BOX:
[ ] NON-ACCESS EMPLOYEE
[ ] ACCESS EMPLOYEE
Code of Ethics
(INVESCO LOGO)
APPENDIX H
DISCLOSURE OF ACTIVITIES OUTSIDE OF INVESCO
_____ OUTSIDE ACTIVITY TO REPORT IF YOU HAVE OUTSIDE ACTIVITIES TO REPORT, PLEASE CHECK HERE, COMPLETE THE BELOW SECTIONS, INCLUDING OBTAINING YOUR SUPERVISOR'S SIGNATURE, AND SIGN BELOW.
_____ INACTIVE OUTSIDE ACTIVITY REPORT IF YOU HAVE CEASED TO PARTICIPATE IN A PRIOR-REPORTED ACTIVITY, PLEASE CHECK HERE, COMPLETE ACTIVITY DETAILS, AND SIGN BELOW.
This is to advise my INVESCO employer and the Compliance Department of the following outside activity, so as to avoid any possible conflict of interest as it relates to my current position with the firm.
NAME TITLE INVESTMENT CENTER ---- ----- ----------------- |
NAME OF OUTSIDE ORGANIZATION _______________________________________ ADDRESS _______________________________________ POSITION _______________________________________ COMPENSATION (DIRECT/INDIRECT) _______________________________________ |
INVESTMENT/OWNERSHIP IN ORGANIZATION _______________________________________
PUBLIC OR NON-PUBLIC _______________________________________ CHARITABLE/NON CHARITABLE _______________________________________ PROFESSIONAL/PERSONAL RELATIONSHIP TO ORGANIZATION _______________________________________ TIME REQUIRED AWAY FROM INVESCO RESPONSIBILITIES _______________________________________ BASIC FUNCTIONS TO BE PERFORMED _______________________________________ POSSIBLE CONFLICT OF INTEREST _______________________________________ |
I understand that my first priority is to INVESCO. At all times I will continue to abide by the INVESCO Compliance Manual guidelines, especially those that may involve ethical behavior, client information, release of material non-public ("insider") information, personal trading, company supplied research material, proprietary information/computer systems data or programs and/or the purchase/sale of securities involving INVESCO clients. Further, I will make it known to all necessary parties that my involvement with any other organization is not meant financially or otherwise to benefit or involve INVESCO. I will not use my position with INVESCO or use the INVESCO name or any association with INVESCO as part of my involvement with this outside activity. No contribution or compensation that I may make or receive, whether direct or indirect, is to be construed as a direct or indirect arrangement with INVESCO. Should any of the above information change, I will notify my supervisors and the INVESCO Compliance Department immediately. In addition, should I become aware of any public offerings by the non-INVESCO company, or should I purchase or be granted additional shares of stock in the non-INVESCO company, I will immediately advise the INVESCO Compliance Department and submit any necessary supplemental documentation.
AT THIS TIME, I DO _________ OR DO NOT _________ HAVE ANY OUTSIDE ACTIVITIES TO REPORT.
Employee Signature: Date:
------------------------------ ---------------------
Compliance: Date:
-------------------------------------- ---------------------
Employee Supervisor: Date:
----------------------------- ---------------------
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PLEASE FORWARD TO THE COMPLIANCE DEPARTMENT, ATLANTA.
Code of Ethics
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Bob R. Baker ----------------------------------------- Bob R. Baker |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Frank S. Bayley ----------------------------------------- Frank S. Bayley |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ James T. Bunch ----------------------------------------- James T. Bunch |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Bruce L. Crockett ----------------------------------------- Bruce L. Crockett |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Albert R. Dowden ----------------------------------------- Albert R. Dowden |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Jack M. Fields ----------------------------------------- Jack M. Fields |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Martin L. Flanagan ----------------------------------------- Martin L. Flanagan |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Carl Frischling ----------------------------------------- Carl Frischling |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Robert H. Graham ----------------------------------------- Robert H. Graham |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Prema Mathai-Davis ----------------------------------------- Prema Mathai-Davis |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Lewis F. Pennock ----------------------------------------- Lewis F. Pennock |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Ruth H. Quigley ----------------------------------------- Ruth H. Quigley |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Larry Soll ----------------------------------------- Larry Soll |
POWER OF ATTORNEY
I appoint Philip A. Taylor and John M. Zerr, and each of them separately, to act as my attorneys-in-fact and agents, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor and John M. Zerr, and each of them separately, as attorneys-in-fact and agents the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor and/or John M. Zerr lawfully takes as my attorneys-in-fact and agents by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Raymond Stickel, Jr. ----------------------------------------- Raymond Stickel, Jr. |
POWER OF ATTORNEY
I appoint John M. Zerr, to act as my attorney-in-fact and agent, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant John M. Zerr, as attorney-in-fact and agent the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that John M. Zerr lawfully takes as my attorney-in-fact and agent by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ Philip A. Taylor ----------------------------------------- Philip A. Taylor |
POWER OF ATTORNEY
I appoint Philip A. Taylor, to act as my attorney-in-fact and agent, in my capacity as a trustee of the Funds listed below to:
(1) sign on my behalf any and all Registration Statements under the Securities Act of 1933, and the Investment Company Act of 1940, and any pre- and post-effective amendments and supplements to such Registration Statements, and to file the same, including all exhibits to such Registration Statements, and other documents filed in connection with such Registration Statements including prospectuses and statements of additional information included in such Registration Statements and supplements to such prospectuses and statements of additional information, with the Securities and Exchange Commission and any other applicable state and federal regulatory authorities, and
(2) sign any and all applications for exemptive relief from state or federal securities regulations, and amendments to such applications, and to file the same with the applicable regulatory authority,
I grant Philip A. Taylor, as attorney-in-fact and agent the power of substitution and resubstitution in his name and stead, and the full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection with the foregoing appointments.
As used in this Power of Attorney, "Funds" shall mean: AIM Core Allocation Portfolio Series, AIM Counselor Series Trust, AIM Equity Funds, AIM Funds Group, AIM Growth Series, AIM International Mutual Funds, AIM Investment Funds, AIM Investment Securities Funds, AIM Sector Funds, AIM Special Opportunities Funds, AIM Stock Funds, AIM Summit Fund, AIM Tax-Exempt Funds, AIM Treasurer's Series Trust, AIM Variable Insurance Funds, Short-Term Investments Trust and Tax-Free Investments Trust, each a Delaware statutory trust.
I ratify and confirm any and all acts that Philip A. Taylor lawfully takes as my attorney-in-fact and agent by virtue of this appointment.
DATED this 23rd day of April, 2007.
/s/ John M. Zerr ----------------------------------------- John M. Zerr |