As filed with the Securities and Exchange Commission on October 2, 1998
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.
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Post-Effective Amendment No. 10 X
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and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 11 X
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(Check appropriate box or boxes.)
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Copy to:
Nancy L. Martin, Esquire
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
If appropriate, check the following:
This post-effective amendment designates a new effective date ------- for a previously filed post-effective amendment.
Title of Securities Being Registered: Common Stock
[LOGO]
[AIM LOGO APPEARS HERE]
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
PROSPECTUS
, 1998
AIM V.I. GLOBAL GROWTH AND INCOME FUND (the "Fund") is one of fifteen investment portfolios comprising series of AIM Variable Insurance Funds, Inc. (the "Company"), an open-end, series, management investment company. Shares of the Fund are currently offered only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. Shares of the Fund may be offered, in the future, to certain pension or retirement plans. The Fund is a diversified portfolio which seeks long-term capital appreciation together with current income. The address for the Company is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, and its telephone number is (713) 626-1919.
This prospectus sets forth basic information about the Fund that prospective investors should know before investing. It should be read and retained for future reference. A Statement of Additional Information dated , 1998, has been filed with the United States Securities and Exchange Commission ("SEC") and is incorporated herein by reference. The Statement of Additional Information is available without charge upon written request to the Company at the address shown above. The SEC maintains a Web site at http://www.sec.gov that contains the Statement of Additional Information, material incorporated by reference, and other information regarding the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
TABLE OF CONTENTS
PAGE
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About the Fund................................ 2
Performance................................... 2
Investment Objective and Program.............. 3
Risk Factors.................................. 7
Management.................................... 8
Purchase and Redemption of Shares............. 9
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PAGE
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Determination of Net Asset Value.............. 10
Dividends, Distributions and Tax Matters...... 10
General Information........................... 11
APPENDIX A.................................... A-1
APPENDIX B.................................... B-1
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ABOUT THE FUND
THE FUND, AIM V.I. AGGRESSIVE GROWTH FUND, AIM V.I. BALANCED FUND, AIM V.I. CAPITAL APPRECIATION FUND, AIM V.I. CAPITAL DEVELOPMENT FUND, AIM V.I. DIVERSIFIED INCOME FUND, AIM V.I. GLOBAL UTILITIES FUND, AIM V.I. GOVERNMENT SECURITIES FUND, AIM V.I. GROWTH FUND, AIM V.I. GROWTH AND INCOME FUND, AIM V.I. HIGH YIELD FUND, AIM V.I. INTERNATIONAL EQUITY FUND, AIM V.I. MONEY MARKET FUND, AIM V.I. TELECOMMUNICATIONS FUND and AIM V.I. VALUE FUND (collectively, the "Funds") are separate series of shares of the Company, a Maryland corporation organized on January 22, 1993 and registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company (see "General Information -- Organization of the Company"). The Fund has its own investment objective and policies designed to meet specific investment goals, operates as a non-diversified, open-end management investment company and expects to be treated as a regulated investment company for federal income tax purposes.
The Fund invests in securities of different issuers and industry classifications in an attempt to spread and reduce the risks inherent in all investing. The Fund continuously offers new shares for sale to separate accounts of participating life insurance companies ("Participating Insurance Companies"), and stands ready to redeem its outstanding shares for cash at their net asset value. A I M Advisors, Inc. ("AIM"), the investment advisor for the Fund, and INVESCO Asset Management Limited ("INVESCO"), the investment sub-advisor for the Fund, continuously review and, from time to time, changes the portfolio holdings of the Fund in pursuit of the Fund's objective.
PERFORMANCE
The Fund's performance may be quoted in advertising in terms of total return. See the Statement of Additional Information for further details concerning performance comparisons used in advertisements by the Fund.
The Fund's total return shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. A cumulative total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical annually compounded return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period. Average annual total return is computed in accordance with a standardized formula described in the Statement of Additional Information. BECAUSE AVERAGE ANNUAL TOTAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of overall performance, the Fund may separate its cumulative and average annual total returns into income results and capital gain or loss.
From time to time and in its discretion, AIM may waive all or a portion of its advisory fees and/or assume certain expenses of the Fund. Such a practice will have the effect of increasing the Fund's total return. Quotations of the Fund's performance will not reflect charges levied at the separate account level.
The performance of the Fund will vary from time to time and past results are not necessarily indicative of future results. The Fund's performance is a function of its portfolio management in selecting the type and quality of portfolio securities and is affected by operating expenses of the Fund and market conditions. A shareholder's investment in the Fund is not insured or guaranteed. These factors should be carefully considered by the investor before making an investment in the Fund.
INVESTMENT OBJECTIVE AND PROGRAM
Set forth in this section is a statement of the Fund's investment objective along with a description of its investment policies, strategies and practices. The investment objective of the Fund is deemed to be a fundamental policy and, therefore, unless permitted by law, may not be changed without the approval of a majority of the Fund's outstanding shares (within the meaning of the 1940 Act). The Fund's investment policies, strategies and practices are not fundamental. The Board of Directors of the Company reserves the right to change any of these non-fundamental investment policies, strategies or practices without shareholder approval. However, shareholders will be notified before any material change in the investment policies become effective. The Fund has adopted investment restrictions, some of which are fundamental and cannot be changed without shareholder approval. See "Investment Restrictions" in the Statement of Additional Information. Individuals considering the purchase of shares of the Fund should recognize that there are risks in the ownership of any security and that no assurance can be given that the Fund will achieve its investment objective.
INVESTMENT OBJECTIVE. The Fund's investment objectives are long-term capital appreciation together with current income. In seeking those objectives, the Fund normally invests at least 65% of its total assets in a combination of blue-chip equity securities and high quality government bonds. The Fund considers an equity security to be "blue chip" if: (i) during the issuer's most recent fiscal year the security offered an above average dividend yield relative to the latest reported dividend yield on the Morgan Stanley Capital International World Index; and (ii) the total equity market capitalization of the issuer is at least $1 billion. Government bonds are deemed to be high quality if at the time of the Fund's investment they are rated within one of the two highest ratings categories of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), i.e., rated Aaa or Aa by Moody's or AAA or AA by S&P (or a comparable rating of any other nationally recognized statistical rating organizations "NRSROs") or, if unrated, are determined by AIM/INVESCO to be of comparable quality. (For a description of the various rating categories of corporate debt securities in which the Fund may invest, see Appendix A to this Prospectus.)
Up to 35% of the Fund's assets may be invested in other equity securities, convertible securities and investment grade government and corporate debt obligations which AIM/INVESCO believes will assist the Fund in achieving its objectives.
Equity securities that the Fund may purchase include common stocks, preferred stocks, and warrants to acquire such stocks and other equity securities. Government bonds that the Fund may purchase include debt obligations issued or guaranteed by the U.S. or foreign governments (including foreign states, provinces or municipalities) or their agencies, authorities or instrumentalities and debt obligations of supranational entities organized or supported by several national governments, such as the World Bank and the Asian Development Bank. The debt obligations held by the Fund may include debt obligations convertible into equity securities or having attached warrants or rights to purchase equity securities.
Under normal market conditions, the Fund invests in the securities of issuers located in at least three different countries. Investments in securities of issuers in any one country, other than the United States, will represent no more than 40% of the Fund's total assets. The Fund may purchase securities of an issuer located in one country but denominated in the currency of another country (or a multinational currency unit).
AIM/INVESCO allocates the Fund's assets among securities of issuers located in countries where opportunities for meeting the Fund's investment objectives are expected to be the most attractive. The relative proportions of equity and debt securities held by the Fund at any one time will vary, and will depend upon AIM/INVESCO's assessment of global political and economic conditions and the relative strengths and weaknesses of the world equity and debt markets. To enable the Fund to respond to general economic changes and market conditions around the world, the Fund is authorized to invest up to 100% of its assets in either equity securities or debt securities.
CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES. The Fund has the flexibility to invest, to the extent described below, in a variety of instruments designed to enhance its investment capabilities. The Fund may: (1) invest in money market obligations, foreign securities (including ADRs, EDRs and other similar securities), repurchase agreements, reverse repurchase agreements, taxable municipal securities, illiquid securities and Rule 144A securities; (2) purchase or sell securities on a delayed delivery or when-issued basis and may borrow money; and (3) lend portfolio securities and make short sales "against the box." A short sale is "against the box" to the extent that the Fund contemporaneously owns or has the right to obtain securities identical to those sold short without payment of any further consideration.
The Fund may write (i.e., sell) "covered" put and call options and buy put and call options on domestic and foreign securities, securities indices and currencies. The Fund may use exchange-traded financial futures contracts, options thereon, and forward contracts as a hedge to protect against possible changes in market values. A brief description of these investment instruments and their risks appears below. See "Hedging and Other Investment Techniques" in the Statement of Additional Information for more detailed information.
MONEY MARKET OBLIGATIONS. Bankers' acceptances, certificates of deposit, repurchase agreements, time deposits, variable rate master demand notes, taxable municipal securities and commercial paper, U.S. Government direct obligations, including U.S. Treasury obligations and repurchase agreements secured by such obligations, and U.S. Government agencies' securities are collectively referred to as "Money Market Obligations," are briefly described in Appendix B to this Prospectus, and are more fully described in the Statement of Additional Information. When deemed appropriate for temporary or defensive purposes, the Fund may hold cash or cash
equivalent Money Market Obligations. Although the Fund is not required by regulation or fundamental policy to limit such investments to those which, at the date of purchase, are "First Tier" securities as that term is defined in Rule 2a-7 under the 1940 Act, it is the current intention of AIM/INVESCO to limit such investments to those securities which, at the time of purchase, are considered "First Tier" securities or securities which AIM/INVESCO has determined to be of comparable credit quality. To the extent the Fund invests to a significant degree in these instruments, its ability to achieve its investment objectives may be adversely affected.
In addition to the Money Market Obligations described above, as a temporary or defensive measure, and without regard to its investment objective, AIM/INVESCO may invest all or substantially all of the assets of the Fund in cash or Money Market Obligations, including repurchase agreements, denominated in foreign currencies.
CONVERTIBLE SECURITIES. To the extent consistent with its investment objective, the Fund may invest in convertible securities. Convertible securities usually consist of corporate debt securities or preferred stock that may in certain circumstances be converted into a predetermined number of shares of another form of that issuer's equity, usually common stock. Convertible securities consequently often involve attributes of both debt and equity instruments, and investment in such securities requires analysis of both credit and stock market risks. Convertible securities rank senior to common stock in a corporation's capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities may be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. Although the Fund will only purchase convertible securities that AIM considers to have adequate protection parameters, including an adequate capacity to pay interest and repay principal in a timely manner, the Fund invests in such securities without regard to corporate bond ratings.
FOREIGN SECURITIES. To the extent consistent with its investment objective, the Fund may invest in foreign securities. It is not anticipated that such foreign securities will constitute more than 90% of the value of the total assets of the Fund.
The Fund may invest up to 90% of its total assets in securities of foreign companies, including investments in ADRs, EDRs and other securities representing underlying securities of foreign issuers. Under normal market conditions, the Fund will be invested in securities of issuers located in at least three different countries, one of which will be the United States. No more than 40% of the Fund's total assets will be invested in securities of issuers located in any one country other than the United States. Also, investments in securities of foreign issuers may involve other risks which are not ordinarily associated with investments in domestic issuers. See "Risk Factors" in this Prospectus. In addition, investors should also be aware that the Fund may invest in companies located within emerging or developing countries.
ADRS AND EDRS. To the extent consistent with its investment objective, the Fund may also invest in securities which are in the form of ADRs, EDRs or other securities representing underlying securities of foreign issuers. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. ADRs, EDRs and other securities representing underlying securities of foreign issuers are treated as foreign securities for purposes of determining the applicable limitation on investment in foreign securities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
institutions believed by the Company's Board of Directors to present minimal
credit risk. A repurchase agreement is an instrument under which the Fund
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the sellers' failure to repurchase the
obligation in accordance with the terms of the agreement), the Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. Repurchase agreements are considered to be
loans by the Fund under the 1940 Act. Repurchase agreements will be secured by
U.S. Treasury securities, U.S. Government agency securities (including, but not
limited to, those which have been stripped of their interest payments and
mortgage-backed securities) and commercial paper. For additional information on
the use of repurchase agreements, see the Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the sale
by the Fund of a portfolio security at an agreed upon price, date and interest
payment. The 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; (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, the Fund will segregate liquid assets having a
dollar value equal to the repurchase price. The Fund may enter into reverse
repurchase agreements in amounts not exceeding 33 1/3% of the value of its total
assets. Reverse repurchase agreements involve the risk that the market value of
securities retained by the Fund in lieu of liquidation may decline below the
repurchase price of the securities sold by the Fund which it is obligated to
repurchase. This risk, if encountered, could cause a reduction in the net asset
value of the Fund's shares. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act. See "Borrowing" in this Prospectus for percentage
limitations on borrowings.
DELAYED DELIVERY AGREEMENTS AND WHEN-ISSUED SECURITIES. The Fund may enter into delayed delivery agreements and may purchase securities on a "when-issued" basis.
Delayed delivery agreements are commitments by the Fund to dealers or issuers to acquire securities beyond the customary settlement date for such securities. These commitments fix the payment price and interest rate to be received on the investment. Delayed delivery agreements will not be used as a speculative or leverage technique. Rather, from time to time, the Fund's investment advisor can anticipate that cash for investment purposes will result from scheduled maturities of existing portfolio instruments or from net sales of shares of the Fund and may enter into delayed delivery agreements to assure that the Fund will be as fully invested as possible in instruments meeting its investment objective.
Debt securities are sometimes offered on a "when-issued" basis; that is, 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 (normally within forty-five days after the date of the transaction). The payment obligation and the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. The Fund will only make commitments to purchase such debt securities with the intention of actually acquiring the securities, but the Fund may sell these securities before the settlement date if it is deemed advisable.
If the Fund enters into a delayed delivery agreement or purchases a when-issued security, the Fund will segregate liquid assets in an amount equal to its delayed delivery agreements or when-issued commitments. If the market value of such securities declines, additional cash or securities will be segregated on a daily basis so that the market value of the account will equal the amount of the Fund's delayed delivery agreements and when-issued commitments. To the extent that funds are segregated, they will not be available for new investment or to meet redemptions. Investment in securities on a when-issued basis and use of delayed delivery agreements may increase the Fund's exposure to market fluctuation, or may increase the possibility that the Fund will incur a short-term loss, if the Fund must engage in portfolio transactions in order to honor a when-issued commitment or accept delivery of a security under a delayed delivery agreement. The Fund will employ techniques designed to minimize these risks. No additional delayed delivery agreements or when-issued commitments will be made by the Fund if, as a result, more than 25% of the Fund's net assets would become so committed.
BORROWING. The Fund may borrow money to a limited extent from banks (including the Fund's custodian bank) for temporary or emergency purposes subject to the limitations under the 1940 Act. The Fund will restrict borrowings and reverse repurchase agreements to an aggregate of 33 1/3% of the Fund's total assets at the time of the transaction. The Fund will not purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets.
ILLIQUID SECURITIES. The Fund will not invest more than 15% of its net assets in illiquid securities, including restricted securities which are illiquid.
RULE 144A SECURITIES. The Fund may invest in securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). These securities are sometimes referred to as private placements. Although securities which may be resold only to "qualified institutional buyers" in accordance with the provisions of Rule 144A under the 1933 Act are technically considered "restricted securities," the Fund may purchase Rule 144A securities without regard to the limitation on investments in illiquid securities described above under "Illiquid Securities," provided that a determination is made that such securities have a readily available trading market. AIM/INVESCO will determine the liquidity of Rule 144A securities under the supervision of the Company's Board of Directors. The liquidity of Rule 144A securities will be monitored by AIM and, if as a result of changed conditions, it is determined that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid securities will be reviewed to determine what, if any, action is required to assure that the Fund does not exceed its applicable percentage limitation for investments in illiquid securities.
LENDING OF PORTFOLIO SECURITIES. The Fund may, from time to time, lend securities from its portfolio, with a value not exceeding 33 1/3% of its total assets, to banks, brokers and other financial institutions, and receive in return collateral in the form of liquid assets which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. During the period of the loan, the Fund receives the income on both the loaned securities and the collateral (or a fee) and thereby increases its yield. In the event that the borrower defaults on its obligation to return loaned securities because of insolvency or otherwise, the Fund could experience delays and costs in gaining access to the collateral and could suffer a loss to the extent that the value of the collateral falls below the market value of the loaned securities.
SHORT SALES. The Fund may make short sales "against the box." A short sale is a transaction in which a party sells a security it does not own in anticipation of a decline in the market value of that security. A short sale is "against the box" to the extent that the Fund contemporaneously owns or has the right to obtain securities identical to those sold short without payment of any further consideration. The Fund will enter into such transactions only to the extent the aggregate value of all securities sold short does not represent more than 10% of the Fund's total assets at any given time.
OPTIONS. The Fund may write (sell) "covered" put and call options and buy put and call options, including securities index and foreign currency options. A call option is a contract that gives to the holder the right to buy a specified amount of the underlying security at a fixed or determinable price (called the exercise or strike price) upon exercise of the option. A put option is a contract that gives the holder the right to sell a specified amount of the underlying security at a fixed or determinable price upon exercise of the option. In the case of index options, exercises are settled through the payment of cash rather than the delivery of property. A call option is cov-
ered if, for example, the Fund owns the underlying security covered by the call or, in the case of a call option on an index, holds securities the price changes of which are expected to substantially replicate the movement of the index. A put option is covered if, for example, the Fund maintains in a segregated account liquid assets with a value equal to the exercise price of the put option.
The Fund may write call options on securities or securities indexes for the purpose of increasing its return (through receipt of premiums) or to provide a partial hedge against a decline in the value of its portfolio securities or both. The Fund may write put options on securities or securities indexes in order to earn additional income or (in the case of put options written on individual securities) to purchase the underlying security at a price below the current market price. If the Fund writes an option which expires unexercised or is closed out by the Fund at a profit, it will retain all or part of the premium received for the option, which will increase its gross income. If the price of the underlying security moves adversely to the Fund's position, the option may be exercised and the Fund will be required to sell or purchase the underlying security at a disadvantageous price, or, in the case of index options, deliver an amount of cash, which loss may only be partially offset by the amount of premium received.
The Fund may also purchase put or call options on securities and securities indexes in order to hedge against changes in interest rates or stock prices which may adversely affect the prices of securities that the Fund wants to purchase at a later date, to hedge its existing investments against a decline in value, or to attempt to reduce the risk of missing a market or industry segment advance. In the event that the expected changes in interest rates or stock prices occur, the Fund may be able to offset the resulting adverse effect on the Fund by exercising or selling the options purchased. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise or liquidation of the option. Unless the price of the underlying security or level of the securities index changes by an amount in excess of the premium paid, the option may expire without value to the Fund.
The Fund may also purchase and write options in combination with each other to adjust the risk and return characteristics of certain portfolio security positions. This technique is commonly referred to as a "collar."
Options purchased or written by the Fund may be traded on the national securities exchanges or negotiated with a dealer. Options traded in the over-the-counter market may not be as actively traded as those on an exchange, so it may be more difficult to value such options. In addition, it may be difficult to enter into closing transactions with respect to such options. Such options and the securities used as "cover" for such options, unless otherwise indicated, would be considered illiquid securities.
In instances in which the Fund has entered into agreements with primary
dealers with respect to the over-the-counter options it has written, and such
agreements would enable the Fund to have an absolute right to repurchase at a
pre-established formula price the over-the-counter option written by it, the
Fund would treat as illiquid only securities equal in amount to the formula
price described above less the amount by which the option is "in-the-money,"
i.e., the price of the option exceeds the exercise price.
The Fund may purchase put and call options and write covered put and call options on foreign currencies for the purpose of protecting against declines in the dollar value of portfolio securities and against increases in the dollar cost of securities to be acquired. Such investment strategies will be used as a hedge and not for speculation. As in the case of other types of options, the writing of an option on foreign currency will constitute a hedge, however it differs in that it is only a partial hedge, up to the amount of the premium received. Moreover, the Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against fluctuations in exchange rates although, in the event of rate movements adverse to the Fund's position, it may forfeit the entire amount of the premium plus related transaction costs. Options on foreign currencies may be traded on the national securities exchanges or in the over-the-counter market. As described above, options traded in the over-the-market may not be as actively traded as those on an exchange, so it may be more difficult to value such options. In addition, it may be difficult to enter into closing transactions with respect to options traded over-the-counter.
Options are subject to certain risks, including the risk of imperfect correlation between the option and the Fund's other investments and the risk that there may not be a liquid secondary market for the option when the Fund seeks to hedge against adverse market movements. This may cause the Fund to lose the entire premium on purchase options or reduce its ability to effect closing transactions at favorable prices.
The Fund will not write options if, immediately after such sale, the aggregate value of the securities or obligations underlying the outstanding options exceeds 25% of the Fund's total assets. The Fund will not purchase options if, at the time of the investment, the aggregate premiums paid for outstanding options will exceed 5% of the Fund's total assets.
FUTURES AND FORWARD CONTRACTS. The Fund may purchase and sell futures contracts on debt securities and on indexes of debt securities to hedge against anticipated changes in interest rates that might otherwise have an adverse effect on the value of its assets or assets it intends to acquire. In addition, the Fund may purchase and sell stock index futures contracts to hedge the value of the portfolio against changes in market conditions. The Fund may also purchase put and call options on futures contracts and write "covered" put and call options on futures contracts in order to hedge against changes in interest rates or stock prices. Although the Fund is authorized to invest in futures contracts and related options with respect to non-U.S. instruments, it will limit such investments to those which have been approved by the Commodity Futures Trading Commission ("CFTC") for investment by U.S. investors. The Fund may enter into futures contracts and buy and sell related options, provided that the futures contracts and related options investments are made for "bona fide hedging" purposes, as defined under CFTC regulations. No more than 5% of the Fund's total assets will be com-
mitted to initial margin deposits required pursuant to futures contracts. Percentage investment limitations on the Fund's investment in options on futures contracts are set forth above under "Options."
To the extent that the Fund invests in securities denominated in foreign currencies, the value of the Fund's portfolio will be affected by changes in exchange rates between currencies (including the U.S. dollar), as well as by changes in the market value of the securities themselves. In order to mitigate the effects of such changes, the Fund may enter into futures contracts on foreign currencies (and related options) and may enter into forward contracts for the purchase or sale of a specific currency at a future date at a price set at the time of the contract. Forward 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 with respect to them.
In managing its currency exposure, the Fund may buy and sell currencies either in the spot (cash) market or in the forward market (through forward contracts generally expiring within one year). The Fund may also enter into forward contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When the 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 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 (or underlying positions, such as in an ADR) denominated or quoted in a foreign currency. Unlike futures contracts, forward contracts are generally individually negotiated and privately traded. A forward contract obligates the seller to sell a specific security or currency at a specified price on a future date, which may be any fixed number of days from the date of the contract. The Fund may enter into forward contracts for transaction hedging purposes with respect to all or a substantial portion of their trades. The Fund will not speculate in foreign exchange, nor commit a larger percentage of its total assets to foreign exchange hedges than the percentage of its total assets which it could invest in foreign securities.
There are risks associated with hedging transactions. During certain market conditions, a hedging transaction may not completely offset a decline or rise in the value of the Fund's portfolio securities or currency being hedged. In addition, changes in the market value of securities or currencies may differ substantially from the changes anticipated by the Fund when hedged positions were established. Successful use of hedging transactions is dependent upon AIM ability to predict correctly movements in the direction of the applicable markets. No assurance can be given that AIM/INVESCO'S judgment in this respect will be correct. Accordingly, the Fund may lose the expected benefit of hedging if markets move in an unanticipated manner. Moreover, in the futures and options on futures markets, it may not always be possible to execute a put or sell at the desired price, or to close out an open position due to market conditions, limits on open positions, and/or daily price fluctuations.
RISK FACTORS
Investors should consider carefully the following special factors before investing in the Fund.
FOREIGN SECURITIES. Investments by the Fund in foreign securities whether denominated in U.S. dollars or foreign currencies, may entail the following risks set forth below. Investments by the Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
CURRENCY RISK. The value of the Fund's foreign investments may be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security generally decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and tends to increase when the value of the U.S. dollar falls against such currency.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain are members of the European Economic and Monetary Union (the "EEMU"). The EEMU intends to establish a common European currency for participating countries which will be known as the "euro." It is anticipated that each participating country will supplement its existing currency with the euro on January 1, 1999, and will replace its existing currency with the euro on July 1, 2002. Any other European country which is a member of the EEMU may elect to participate in the EEMU and may supplement its existing currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties, including whether the payment and operational systems of banks and other financial institutions will be ready by January 1, 1999; how outstanding financial contracts will be treated after January 1, 1999; the establishment of exchange rates for existing currencies and the euro; and the creation of suitable clearing and settlement systems for the euro. These and other factors could cause market disruptions before or after the introduction of the euro and could adversely affect the value of securities held by the Fund.
POLITICAL AND ECONOMIC RISK. The economies of many of the countries in which the Fund may invest are not as developed as the United States economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Fund's investments.
REGULATORY RISK. Foreign companies 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, practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Fund may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Fund's shareholders.
MARKET RISK. The securities markets in many of the countries in which the Fund invests will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies and governments may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative difficulties (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.
In addition, there are risks associated with certain investment strategies employed by the Fund as discussed in the previous section.
MANAGEMENT
The overall management of the business and affairs of the Fund is vested with the Company's Board of Directors. The Board of Directors approves all significant agreements between the Fund and persons or companies furnishing services to the Fund or the Company, including the Master Advisory Agreement with AIM, the Master Distribution Agreement with A I M Distributors, Inc. ("AIM Distributors"), the Custodian Agreement with State Street Bank and Trust Company (the "Custodian"), and the Transfer Agency Agreement with State Street Bank and Trust Company (the "Transfer Agent"). The day-to-day operations of the Fund are delegated to its officers and to AIM, subject always to the objectives and policies of the Fund and to the general supervision of the Company's Board of Directors. Certain directors and officers of the Company are affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the parent corporation of AIM. AIM Management is a holding company engaged in the financial services business and is an indirect wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent investment management group engaged in institutional investment management and retail mutual fund businesses in the United States, Europe and the Pacific Region. Information concerning the Board of Directors may be found in the Statement of Additional Information.
For a discussion of AIM Management and its subsidiaries' Year 2000 Compliance Project, see "General Information -- Year 2000 Compliance Project."
INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173, serves as the investment advisor to the Fund pursuant to a master investment advisory agreement dated February 28, 1997 (the "Advisory Agreement"). AIM was organized in 1976, and, together with its subsidiaries, manages or advises approximately 90 investment company portfolios encompassing a broad range of investment objectives.
Under the terms of the Fund's Advisory Agreement, AIM supervises all aspects of the Fund's operations and provides investment advisory services to the Fund. The Advisory Agreement also provides that, upon the request of the Company's Board of Directors, AIM may perform or arrange for the provision of certain accounting and other administrative services to the Fund which are not required to be performed by AIM under the Advisory Agreement. Pursuant to a master administrative services agreement dated May 1, 1998 (the "Administrative Services Agreement") between the Company and AIM with respect to the Fund, AIM provides the services of the
Company's principal financial officer (including related office, facilities and equipment) and may provide other administrative services requested by the Company's Board of Directors from time to time. A master administrative services agreement, with substantially similar terms to the Administrative Services Agreement, was in effect prior to May 1, 1998. AIM is entitled to receive from the Fund reimbursement of its costs or such reasonable compensation as may be approved by the Company's Board of Directors.
For a discussion of AIM's brokerage allocation policies and practices, see "Portfolio Transactions and Brokerage" in the Statement of Additional Information. In accordance with policies established by the directors, AIM may pay brokerage commissions to broker-dealers that may be affiliated with the Company and may take into account sales of shares of the Fund and other funds advised by AIM in selecting broker-dealers to effect portfolio transactions on behalf of the Fund.
SUB-ADVISOR. INVESCO Asset Management Limited, 11 Devonshire Square, London, England EC2M4YR, serves as sub-advisor to the Fund pursuant to the Sub-Advisory Agreement between AIM and INVESCO. Under the terms of the Sub-Advisory Agreement, AIM has appointed INVESCO to provide certain investment advisory services for the Fund, subject to overall supervision by AIM and the Company's Board of Directors. INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC.
PORTFOLIO MANAGEMENT. AIM uses a team approach and a disciplined investment process in providing investment advisory services to all its accounts, including the Fund. AIM's investment staff consists of approximately 135 individuals. While individual members of AIM's investment staff are assigned primary responsibility for the day-to-day management of each of AIM's accounts, all accounts are reviewed on a regular basis by AIM's Investment Policy Committee to ensure that they are being invested in accordance with the account's and AIM's investment policies. The individuals who are primarily responsible for the day-to-day management of the Fund and their titles with AIM or its subsidiaries and the Fund, the length of time they have been responsible for the management, their years of investment experience and prior experience (if they have been with AIM for less than five years) are shown below:
Paul Griffiths, Michael Lindsell and John Nadell are primarily responsible for the day-to-day management of the Fund. Paul Griffiths is Head of Global Fixed Income for INVESCO (NY), Inc. and INVESCO GT Asset Management since 1997, and Portfolio Manager from 1994 to 1997. Prior to 1994, he was Global Bond Fund Manager for Lazard Investors from 1993 to 1994. Michael Lindsell has been Head of Investment Strategy for Global Equities for INVESCO (NY), Inc. and GT London since 1996. From 1992 to 1996, Mr. Lindsell was Chief Investment Officer for Japan for INVESCO GT Asset Management Asia Ltd. (Hong Kong) ("GT Asia") and Portfolio Manager for INVESCO (NY), Inc. Prior thereto, Mr. Lindsell was a Director of Warburg Asset Management (Tokyo). John Nadell has been a Portfolio Manager for INVESCO (NY), Inc. since July 1998 and for INVESCO GT Asset Management Japan Ltd. (Tokyo) ("GT Tokyo") since 1996. Mr. Nadell joined GT Tokyo in 1994 as an Investment Analyst. Prior thereto, Mr. Nadell was an Investment Analyst at Pacific Equity Management (Oakland, California) from 1990 to 1994.
ADVISORY FEES. As compensation for its services AIM is paid an investment advisory fee, which is calculated for the Fund at an annual rate of 1.00% of the Fund's average daily net assets. As compensation for its services, INVESCO receives a fee from AIM equal to 0.40% of the Fund's average daily net assets.
AIM may from time to time voluntarily waive or reduce its fees, while retaining its ability to be reimbursed for such fees prior to the end of each fiscal year. Any fee waivers will be shared proportionately by AIM and INVESCO. Fee waivers or reductions, other than those contained in the Advisory Agreement, may be modified or terminated at any time and without notice to investors.
ADMINISTRATOR. AIM provides various administrative services to the Company
pursuant to an Administrative Services Agreement. AIM provides the services of a
principal financial officer of the Company, who maintains the financial accounts
and books and records of the Company and the Fund, including the review of daily
net asset value calculations and the preparation of tax returns. The Fund
reimburses AIM for expenses incurred by AIM or its subsidiaries in providing
these services. AIM also provides, or assures that Participating Insurance
Companies will provide, certain services implementing the Company's funding
arrangements with Participating Insurance Companies. These services include:
establishment of compliance procedures; negotiation of participation agreements;
preparation of prospectuses, financial reports and proxy statements for existing
Contractowners; maintenance of master accounts; facilitation of purchases and
redemptions requested by Contractowners; distribution to existing Contractowners
of copies of prospectuses, proxy materials, periodic Fund reports and other
materials; maintenance of records; and Contractowner services and communication.
The Fund reimburses AIM for its costs in providing, or assuring that
Participating Insurance Companies provide, these services, in an amount up to
0.25% of the average net asset value of the Fund in excess of the net asset
value of the Fund. However, AIM does not currently seek reimbursement of (i) the
cost of the first three services listed above and (ii) the cost of any other
service in excess of the amount charged by Participating Insurance Companies.
DISTRIBUTOR. The Company has entered into a master distribution agreement, dated February 28, 1997 (the "Distribution Agreement"), with AIM Distributors, a registered broker-dealer and a wholly owned subsidiary of AIM, to act as the distributor of the shares of the Fund. The address of AIM Distributors is 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173. Certain directors and officers of the Company are affiliated with AIM Distributors and AIM Management. The Distribution Agreement provides that AIM Distributors has the exclusive right to distribute shares of the Fund to insurance company separate accounts.
PURCHASE AND REDEMPTION OF SHARES
The Company offers the shares of the Fund, 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 (the "Policies"). Each separate account contains divisions, and one of the divisions corresponds to the Fund. Net purchase payments under the Contracts and Policies are placed in one or more of the divisions of the relevant separate account and the assets of the division that corresponds to the Fund are invested in the shares of the Fund. Each separate account purchases and redeems shares of the Fund for its respective division at net asset value without sales or redemption charges.
The Company, in the future, may offer the shares of the Fund 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 Fund ordinarily effects orders to purchase or redeem its shares that are based on transactions under Policies or Contracts (e.g., purchase or premium payments, surrender or withdrawal requests, etc.) at the Fund's net asset value per share next computed on the day on which the separate account processes such transactions. The Fund effects orders to purchase or redeem its shares that are not based on such transactions at the Fund's net asset value per share next computed on the day on which the Fund receives the orders.
Please refer to the appropriate separate account prospectus related to your Contract for more information regarding the Contract.
The Company does not foresee any disadvantage to purchasers of Contracts or Policies (or to Plan participants) arising out of these arrangements. Nevertheless, differences in treatment under tax and other laws, as well as other considerations, could cause the interests of various purchasers of Contracts and Policies (and the interests of any Plan participants) to conflict. For example, violation of the federal tax laws by one separate account investing in the Company could cause the Contracts and Policies funded through another separate account to lose their tax-deferred status, unless remedial action were taken. If a material irreconcilable conflict arises between separate accounts (or Plans), a separate account (or Plan) may be required to withdraw its participation in the Fund. If it becomes necessary for any separate account (or Plan) to replace shares of the Fund with another investment, the Fund may have to liquidate portfolio securities on a disadvantageous basis. At the same time, the Company and the Participating Insurance Companies (and any Plans investing in the Company) are subject to conditions imposed by the Securities and Exchange Commission and designed to prevent or remedy any conflict of interest. In this connection, the Board of Directors has the obligation to monitor events to identify any material irreconcilable conflict that may possibly arise and to determine what action, if any, should be taken to remedy or eliminate the conflict.
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of the Fund will be determined as of the close of regular trading of the New York Stock Exchange ("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 a Fund share is determined as of the close of the NYSE on such day. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the NYSE. A "business day of a Fund" is any day on which the NYSE is open for business. It is expected that the NYSE will be closed during the next twelve months on Saturdays and Sundays and on the observed holidays of New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of the Fund is determined by subtracting the liabilities (e.g., the expenses) of the Fund from the assets of the Fund and dividing the result by the total number of shares outstanding of the Fund. The determination of the Fund's net asset value per share is made in accordance with generally accepted accounting principles.
VALUATION OF INVESTMENTS OF THE FUND. Among other items, the Fund's liabilities include accrued expenses and dividends payable, and its total assets include portfolio securities valued at their market value as well as income accrued but not received. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by or under the supervision of the Company's officers and in accordance with methods which are specifically authorized by the Board of Directors of the Company. Short-term obligations with maturities of 60 days or less are valued at amortized cost as reflecting fair value.
FUTURES CONTRACTS. Initial margin deposits made upon entering into futures contracts are recognized as assets due from the broker (the Fund's agent in acquiring the futures position). During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or
losses are incurred. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contract.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and distributes dividends representing net investment income annually. Substantially all net realized capital gains, if any, are distributed on an annual basis. All such distributions will be automatically reinvested, at the election of Participating Insurance Companies, in shares of the Fund at the net asset value determined on the reinvestment date.
TAX MATTERS. Each series of shares of the Company is treated as a separate association taxable as a corporation. The 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, the Fund will not be subject to federal income tax to the extent it distributes to its shareholders its net investment income and net capital gains.
In order to qualify as a regulated investment company, the Fund must satisfy certain requirements concerning the nature of its income, diversification of its assets and distribution of its income to shareholders. In order to ensure that individuals holding the Contracts or Policies whose assets are invested in the Fund will not be subject to federal income tax on distributions made by the Fund prior to the receipt of payments under the Contracts or Policies, the Fund intends to comply with additional requirements of Section 817(h) of the Code relating to both diversification of its assets and eligibility of an investor to be its shareholder. Certain of these requirements in the aggregate may limit the ability of the Fund to engage in transactions involving options, futures contracts, forward contracts and foreign currency and related deposits.
The Fund's transactions in non-equity options, forward contracts, futures contracts and foreign currency will be subject to special tax rules, the effect of which may be to accelerate income to the Fund, defer Fund losses, cause adjustments in the holding periods of fund securities and convert short-term capital losses into long-term capital losses. These losses could therefore affect the amount, timing and character of distributions.
The holding of the foreign currencies and investments by the Fund in certain "passive foreign investment companies" may be limited in order to avoid imposition of a tax on the Fund.
The Fund may be subject to foreign withholding taxes on income from its investments in foreign securities. In any year in which more than 50% in value of the 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.
Holders of Contracts and Policies under which assets are invested in the Fund should refer to the prospectus for the Contracts and Policies for information regarding the tax aspects of ownership of such Contracts and Policies.
Shareholders should also note that the IRS is currently considering whether and when the introduction of a single European currency (euro) in 1999 will cause gain or loss to be realized on foreign financial instruments denominated in certain European currencies, which could affect the amount of distributions made by the Fund investing in such instruments.
GENERAL INFORMATION
ORGANIZATION OF THE COMPANY. The Company was organized on January 22, 1993 as a Maryland corporation, and is registered with the Securities and Exchange Commission as an open-end, series, management investment company. The Company currently consists of fifteen separate portfolios.
The authorized capital stock of the Company consists of 4,000,000,000 shares of common stock with a par value of $.001 per share, of which 250,000,000 shares are classified AIM V.I. AGGRESSIVE GROWTH FUND shares, 250,000,000 shares are classified AIM V.I. BALANCED FUND shares, 250,000,000 shares are classified AIM V.I. CAPITAL APPRECIATION FUND shares, 250,000,000 shares are classified AIM V.I. CAPITAL DEVELOPMENT FUND shares, 250,000,000 shares are classified AIM V.I. DIVERSIFIED INCOME FUND shares, 250,000,000 shares are classified AIM V.I. GLOBAL GROWTH AND INCOME FUND, 250,000,000 shares are classified AIM V.I. GLOBAL UTILITIES FUND shares, 250,000,000 shares are classified AIM V.I. GOVERNMENT SECURITIES FUND shares, 250,000,000 are classified AIM V.I. GROWTH FUND shares, 250,000,000 shares are classified AIM V.I. GROWTH AND INCOME FUND shares, 250,000,000 shares are classified AIM V.I. HIGH YIELD FUND shares, 250,000,000 shares are classified AIM V.I. INTERNATIONAL EQUITY FUND shares, 250,000,000 shares are classified AIM V.I. MONEY MARKET FUND shares, 250,000,000 shares are classified AIM V.I. TELECOMMUNICATIONS FUND, 250,000,000 shares are classified AIM V.I. VALUE FUND shares, and the balance of which are unclassified.
The shares of each Fund have equal rights with respect to voting, except that
(i) the holders of shares of a particular Fund voting together will have the
exclusive right to vote on matters (such as advisory fees) pertaining solely to
that Fund, and (ii) the holders of
shares of a particular Fund will have the exclusive right to vote on matters pertaining to distribution plans, if any such plans are adopted, relating solely to such Fund. Shareholders of the Fund do not have cumulative voting rights.
The Company understands that insurance company separate accounts owning shares of the Fund will vote their shares in accordance with instructions received from Policy or Contract owners, annuitants and beneficiaries. Fund shares held by a registered 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 registered separate account that are not attributable to Policies or 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 Fund in its own right, it may elect to do so, subject to the then current interpretation of the 1940 Act and the rules thereunder.
Under Maryland law and the Company's By-Laws, the Company need not hold an annual meeting of shareholders unless a meeting is required under the 1940 Act to elect directors. Shareholders may remove directors from office, and a meeting of shareholders may be called at the request of the holders of 10% or more of the Company's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Company's shares. The Fund's shares, when issued, are fully paid and nonassessable.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110, serves as custodian for the Fund's portfolio securities and cash and also serves as the transfer agent and as dividend paying agent.
LEGAL COUNSEL. Freedman, Levy, Kroll & Simonds, Washington, D.C. has advised the Company on certain federal securities law matters.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the Fund, AIM Management and its subsidiaries rely on both internal software systems as well as external software systems provided by third parties. Many software systems in use today are unable to distinguish between the year 2000 from the year 1900. This defect if not cured will likely adversely affect the services that AIM Management, its subsidiaries and other service providers provide the Fund and its shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm Year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the Fund will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors should know about the Fund prior to investing. A Statement of Additional Information has been filed with the SEC and is available upon request and without charge by writing or calling AIM Distributors. This Prospectus omits certain information contained in the registration statement filed with the SEC. Copies of the registration statement, including items omitted from this Prospectus, may be obtained from the SEC by paying the charges prescribed under its rules and regulations.
DESCRIPTION OF CORPORATE BOND RATINGS
Investment grade debt securities are those rating categories indicated by an asterisk (*).
Moody's Investors Service, Inc.'s corporate bond ratings are as follows:
*Aaa -- Bonds 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 edge." 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 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. They 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 risks appear somewhat larger than in Aaa securities.
*A -- Bonds 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 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 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 other good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B -- Bonds 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 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 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 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 B in its corporate bond rating system. The modifier indicates that the security 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 rating category.
Standard and Poor's Ratings Services classifications are as follows:
*AAA -- Debt rated "AAA" has the highest rating assigned by Standard & Poor's. 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 small degree.
*A -- Debt rated "A" has a strong capacity to pay interest and repay principal 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" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher categories.
BB, B, CCC, CC, C -- Debt rated "BB", "B", "CCC", "CC" and "C" is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "C" the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
BB -- Debt rated "BB" has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The "BB" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BBB --" rating.
B -- Debt rated "B" has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The "B" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BB" or "BB --" rating.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The "CCC" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "B" or "B --" rating.
CC -- The rating "CC" is typically applied to debt subordinated to senior debt that is assigned an actual or implied "CCC" rating.
C -- The rating "C" is typically applied to debt subordinated to senior debt which is assigned an actual or implied "CCC --" debt rating. The "C" rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued.
C1 -- The rating "C1" is reserved for income bonds on which no interest is being paid.
D -- Debt rated "D" is in payment default. The "D" rating category is used when interest payments or principal or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The rating from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major categories.
Duff & Phelps fixed-income ratings are as follows:
*AAA -- Highest credit quality. The risk factors are negligible, being only slightly more than for risk-free U.S. Treasury debt.
*AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.
*A+, A, A- -- Protection factors are average but adequate. However, risk factors are more variable and greater in periods of economic stress.
*BBB+, BBB, BBB- -- Below average protection factors but still considered sufficient for prudent investment. Considerable variability in risk during economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet obligations when due. Present or prospective financial protection factors fluctuate according to industry conditions or company fortunes. Overall quality may move up or down frequently within this category.
B+, B, B- -- Below investment grade and possessing risk that obligations will not be met when due. Financial protection factors will fluctuate widely according to economic cycles, industry conditions and/or company fortunes. Potential exists for frequent changes in quality rating within this category or into a higher or lower quality rating grade.
CCC -- Well below investment grade securities. May be in default or have considerable uncertainty as to timely payment of interest, preferred dividends and/or principal. Protection factors are narrow and risk can be substantial with unfavorable economic/industry conditions, and/or with unfavorable company developments.
Fitch Investors Service, Inc.'s bond ratings are as follows:
*AAA -- Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
*AA -- Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated "F-1+".
*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 satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
BB -- Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue.
CCC -- Bonds have certain identifiable characteristics which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment.
CC -- Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time.
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 should be valued on the basis of their ultimate 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 the "AAA", "DDD", "DD", or "D" categories.
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money Market Obligations, and the Fund reserves the right to invest in Money Market Obligations other than those listed below:
1. GOVERNMENT OBLIGATIONS.
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes, and bonds issued by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such as the Government National Mortgage Association have been established as instrumentalities of the U.S. Government to supervise and finance certain types of activities. Issues of these agencies, while not direct obligations of the U.S. Government, are either backed by the full faith and credit of the United States or are guaranteed by the Treasury or supported by the issuing agencies' right to borrow from the Treasury.
FOREIGN GOVERNMENT OBLIGATIONS -- These are U.S. dollar denominated obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions, agencies or instrumentalities that are determined by the Fund's investment advisor to be of comparable quality to the other obligations in which the Fund may invest. Such securities also include debt obligations of supranational entities. Supranational entities include international organizations designated or supported by governmental entities to promote economic reconstruction or development and international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the World Bank), the European Coal and Steel Community, the Asian Development Bank and the InterAmerican Development Bank. The percentage of the Fund's assets invested in securities issued by foreign governments will vary depending on the relative yields of such securities, the economic and financial markets of the countries in which the investments are made and the interest rate climate of such countries.
2. BANK INSTRUMENTS.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and accepted by a commercial bank. It is used by corporations to finance the shipment and storage of goods and to furnish dollar exchange. Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT -- 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.
TIME DEPOSITS -- 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.
EURODOLLAR OBLIGATIONS -- A Eurodollar obligation is a U.S. dollar-denominated obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS -- A Yankee dollar obligation is a U.S. dollar-denominated obligation issued by a domestic branch of a foreign bank.
3. COMMERCIAL INSTRUMENTS.
COMMERCIAL PAPER -- The term used to designate unsecured short-term promissory notes issued by corporations and other entities. Maturities on these issues vary from a few days to nine months.
VARIABLE RATE MASTER DEMAND NOTES -- 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 foregoing quality criteria as discussed in the Statement of Additional Information under "Investment Programs." The interest rate on a variable rate master demand note is periodically redetermined according to a prescribed formula. Although there is no secondary market in master demand notes, the payee may demand payment of the principal amount of the note on relatively short notice.
4. REPURCHASE AGREEMENTS.
A repurchase agreement is a contractual undertaking whereby the seller of securities (limited to U.S. Government securities, including securities issued or guaranteed by the U.S. Treasury or the various agencies and instrumentalities of the U.S. Government) agrees to repurchase the securities at a specified price on a future date determined by ions.
5. 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.
[AIM LOGO]
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. TELECOMMUNICATIONS FUND
PROSPECTUS
, 1998
AIM V.I. TELECOMMUNICATIONS FUND (the "Fund") is one of fifteen
investment portfolios comprising series of AIM Variable Insurance
Funds, Inc. (the "Company"), an open-end, series, management
investment company. Shares of the Fund are currently offered only to
insurance company separate accounts to fund the benefits of variable
annuity contracts and variable life insurance policies. Shares of the
Fund may be offered, in the future, to certain pension or retirement
plans. The Fund is a diversified portfolio which seeks long-term
growth of capital. The address for the Company is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173, and its telephone number is
(713) 626-1919.
This prospectus sets forth basic information about the Fund that prospective investors should know before investing. It should be read and retained for future reference. A Statement of Additional Information dated , 1998, has been filed with the United States Securities and Exchange Commission ("SEC") and is incorporated herein by reference. The Statement of Additional Information is available without charge upon written request to the Company at the address shown above. The SEC maintains a Web site at http://www.sec.gov that contains the Statement of Additional Information, material incorporated by reference, and other information regarding the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUND'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE FUND'S SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
TABLE OF CONTENTS
PAGE
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About the Fund................................ 2
Performance................................... 2
Investment Objective and Program.............. 3
Risk Factors.................................. 8
Management.................................... 9
Purchase and Redemption of Shares............. 10
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PAGE
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Determination of Net Asset Value.............. 11
Dividends, Distributions and Tax Matters...... 11
General Information........................... 12
APPENDIX A.................................... A-1
APPENDIX B.................................... B-1
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ABOUT THE FUND
THE FUND, AIM V.I. AGGRESSIVE GROWTH FUND, AIM V.I. BALANCED FUND, AIM V.I. CAPITAL APPRECIATION FUND, AIM V.I. CAPITAL DEVELOPMENT FUND, AIM V.I. DIVERSIFIED INCOME FUND, AIM V.I. GLOBAL GROWTH AND INCOME FUND, AIM V.I. GLOBAL UTILITIES FUND, AIM V.I. GOVERNMENT SECURITIES FUND, AIM V.I. GROWTH FUND, AIM V.I. GROWTH AND INCOME FUND, AIM V.I. HIGH YIELD FUND, AIM V.I. INTERNATIONAL EQUITY FUND, AIM V.I. MONEY MARKET FUND and AIM V.I. VALUE FUND (collectively, the "Funds") are separate series of shares of the Company, a Maryland corporation organized on January 22, 1993 and registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company (see "General Information -- Organization of the Company"). The Fund has its own investment objective and policies designed to meet specific investment goals, operates as a non-diversified, open-end management investment company and expects to be treated as a regulated investment company for federal income tax purposes.
The Fund invests in securities of different issuers and industry classifications in an attempt to spread and reduce the risks inherent in all investing. The Fund continuously offers new shares for sale to separate accounts of participating life insurance companies ("Participating Insurance Companies"), and stands ready to redeem its outstanding shares for cash at their net asset value. A I M Advisors, Inc. ("AIM"), the investment advisor for the Fund, continuously reviews and, from time to time, changes the portfolio holdings of the Fund in pursuit of the Fund's objective.
PERFORMANCE
The Fund's performance may be quoted in advertising in terms of total return. See the Statement of Additional Information for further details concerning performance comparisons used in advertisements by the Fund.
The Fund's total return shows its overall change in value, including changes in share price and assuming all the Fund's dividends and capital gain distributions are reinvested. A cumulative total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical annually compounded return that would have produced the same cumulative total return if the Fund's performance had been constant over the entire period. Average annual total return is computed in accordance with a standardized formula described in the Statement of Additional Information. BECAUSE AVERAGE ANNUAL TOTAL RETURNS TEND TO EVEN OUT VARIATIONS IN THE FUND'S RETURN, INVESTORS SHOULD RECOGNIZE THAT SUCH RETURNS ARE NOT THE SAME AS ACTUAL YEAR-BY-YEAR RESULTS. To illustrate the components of overall performance, the Fund may separate its cumulative and average annual total returns into income results and capital gain or loss.
From time to time and in its discretion, AIM may waive all or a portion of its advisory fees and/or assume certain expenses of the Fund. Such a practice will have the effect of increasing the Fund's total return. Quotations of the Fund's performance will not reflect charges levied at the separate account level.
The performance of the Fund will vary from time to time and past results are not necessarily indicative of future results. The Fund's performance is a function of its portfolio management in selecting the type and quality of portfolio securities and is affected by operating expenses of the Fund and market conditions. A shareholder's investment in the Fund is not insured or guaranteed. These factors should be carefully considered by the investor before making an investment in the Fund.
INVESTMENT OBJECTIVE AND PROGRAM
Set forth in this section is a statement of the Fund's investment objective along with a description of its investment policies, strategies and practices. The investment objective of the Fund is deemed to be a fundamental policy and, therefore, unless permitted by law, may not be changed without the approval of a majority of the Fund's outstanding shares (within the meaning of the 1940 Act). The Fund's investment policies, strategies and practices are not fundamental. The Board of Directors of the Company reserves the right to change any of these non-fundamental investment policies, strategies or practices without shareholder approval. However, shareholders will be notified before any material change in the investment policies become effective. The Fund has adopted investment restrictions, some of which are fundamental and cannot be changed without shareholder approval. See "Investment Restrictions" in the Statement of Additional Information. Individuals considering the purchase of shares of the Fund should recognize that there are risks in the ownership of any security and that no assurance can be given that the Fund will achieve its investment objective.
INVESTMENT OBJECTIVE. The Fund's investment objective is long-term growth of capital. It seeks its objective by investing primarily in equity securities of companies throughout the world engaged in the development, manufacture or sale of telecommunications services or equipment.
At least 65% of the Fund's total assets normally will be invested in common and preferred stocks and warrants to acquire such stocks issued by telecommunications companies. A "telecommunications company" is an entity in which (i) at least 50% of either its revenues or earnings was derived from telecommunications activities, or (ii) at least 50% of its assets was devoted to telecommunications activities, based on the issuer's most recent fiscal year. The remainder of the assets of the Fund may be invested in debt securities issued by telecommunications companies and/or equity and debt securities of companies outside of the telecommunications industry which, in the opinion of AIM, stand to benefit from developments in the telecommunications industries. (For a description of the various rating categories of corporate debt securities in which the Fund may invest, see Appendix A to this Prospectus). The Fund may, in pursuit of its objective, invest up to 5% of its total assets in below investment grade debt securities. See "Risk Factors -- Non-Investment Grade Debt Securities" for more information concerning the risk factors associated with investing in such securities.
The Fund may invest substantially in securities denominated in one or more currencies. Under normal conditions, the Fund invests in the equity securities of issuers located in at least three different countries, including the United States. No more than 40% of the Fund's total assets will be invested in securities of issuers in any one country other than the United States.
Telecommunications companies cover a variety of sectors, ranging from companies concentrating on established technologies to those primarily engaged in emerging or developing technologies. The characteristics of companies focusing on the same technology will vary among countries depending upon the extent to which the technology is established in the particular country. AIM will allocate the Fund's investments among these sectors depending upon its assessment of their relative long-term growth potentials.
The Fund will invest primarily in issuers engaged in designing, developing or providing the following products and services: communications equipment and services (including equipment and services for both data and voice transmission); electronic components and equipment; broadcasting (including television and radio, satellite, microwave and cable television and narrowcasting); computer equipment, mobile communications and cellular radio/paging; electronic mail; local and wide area networking and linkage of word and data processing systems; publishing and information systems; videotext and teletext; and emerging technologies combining telephone, television and/or computer systems.
Telecommunications is a global industry with significant, growing markets outside of the United States. A sizeable proportion of the companies that comprise the telecommunications industry are headquartered outside of the United States. From time to time, however, a significant portion of the Fund's assets may be invested in the securities of domestic issuers.
AIM uses its financial expertise in markets located throughout the world in attempting to identify those countries and telecommunications companies then providing the greatest potential for long-term capital appreciation. In this fashion, AIM and the Fund seek to enable shareholders to capitalize on the substantial investment opportunities and the potential for long-term growth of capital presented by the global telecommunications industry. AIM will allocate the Fund's assets among securities of countries and in currency denominations and industry sectors where opportunities for meeting the Fund's investment objective are expected to be the most attractive.
AIM believes that there are opportunities for continued growth in demand for components, products, media and systems to collect, store, retrieve, transmit, process, distribute, record, reproduce and use information. The pervasive societal impact of communications and information technologies has been accelerated by the lower costs and higher efficiencies that result from the blending of computers with telecommunications systems. Accordingly, companies engaged in the production of methods for using electronic and, potentially, video technology to communicate information are expected to be important in the Fund's portfolio. Older technologies, such as photography and print, also may be represented, however.
CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES. The Fund has the flexibility to
invest, to the extent described below, in a variety of instruments designed to
enhance its investment capabilities. The Fund may: (1) invest in money market
obligations, foreign securities (including ADRs, EDRs and other similar
securities), repurchase agreements, reverse repurchase agreements, taxable
municipal securities, illiquid securities and Rule 144A securities; (2) purchase
or sell securities on a delayed delivery or when-issued basis and may borrow
money; and (3) lend portfolio securities and make short sales "against the box."
A short sale is
"against the box" to the extent that the Fund contemporaneously owns or has the right to obtain securities identical to those sold short without payment of any further consideration.
The Fund may write (i.e., sell) "covered" put and call options and buy put and call options on domestic and foreign securities, securities indices and currencies. The Fund may use exchange-traded financial futures contracts, options thereon, and forward contracts as a hedge to protect against possible changes in market values. A brief description of these investment instruments and their risks appears below. See "Hedging and Other Investment Techniques" in the Statement of Additional Information for more detailed information.
MONEY MARKET OBLIGATIONS. Bankers' acceptances, certificates of deposit, repurchase agreements, time deposits, variable rate master demand notes, taxable municipal securities and commercial paper, U.S. Government direct obligations, including U.S. Treasury obligations and repurchase agreements secured by such obligations, and U.S. Government agencies' securities are collectively referred to as "Money Market Obligations," are briefly described in Appendix B to this Prospectus, and are more fully described in the Statement of Additional Information. When deemed appropriate for temporary or defensive purposes, the Fund may hold cash or cash equivalent Money Market Obligations. Although the Fund is not required by regulation or fundamental policy to limit such investments to those which, at the date of purchase, are "First Tier" securities as that term is defined in Rule 2a-7 under the 1940 Act, it is the current intention of AIM to limit such investments to those securities which, at the time of purchase, are considered "First Tier" securities or securities which AIM has determined to be of comparable credit quality. To the extent the Fund invests to a significant degree in these instruments, its ability to achieve its investment objectives may be adversely affected.
In addition to the Money Market Obligations described above, as a temporary or defensive measure, and without regard to its investment objective, AIM may invest all or substantially all of the assets of the Fund in cash or Money Market Obligations, including repurchase agreements, denominated in foreign currencies.
CONVERTIBLE SECURITIES. To the extent consistent with its investment objective, the Fund may invest in convertible securities. Convertible securities usually consist of corporate debt securities or preferred stock that may in certain circumstances be converted into a predetermined number of shares of another form of that issuer's equity, usually common stock. Convertible securities consequently often involve attributes of both debt and equity instruments, and investment in such securities requires analysis of both credit and stock market risks. Convertible securities rank senior to common stock in a corporation's capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities may be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. Although the Fund will only purchase convertible securities that AIM considers to have adequate protection parameters, including an adequate capacity to pay interest and repay principal in a timely manner, the Fund invests in such securities without regard to corporate bond ratings.
FOREIGN SECURITIES. To the extent consistent with its investment objective, the Fund may invest in foreign securities. It is not anticipated that such foreign securities will constitute more than 75% of the value of the total assets of the Fund.
The Fund may invest up to 100% of its total assets in securities of foreign companies, including investments in ADRs, EDRs and other securities representing underlying securities of foreign issuers. Under normal market conditions, the Fund will be invested in securities of issuers located in at least three different countries, one of which will be the United States. Investments in securities of issuers in any one country, other than the United States, will represent no more than 40% of the Fund's total assets. Also, investments in securities of foreign issuers may involve other risks which are not ordinarily associated with investments in domestic issuers. See "Risk Factors" in this Prospectus. In addition, investors should also be aware that the Fund may invest in companies located within emerging or developing countries.
ADRS AND EDRS. To the extent consistent with its investment objective, the Fund may also invest in securities which are in the form of ADRs, EDRs or other securities representing underlying securities of foreign issuers. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. ADRs, EDRs and other securities representing underlying securities of foreign issuers are treated as foreign securities for purposes of determining the applicable limitation on investment in foreign securities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
institutions believed by the Company's Board of Directors to present minimal
credit risk. A repurchase agreement is an instrument under which the Fund
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the sellers' failure to repurchase the
obligation in accordance with the terms of the agreement), the Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. Repurchase agreements are considered to be
loans by the Fund under the 1940 Act. Repurchase agreements will be secured by
U.S. Treasury securities, U.S. Government agency securities (including, but not
limited to, those which have been stripped of their interest payments and
mortgage-backed securities) and commercial paper. For additional information on
the use of repurchase agreements, see the Statement of Additional Information.
REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements involve the sale
by the Fund of a portfolio security at an agreed upon price, date and interest
payment. The 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; (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, the Fund will segregate liquid assets having a
dollar value equal to the repurchase price. The Fund will use reverse repurchase
agreements when the interest income to be earned from the securities that would
otherwise have to be liquidated to meet redemption requests is greater than the
interest expense of the reverse repurchase transaction. The Fund may enter into
reverse repurchase agreements in amounts not exceeding 33 1/3% of the value of
its total assets. Reverse repurchase agreements involve the risk that the market
value of securities retained by the Fund in lieu of liquidation may decline
below the repurchase price of the securities sold by the Fund which it is
obligated to repurchase. This risk, if encountered, could cause a reduction in
the net asset value of the Fund's shares. Reverse repurchase agreements are
considered to be borrowings under the 1940 Act. See "Borrowing" in this
Prospectus for percentage limitations on borrowings.
DELAYED DELIVERY AGREEMENTS AND WHEN-ISSUED SECURITIES. The Fund may enter into delayed delivery agreements and may purchase securities on a "when-issued" basis.
Delayed delivery agreements are commitments by the Fund to dealers or issuers to acquire securities beyond the customary settlement date for such securities. These commitments fix the payment price and interest rate to be received on the investment. Delayed delivery agreements will not be used as a speculative or leverage technique. Rather, from time to time, the Fund's investment advisor can anticipate that cash for investment purposes will result from scheduled maturities of existing portfolio instruments or from net sales of shares of the Fund and may enter into delayed delivery agreements to assure that the Fund will be as fully invested as possible in instruments meeting its investment objective.
Debt securities are sometimes offered on a "when-issued" basis; that is, 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 (normally within forty-five days after the date of the transaction). The payment obligation and the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. The Fund will only make commitments to purchase such debt securities with the intention of actually acquiring the securities, but the Fund may sell these securities before the settlement date if it is deemed advisable.
If the Fund enters into a delayed delivery agreement or purchases a when-issued security, the Fund will segregate liquid assets in an amount equal to its delayed delivery agreements or when-issued commitments. If the market value of such securities declines, additional cash or securities will be segregated on a daily basis so that the market value of the account will equal the amount of the Fund's delayed delivery agreements and when-issued commitments. To the extent that funds are segregated, they will not be available for new investment or to meet redemptions. Investment in securities on a when-issued basis and use of delayed delivery agreements may increase the Fund's exposure to market fluctuation, or may increase the possibility that the Fund will incur a short-term loss, if the Fund must engage in portfolio transactions in order to honor a when-issued commitment or accept delivery of a security under a delayed delivery agreement. The Fund will employ techniques designed to minimize these risks. No additional delayed delivery agreements or when-issued commitments will be made by the Fund if, as a result, more than 25% of the Fund's net assets would become so committed.
BORROWING. The Fund may borrow money to a limited extent from banks (including the Fund's custodian bank) for temporary or emergency purposes subject to the limitations under the 1940 Act. The Fund will restrict borrowings and reverse repurchase agreements to an aggregate of 33 1/3% of the Fund's total assets at the time of the transaction. The Fund will not purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets.
ILLIQUID SECURITIES. The Fund will not invest more than 15% of its net assets in illiquid securities, including restricted securities which are illiquid.
RULE 144A SECURITIES. The Fund may invest in securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). These securities are sometimes referred to as private placements. Although securities which may be resold only to "qualified institutional buyers" in accordance with the provisions of Rule 144A under the 1933 Act are technically considered "restricted securities," the Fund may purchase Rule 144A securities without regard to the limitation on investments in illiquid securities described above under "Illiquid Securities," provided that a determination is made that such securities have a readily available trading market. AIM will determine the liquidity of Rule 144A securities under the supervision of the Company's Board of Directors. The liquidity of Rule 144A securities will be monitored by AIM and, if as a result of changed conditions, it is determined that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid securities will be reviewed to determine what, if any, action is required to assure that the Fund does not exceed its applicable percentage limitation for investments in illiquid securities.
LENDING OF PORTFOLIO SECURITIES. The Fund may, from time to time, lend securities from its portfolio, with a value not exceeding 33 1/3% of its total assets, to banks, brokers and other financial institutions, and receive in return collateral in the form of liquid assets which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. During the period of the loan, the Fund receives the income on both the loaned securities and the collateral (or a fee) and thereby
increases its yield. In the event that the borrower defaults on its obligation to return loaned securities because of insolvency or otherwise, the Fund could experience delays and costs in gaining access to the collateral and could suffer a loss to the extent that the value of the collateral falls below the market value of the loaned securities.
SHORT SALES. The Fund may make short sales "against the box." A short sale is a transaction in which a party sells a security it does not own in anticipation of a decline in the market value of that security. A short sale is "against the box" to the extent that the Fund contemporaneously owns or has the right to obtain securities identical to those sold short without payment of any further consideration. The Fund will enter into such transactions only to the extent the aggregate value of all securities sold short does not represent more than 10% of the Fund's total assets at any given time.
OPTIONS. The Fund may write (sell) "covered" put and call options and buy put and call options, including securities index and foreign currency options. A call option is a contract that gives to the holder the right to buy a specified amount of the underlying security at a fixed or determinable price (called the exercise or strike price) upon exercise of the option. A put option is a contract that gives the holder the right to sell a specified amount of the underlying security at a fixed or determinable price upon exercise of the option. In the case of index options, exercises are settled through the payment of cash rather than the delivery of property. A call option is covered if, for example, the Fund owns the underlying security covered by the call or, in the case of a call option on an index, holds securities the price changes of which are expected to substantially replicate the movement of the index. A put option is covered if, for example, the Fund maintains in a segregated account liquid assets with a value equal to the exercise price of the put option.
The Fund may write call options on securities or securities indexes for the purpose of increasing its return (through receipt of premiums) or to provide a partial hedge against a decline in the value of its portfolio securities or both. The Fund may write put options on securities or securities indexes in order to earn additional income or (in the case of put options written on individual securities) to purchase the underlying security at a price below the current market price. If the Fund writes an option which expires unexercised or is closed out by the Fund at a profit, it will retain all or part of the premium received for the option, which will increase its gross income. If the price of the underlying security moves adversely to the Fund's position, the option may be exercised and the Fund will be required to sell or purchase the underlying security at a disadvantageous price, or, in the case of index options, deliver an amount of cash, which loss may only be partially offset by the amount of premium received.
The Fund may also purchase put or call options on securities and securities indexes in order to hedge against changes in interest rates or stock prices which may adversely affect the prices of securities that the Fund wants to purchase at a later date, to hedge its existing investments against a decline in value, or to attempt to reduce the risk of missing a market or industry segment advance. In the event that the expected changes in interest rates or stock prices occur, the Fund may be able to offset the resulting adverse effect on the Fund by exercising or selling the options purchased. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise or liquidation of the option. Unless the price of the underlying security or level of the securities index changes by an amount in excess of the premium paid, the option may expire without value to the Fund.
The Fund may also purchase and write options in combination with each other to adjust the risk and return characteristics of certain portfolio security positions. This technique is commonly referred to as a "collar."
Options purchased or written by the Fund may be traded on the national securities exchanges or negotiated with a dealer. Options traded in the over-the-counter market may not be as actively traded as those on an exchange, so it may be more difficult to value such options. In addition, it may be difficult to enter into closing transactions with respect to such options. Such options and the securities used as "cover" for such options, unless otherwise indicated, would be considered illiquid securities.
In instances in which the Fund has entered into agreements with primary
dealers with respect to the over-the-counter options it has written, and such
agreements would enable the Fund to have an absolute right to repurchase at a
pre-established formula price the over-the-counter option written by it, the
Fund would treat as illiquid only securities equal in amount to the formula
price described above less the amount by which the option is "in-the-money,"
i.e., the price of the option exceeds the exercise price.
The Fund may purchase put and call options and write covered put and call options on foreign currencies for the purpose of protecting against declines in the dollar value of portfolio securities and against increases in the dollar cost of securities to be acquired. Such investment strategies will be used as a hedge and not for speculation. As in the case of other types of options, the writing of an option on foreign currency will constitute a hedge, however it differs in that it is only a partial hedge, up to the amount of the premium received. Moreover, the Fund could be required to purchase or sell foreign currencies at disadvantageous exchange rates, thereby incurring losses. The purchase of an option on foreign currency may constitute an effective hedge against fluctuations in exchange rates although, in the event of rate movements adverse to the Fund's position, it may forfeit the entire amount of the premium plus related transaction costs. Options on foreign currencies may be traded on the national securities exchanges or in the over-the-counter market. As described above, options traded in the over-the-market may not be as actively traded as those on an exchange, so it may be more difficult to value such options. In addition, it may be difficult to enter into closing transactions with respect to options traded over-the-counter.
Options are subject to certain risks, including the risk of imperfect correlation between the option and the Fund's other investments and the risk that there may not be a liquid secondary market for the option when the Fund seeks to hedge against adverse market movements. This may cause the Fund to lose the entire premium on purchase options or reduce its ability to effect closing transactions at favorable prices.
The Fund will not write options if, immediately after such sale, the aggregate value of the securities or obligations underlying the outstanding options exceeds 25% of the Fund's total assets. The Fund will not purchase options if, at the time of the investment, the aggregate premiums paid for outstanding options will exceed 5% of the Fund's total assets.
FUTURES AND FORWARD CONTRACTS. The Fund may purchase and sell futures contracts on debt securities and on indexes of debt securities to hedge against anticipated changes in interest rates that might otherwise have an adverse effect on the value of its assets or assets it intends to acquire. In addition, the Fund may purchase and sell stock index futures contracts to hedge the value of the portfolio against changes in market conditions. The Fund may also purchase put and call options on futures contracts and write "covered" put and call options on futures contracts in order to hedge against changes in interest rates or stock prices. Although the Fund is authorized to invest in futures contracts and related options with respect to non-U.S. instruments, it will limit such investments to those which have been approved by the Commodity Futures Trading Commission ("CFTC") for investment by U.S. investors. The Fund may enter into futures contracts and buy and sell related options, provided that the futures contracts and related options investments are made for "bona fide hedging" purposes, as defined under CFTC regulations. No more than 5% of the Fund's total assets will be committed to initial margin deposits required pursuant to futures contracts. Percentage investment limitations on the Fund's investment in options on futures contracts are set forth above under "Options."
To the extent that the Fund invests in securities denominated in foreign currencies, the value of the Fund's portfolio will be affected by changes in exchange rates between currencies (including the U.S. dollar), as well as by changes in the market value of the securities themselves. In order to mitigate the effects of such changes, the Fund may enter into futures contracts on foreign currencies (and related options) and may enter into forward contracts for the purchase or sale of a specific currency at a future date at a price set at the time of the contract. Forward 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 with respect to them.
In managing its currency exposure, the Fund may buy and sell currencies either in the spot (cash) market or in the forward market (through forward contracts generally expiring within one year). The Fund may also enter into forward contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When the 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 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 (or underlying portfolio positions, such as in an ADR) denominated or quoted in a foreign currency. Unlike futures contracts, forward contracts are generally individually negotiated and privately traded. A forward contract obligates the seller to sell a specific security or currency at a specified price on a future date, which may be any fixed number of days from the date of the contract. The Fund may enter into forward contracts for transaction hedging purposes with respect to all or a substantial portion of their trades. The Fund will not speculate in foreign exchange, nor commit a larger percentage of its total assets to foreign exchange hedges than the percentage of its total assets which it could invest in foreign securities.
There are risks associated with hedging transactions. During certain market conditions, a hedging transaction may not completely offset a decline or rise in the value of the Fund's portfolio securities or currency being hedged. In addition, changes in the market value of securities or currencies may differ substantially from the changes anticipated by the Fund when hedged positions were established. Successful use of hedging transactions is dependent upon AIM's ability to predict correctly movements in the direction of the applicable markets. No assurance can be given that AIM's judgment in this respect will be correct. Accordingly, the Fund may lose the expected benefit of hedging if markets move in an unanticipated manner. Moreover, in the futures and options on futures markets, it may not always be possible to execute a put or sell at the desired price, or to close out an open position due to market conditions, limits on open positions, and/or daily price fluctuations.
INVESTMENT RESTRICTIONS. The Fund has adopted a number of investment restrictions, as set forth in the Statement of Additional Information, some of which restrictions may not be changed without shareholder approval.
RISK FACTORS
Investors should consider carefully the following special factors before investing in the Fund.
SPECIAL RISKS FACTORS. Because the Fund focuses its investments on particular industries, an investment in it may be more volatile than an investment in an investment company that does not concentrate its investments in such a manner. Moreover, the value of the shares of the Fund will be especially susceptible to factors affecting the industries in which it focuses. Accordingly, the Fund should not be considered a complete investment program. Telecommunications industries may be subject to greater governmental regulation than many other industries, and changes in governmental policies and the need for regulatory approvals may have a material effect on the products and services offered by companies in the telecommunications industries. Telephone operating companies in the United States, for example, are subject to both federal and state regulation affecting permitted rates of return and the kinds of services that may be offered. Certain types of companies in the telecommunications industries are engaged in fierce competition for market share that could result in increased share price volatility.
SMALL CAPITALIZATION COMPANIES. While the holdings of the Fund normally will include securities of established suppliers of traditional products and services, the Fund may invest in smaller companies which can benefit from the development of new products and services. Investors should realize that equity securities of small to medium-sized companies may involve greater risk than is associated with investing in more established companies. Small to medium-sized companies often have limited product and market diversification, fewer financial resources or may be dependent on a few key managers. Any one of the foregoing may change suddenly and have an immediate impact on the value of the company's securities. Furthermore, whenever the securities markets are experiencing rapid price changes due to national economic trends, secondary growth securities have historically been subject to exaggerated price changes.
FOREIGN SECURITIES. Investments by the Fund in foreign securities whether denominated in U.S. dollars or foreign currencies, may entail the following risks set forth below. Investments by the Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below.
CURRENCY RISK. The value of the Fund's foreign investments may be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security generally decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and tends to increase when the value of the U.S. dollar falls against such currency.
Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain are members of the European Economic and Monetary Union (the "EEMU"). The EEMU intends to establish a common European currency for participating countries which will be known as the "euro." It is anticipated that each participating country will supplement its existing currency with the euro on January 1, 1999, and will replace its existing currency with the euro on July 1, 2002. Any other European country which is a member of the EEMU may elect to participate in the EEMU and may supplement its existing currency with the euro after January 1, 1999.
The expected introduction of the euro presents unique risks and uncertainties, including whether the payment and operational systems of banks and other financial institutions will be ready by January 1, 1999; how outstanding financial contracts will be treated after January 1, 1999; the establishment of exchange rates for existing currencies and the euro; and the creation of suitable clearing and settlement systems for the euro. These and other factors could cause market disruptions before or after the introduction of the euro and could adversely affect the value of securities held by the Fund.
POLITICAL AND ECONOMIC RISK. The economies of many of the countries in which the Fund may invest are not as developed as the United States economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Fund's investments.
REGULATORY RISK. Foreign companies 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, practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Fund may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Fund's shareholders.
MARKET RISK. The securities markets in many of the countries in which the Fund invests will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies and governments may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative difficulties (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.
NON-INVESTMENT GRADE DEBT SECURITIES. The Fund seeks to meet its investment objective by investing in non-investment grade debt securities, commonly known as "junk bonds." While generally providing greater income and opportunity for gain, non-investment grade debt securities may be subject to greater risks than higher-rated securities. Economic downturns tend to disrupt the market for junk bonds and adversely affect their values. Such economic downturns may be expected to result in increased price volatility for junk bonds and of the value of shares of the Fund, and increased issuer defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged, which may impair their ability to meet their obligations. In some cases, junk bonds are subordinated to the prior payment of senior indebtedness, which potentially limits the Fund's ability to fully recover principal or to receive payments when senior securities are subject to a default.
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. Junk bonds have speculative characteristics which are likely to increase in number and significance with each successive lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in the absence of readily available market quotations for such securities, the relative lack of reliable objective data makes it more difficult for the Company's directors to value the Fund's securities, and judgment plays a more important role in determining such valuations. Increased illiquidity in the junk bond market also may affect the Fund's ability to dispose of such securities at desirable prices.
In the event the Fund experiences an unexpected level of net redemptions, the Fund could be forced to sell its junk bonds without regard to their investment merits, thereby decreasing the asset base upon which the Fund's expenses can be spread and possibly reducing the Fund's rate of return. 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.
In addition, there are risks associated with certain investment strategies employed by the Fund as discussed in the previous section.
MANAGEMENT
The overall management of the business and affairs of the Fund is vested with the Company's Board of Directors. The Board of Directors approves all significant agreements between the Fund and persons or companies furnishing services to the Fund or the Company, including the Master Advisory Agreement with AIM, the Master Distribution Agreement with A I M Distributors, Inc. ("AIM Distributors"), the Custodian Agreement with State Street Bank and Trust Company (the "Custodian"), and the Transfer Agency Agreement with State Street Bank and Trust Company (the "Transfer Agent"). The day-to-day operations of the Fund are delegated to its officers and to AIM, subject always to the objectives and policies of the Fund and to the general supervision of the Company's Board of Directors. Certain directors and officers of the Company are affiliated with AIM and A I M Management Group Inc. ("AIM Management"), the parent corporation of AIM. AIM Management is a holding company engaged in the financial services business and is an indirect wholly owned subsidiary of AMVESCAP PLC. AMVESCAP PLC and its subsidiaries are an independent investment management group engaged in institutional investment management and retail mutual fund businesses in the United States, Europe and the Pacific Region. Information concerning the Board of Directors may be found in the Statement of Additional Information.
For a discussion of AIM Management and its subsidiaries' Year 2000 Compliance Project, see "General Information -- Year 2000 Compliance Project."
INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173, serves as the investment advisor to the Fund pursuant to a master investment advisory agreement dated February 28, 1997 (the "Advisory Agreement"). AIM
was organized in 1976, and, together with its subsidiaries, manages or advises approximately 90 investment company portfolios encompassing a broad range of investment objectives.
Under the terms of the Fund's Advisory Agreement, AIM supervises all aspects of the Fund's operations and provides investment advisory services to the Fund. The Advisory Agreement also provides that, upon the request of the Company's Board of Directors, AIM may perform or arrange for the provision of certain accounting and other administrative services to the Fund which are not required to be performed by AIM under the Advisory Agreement. Pursuant to a master administrative services agreement dated May 1, 1998 (the "Administrative Services Agreement") between the Company and AIM with respect to the Fund, AIM provides the services of the Company's principal financial officer (including related office, facilities and equipment) and may provide other administrative services requested by the Company's Board of Directors from time to time. A master administrative services agreement, with substantially similar terms to the Administrative Services Agreement, was in effect prior to May 1, 1998. AIM is entitled to receive from the Fund reimbursement of its costs or such reasonable compensation as may be approved by the Company's Board of Directors.
For a discussion of AIM's brokerage allocation policies and practices, see "Portfolio Transactions and Brokerage" in the Statement of Additional Information. In accordance with policies established by the directors, AIM may pay brokerage commissions to broker-dealers that may be affiliated with the Company and may take into account sales of shares of the Fund and other funds advised by AIM in selecting broker-dealers to effect portfolio transactions on behalf of the Fund.
PORTFOLIO MANAGEMENT. AIM uses a team approach and a disciplined investment process in providing investment advisory services to all its accounts, including the Fund. AIM's investment staff consists of approximately 135 individuals. While individual members of AIM's investment staff are assigned primary responsibility for the day-to-day management of each of AIM's accounts, all accounts are reviewed on a regular basis by AIM's Investment Policy Committee to ensure that they are being invested in accordance with the account's and AIM's investment policies. The individuals who are primarily responsible for the day-to-day management of the Fund and their titles with AIM or its subsidiaries and the Fund, the length of time they have been responsible for the management, their years of investment experience and prior experience (if they have been with AIM for less than five years) are shown below:
Michael J. Mahoney is primarily responsible for the day-to-day management of the Fund. He has been responsible for the Fund since its inception. Mr. Mahoney has been associated with AIM and/or its subsidiaries since 1998 and has been an investment professional since 1991. Previously, Mr. Mahoney was Portfolio Manager for GT Global (SF) from 1993 to 1998 and Investment Analyst with GT Global (SF) from 1991-1993.
ADVISORY FEES. As compensation for its services AIM is paid an investment advisory fee, which is calculated for the Fund at an annual rate of 1.00% of the Fund's average daily net assets.
AIM may from time to time voluntarily waive or reduce its fees. Fee waivers or reductions, other than those contained in the Advisory Agreement, may be modified or terminated at any time.
ADMINISTRATOR. AIM provides various administrative services to the Company
pursuant to an Administrative Services Agreement. AIM provides the services of a
principal financial officer of the Company, who maintains the financial accounts
and books and records of the Company and the Fund, including the review of daily
net asset value calculations and the preparation of tax returns. The Fund
reimburses AIM for expenses incurred by AIM or its subsidiaries in providing
these services. AIM also provides, or assures that Participating Insurance
Companies will provide, certain services implementing the Company's funding
arrangements with Participating Insurance Companies. These services include:
establishment of compliance procedures; negotiation of participation agreements;
preparation of prospectuses, financial reports and proxy statements for existing
Contractowners; maintenance of master accounts; facilitation of purchases and
redemptions requested by Contractowners; distribution to existing Contractowners
of copies of prospectuses, proxy materials, periodic Fund reports and other
materials; maintenance of records; and Contractowner services and communication.
The Fund reimburses AIM for its costs in providing, or assuring that
Participating Insurance Companies provide, these services, in an amount up to
0.25% of the average net asset value of the Fund in excess of the net asset
value of the Fund. However, AIM does not currently seek reimbursement of (i) the
cost of the first three services listed above and (ii) the cost of any other
service in excess of the amount charged by Participating Insurance Companies.
PURCHASE AND REDEMPTION OF SHARES
The Company offers the shares of the Fund, 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 (the "Policies"). Each separate account contains divisions, and one of the divisions corresponds to the Fund. Net purchase payments under the Contracts and Policies are placed in one or more of the divisions of the relevant separate account and the assets of the division that corresponds to the Fund are invested in the shares of the Fund. Each separate account purchases and redeems shares of the Fund for its respective division at net asset value without sales or redemption charges.
The Company, in the future, may offer the shares of the Fund 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 Fund ordinarily effects orders to purchase or redeem its shares that are based on transactions under Policies or Contracts (e.g., purchase or premium payments, surrender or withdrawal requests, etc.) at the Fund's net asset value per share next computed on the day on which the separate account processes such transactions. The Fund effects orders to purchase or redeem its shares that are not based on such transactions at the Fund's net asset value per share next computed on the day on which the Fund receives the orders.
Please refer to the appropriate separate account prospectus related to your Contract for more information regarding the Contract.
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of the Fund will be determined as of the close of regular trading of the New York Stock Exchange ("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 a Fund share is determined as of the close of the NYSE on such day. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the NYSE. A "business day of a Fund" is any day on which the NYSE is open for business. It is expected that the NYSE will be closed during the next twelve months on Saturdays and Sundays and on the observed holidays of New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of the Fund is determined by subtracting the liabilities (e.g., the expenses) of the Fund from the assets of the Fund and dividing the result by the total number of shares outstanding of the Fund. The determination of the Fund's net asset value per share is made in accordance with generally accepted accounting principles.
VALUATION OF INVESTMENTS OF THE FUND. Among other items, the Fund's liabilities include accrued expenses and dividends payable, and its total assets include portfolio securities valued at their market value as well as income accrued but not received. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by or under the supervision of the Company's officers and in accordance with methods which are specifically authorized by the Board of Directors of the Company. Short-term obligations with maturities of 60 days or less are valued at amortized cost as reflecting fair value.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS. The Fund declares and distributes dividends representing net investment income annually. Substantially all net realized capital gains, if any, are distributed on an annual basis. All such distributions will be automatically reinvested, at the election of Participating Insurance Companies, in shares of the Fund at the net asset value determined on the reinvestment date.
TAX MATTERS. Each series of shares of the Company is treated as a separate association taxable as a corporation. The 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, the Fund will not be subject to federal income tax to the extent it distributes to its shareholders its net investment income and net capital gains.
In order to qualify as a regulated investment company, the Fund must satisfy certain requirements concerning the nature of its income, diversification of its assets and distribution of its income to shareholders. In order to ensure that individuals holding the Contracts or Policies whose assets are invested in the Fund will not be subject to federal income tax on distributions made by the Fund prior to the receipt of payments under the Contracts or Policies, the Fund intends to comply with additional requirements of Section 817(h) of the Code relating to both diversification of its assets and eligibility of an investor to be its shareholder. Certain of these requirements in the aggregate may limit the ability of the Fund to engage in transactions involving options, futures contracts, forward contracts and foreign currency and related deposits.
The Fund's transactions in non-equity options, forward contracts, futures contracts and foreign currency will be subject to special tax rules, the effect of which may be to accelerate income to the Fund, defer Fund losses, cause adjustments in the holding periods of fund securities and convert short-term capital losses into long-term capital losses. These losses could therefore affect the amount, timing and character of distributions.
The holding of the foreign currencies and investments by the Fund in certain "passive foreign investment companies" may be limited in order to avoid imposition of a tax on the Fund.
The Fund may be subject to foreign withholding taxes on income from its investments in foreign securities. In any year in which more than 50% in value of the 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.
Holders of Contracts and Policies under which assets are invested in the Fund should refer to the prospectus for the Contracts and Policies for information regarding the tax aspects of ownership of such Contracts and Policies.
GENERAL INFORMATION
ORGANIZATION OF THE COMPANY. The Company was organized on January 22, 1993 as a Maryland corporation, and is registered with the Securities and Exchange Commission as an open-end, series, management investment company. The Company currently consists of fifteen separate portfolios.
The authorized capital stock of the Company consists of 4,000,000,000 shares of common stock with a par value of $.001 per share, of which 250,000,000 shares are classified AIM V.I. AGGRESSIVE GROWTH FUND shares, 250,000,000 shares are classified AIM V.I. BALANCED FUND shares, 250,000,000 shares are classified AIM V.I. CAPITAL APPRECIATION FUND shares, 250,000,000 shares are classified AIM V.I. CAPITAL DEVELOPMENT FUND shares, 250,000,000 shares are classified AIM V.I. DIVERSIFIED INCOME FUND shares, 250,000,000 shares are classified AIM V.I. GLOBAL GROWTH AND INCOME FUND, 250,000,000 shares are classified AIM V.I. GLOBAL UTILITIES FUND shares, 250,000,000 shares are classified AIM V.I. GOVERNMENT SECURITIES FUND shares, 250,000,000 are classified AIM V.I. GROWTH FUND shares, 250,000,000 shares are classified AIM V.I. GROWTH AND INCOME FUND shares, 250,000,000 shares are classified AIM V.I. HIGH YIELD FUND shares, 250,000,000 shares are classified AIM V.I. INTERNATIONAL EQUITY FUND shares, 250,000,000 shares are classified AIM V.I. MONEY MARKET FUND shares, 250,000,000 shares are classified AIM V.I. TELECOMMUNICATIONS FUND, 250,000,000 shares are classified AIM V.I. VALUE FUND shares, and the balance of which are unclassified.
The shares of each Fund have equal rights with respect to voting, except that
(i) the holders of shares of a particular Fund voting together will have the
exclusive right to vote on matters (such as advisory fees) pertaining solely to
that Fund, and (ii) the holders of shares of a particular Fund will have the
exclusive right to vote on matters pertaining to distribution plans, if any such
plans are adopted, relating solely to such Fund. Shareholders of the Fund do not
have cumulative voting rights.
The Company understands that insurance company separate accounts owning shares of the Fund will vote their shares in accordance with instructions received from Policy or Contract owners, annuitants and beneficiaries. Fund shares held by a registered 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 registered separate account that are not attributable to Policies or 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 Fund in its own right, it may elect to do so, subject to the then current interpretation of the 1940 Act and the rules thereunder.
Under Maryland law and the Company's By-Laws, the Company need not hold an annual meeting of shareholders unless a meeting is required under the 1940 Act to elect directors. Shareholders may remove directors from office, and a meeting of shareholders may be called at the request of the holders of 10% or more of the Company's outstanding shares.
There are no preemptive or conversion rights applicable to any of the Company's shares. The Fund's shares, when issued, are fully paid and nonassessable.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225 Franklin Street, Boston, MA 02110, serves as custodian for the Fund's portfolio securities and cash and also serves as the transfer agent and as dividend paying agent.
LEGAL COUNSEL. Freedman, Levy, Kroll & Simonds, Washington, D.C. has advised the Company on certain federal securities law matters.
YEAR 2000 COMPLIANCE PROJECT. In providing services to the Fund, AIM Management and its subsidiaries rely on both internal software systems as well as external software systems provided by third parties. Many software systems in use today are unable to distinguish between the year 2000 from the year 1900. This defect if not cured will likely adversely affect the services that AIM Management, its subsidiaries and other service providers provide the Fund and its shareholders.
To address this issue, AIM Management and its subsidiaries, together with
independent technology consultants, are undertaking a comprehensive Year 2000
Compliance Project (the "Project"). The Project consists of three phases, namely
(i) inventorying every software application in use at AIM Management and its
subsidiaries, as well as remote, third party software systems on which AIM
Management and its subsidiaries rely, (ii) identifying those applications that
may not function properly after December 31, 1999, and (iii) correcting and
subsequently testing those applications that may not function properly after
December 31, 1999. Phases (i) and (ii) are complete and phase (iii) has
commenced. The Project is scheduled to be completed during the second quarter of
1999. Software applications acquired by AIM Management and its subsidiaries
after completion of the Project will be reviewed to confirm Year 2000 compliance
upon installation. No assurance can be given that the Project will be successful
or that the Fund will not otherwise be adversely affected by the year 2000
issue.
OTHER INFORMATION. This Prospectus sets forth basic information that investors should know about the Fund prior to investing. A Statement of Additional Information has been filed with the SEC and is available upon request and without charge by writing or calling AIM Distributors. This Prospectus omits certain information contained in the registration statement filed with the SEC. Copies of the registration statement, including items omitted from this Prospectus, may be obtained from the SEC by paying the charges prescribed under its rules and regulations.
DESCRIPTION OF CORPORATE BOND RATINGS
Investment grade debt securities are those rating categories indicated by an asterisk (*).
Moody's Investors Service, Inc.'s corporate bond ratings are as follows:
*Aaa -- Bonds 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 edge." 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 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. They 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 risks appear somewhat larger than in Aaa securities.
*A -- Bonds 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 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 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 other good and bad times over the future. Uncertainty of position characterizes bonds in this class.
B -- Bonds 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 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 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 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 B in its corporate bond rating system. The modifier indicates that the security 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 rating category.
Standard and Poor's Ratings Services classifications are as follows:
*AAA -- Debt rated "AAA" has the highest rating assigned by Standard & Poor's. 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 small degree.
*A -- Debt rated "A" has a strong capacity to pay interest and repay principal 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" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher categories.
BB, B, CCC, CC, C -- Debt rated "BB", "B", "CCC", "CC" and "C" is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. "BB" indicates the lowest degree of speculation and "C" the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
BB -- Debt rated "BB" has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The "BB" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BBB --" rating.
B -- Debt rated "B" has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The "B" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BB" or "BB --" rating.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The "CCC" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "B" or "B --" rating.
CC -- The rating "CC" is typically applied to debt subordinated to senior debt that is assigned an actual or implied "CCC" rating.
C -- The rating "C" is typically applied to debt subordinated to senior debt which is assigned an actual or implied "CCC --" debt rating. The "C" rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued.
C1 -- The rating "C1" is reserved for income bonds on which no interest is being paid.
D -- Debt rated "D" is in payment default. The "D" rating category is used when interest payments or principal or principal payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The rating from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major categories.
Duff & Phelps fixed-income ratings are as follows:
*AAA -- Highest credit quality. The risk factors are negligible, being only slightly more than for risk-free U.S. Treasury debt.
*AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.
*A+, A, A- -- Protection factors are average but adequate. However, risk factors are more variable and greater in periods of economic stress.
*BBB+, BBB, BBB- -- Below average protection factors but still considered sufficient for prudent investment. Considerable variability in risk during economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet obligations when due. Present or prospective financial protection factors fluctuate according to industry conditions or company fortunes. Overall quality may move up or down frequently within this category.
B+, B, B- -- Below investment grade and possessing risk that obligations will not be met when due. Financial protection factors will fluctuate widely according to economic cycles, industry conditions and/or company fortunes. Potential exists for frequent changes in quality rating within this category or into a higher or lower quality rating grade.
CCC -- Well below investment grade securities. May be in default or have considerable uncertainty as to timely payment of interest, preferred dividends and/or principal. Protection factors are narrow and risk can be substantial with unfavorable economic/industry conditions, and/or with unfavorable company developments.
Fitch Investors Service, Inc.'s bond ratings are as follows:
*AAA -- Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
*AA -- Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated "F-1+".
*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 satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
BB -- Bonds are considered speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issue.
CCC -- Bonds have certain identifiable characteristics which, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment.
CC -- Bonds are minimally protected. Default in payment of interest and/or principal seems probable over time.
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 should be valued on the basis of their ultimate 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 the "AAA", "DDD", "DD", or "D" categories.
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money Market Obligations, and the Fund reserves the right to invest in Money Market Obligations other than those listed below:
1. GOVERNMENT OBLIGATIONS.
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes, and bonds issued by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such as the Government National Mortgage Association have been established as instrumentalities of the U.S. Government to supervise and finance certain types of activities. Issues of these agencies, while not direct obligations of the U.S. Government, are either backed by the full faith and credit of the United States or are guaranteed by the Treasury or supported by the issuing agencies' right to borrow from the Treasury.
FOREIGN GOVERNMENT OBLIGATIONS -- These are U.S. dollar denominated obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions, agencies or instrumentalities that are determined by the Fund's investment advisor to be of comparable quality to the other obligations in which the Fund may invest. Such securities also include debt obligations of supranational entities. Supranational entities include international organizations designated or supported by governmental entities to promote economic reconstruction or development and international banking institutions and related government agencies. Examples include the International Bank for Reconstruction and Development (the World Bank), the European Coal and Steel Community, the Asian Development Bank and the InterAmerican Development Bank. The percentage of the Fund's assets invested in securities issued by foreign governments will vary depending on the relative yields of such securities, the economic and financial markets of the countries in which the investments are made and the interest rate climate of such countries.
2. BANK INSTRUMENTS.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and accepted by a commercial bank. It is used by corporations to finance the shipment and storage of goods and to furnish dollar exchange. Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT -- 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.
TIME DEPOSITS -- 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.
EURODOLLAR OBLIGATIONS -- A Eurodollar obligation is a U.S. dollar-denominated obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS -- A Yankee dollar obligation is a U.S. dollar-denominated obligation issued by a domestic branch of a foreign bank.
3. COMMERCIAL INSTRUMENTS.
COMMERCIAL PAPER -- The term used to designate unsecured short-term promissory notes issued by corporations and other entities. Maturities on these issues vary from a few days to nine months.
VARIABLE RATE MASTER DEMAND NOTES -- 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 foregoing quality criteria as discussed in the Statement of Additional Information under "Investment Programs." The interest rate on a variable rate master demand note is periodically redetermined according to a prescribed formula. Although there is no secondary market in master demand notes, the payee may demand payment of the principal amount of the note on relatively short notice.
4. REPURCHASE AGREEMENTS.
A repurchase agreement is a contractual undertaking whereby the seller of securities (limited to U.S. Government securities, including securities issued or guaranteed by the U.S. Treasury or the various agencies and instrumentalities of the U.S. Government) agrees to repurchase the securities at a specified price on a future date determined by ions.
5. 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.
STATEMENT OF
ADDITIONAL INFORMATION
AIM VARIABLE INSURANCE FUNDS, INC.
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
AIM V.I. AGGRESSIVE GROWTH FUND AIM V.I. BALANCED FUND AIM V.I. CAPITAL APPRECIATION FUND AIM V.I. CAPITAL DEVELOPMENT FUND AIM V.I. DIVERSIFIED INCOME FUND AIM V.I. GLOBAL UTILITIES FUND AIM V.I. GLOBAL GROWTH AND INCOME FUND AIM V.I. GROWTH FUND AIM V.I. GOVERNMENT SECURITIES FUND AIM V.I. HIGH YIELD FUND AIM V.I. GROWTH AND INCOME FUND AIM V.I. MONEY MARKET FUND AIM V.I. INTERNATIONAL EQUITY FUND AIM V.I. TELECOMMUNICATIONS FUND |
AIM V.I. VALUE FUND
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH
MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC., P. O. BOX 4739,
HOUSTON, TX 77210-4739
OR BY CALLING (713) 626-1919 (HOUSTON RESIDENTS)
OR (800) 347-1919 (ALL OTHERS).
STATEMENT OF ADDITIONAL INFORMATION DATED: , 1998
------------------
RELATING TO PROSPECTUS DATED: , 1998
--------------------
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TABLE OF CONTENTS
PAGE
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION ABOUT THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company and Its Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Total Return Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Historical Portfolio Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Yield Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
General Brokerage Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 28(e) Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Brokerage Commissions Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
INVESTMENT PROGRAMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Money Market Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Delayed Delivery Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
When-Issued Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Special Situations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Short Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Asset Allocation Among Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Utilities Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Foreign Exchange Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
HEDGING AND OTHER INVESTMENT TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Fundamental Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Non-fundamental Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Remuneration of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
AIM Funds Retirement Plan for Eligible Directors/Trustees . . . . . . . . . . . . . . . . . . . . . 23
Deferred Compensation Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Investment Advisory, Sub-Advisory and Administrative Services Agreements . . . . . . . . . . . . . . . . . . 24
The Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
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INTRODUCTION
AIM Variable Insurance Funds, Inc. (the "Company") is a mutual fund. The rules and regulations of the United States Securities and Exchange Commission (the "SEC") require all mutual funds to furnish prospective investors certain information concerning the activities of the fund being considered for investment. This information is included in Prospectuses dated _________________, 1998 (referred to collectively as the "Prospectuses" and separately as a "Prospectus"), which relate to one or more of the fifteen series portfolios of the Company (referred to collectively as the "Funds" and separately as a "Fund"). One or more of the Company's fifteen Funds may not be available under a particular variable annuity contract or variable life insurance policy. Accordingly, this Statement of Additional Information may contain information that is not relevant to the investment options under such a contract or policy. Additional copies of the Prospectuses of the Funds available under a contract or policy and this Statement of Additional Information may be obtained without charge by contacting the principal distributor of the Funds' shares, A I M Distributors, Inc. ("AIM Distributors"), P. O. Box 4739, Houston, TX 77210-4739 or by calling (713) 626-1919. Investors must receive a Prospectus before they invest. To the extent that this Statement of Additional Information contains information concerning a Fund that is not available under a contract or policy, the Statement of Additional Information does not constitute the offer of the shares of that Fund.
This Statement of Additional Information is intended to furnish prospective investors with additional information concerning the Funds. Some of the information required to be in this Statement of Additional Information is also included in the Funds' current Prospectus and, in order to avoid repetition, reference will be made to sections of the Prospectus. Additionally, the Prospectus and this Statement of Additional Information omit certain information contained in the Registration Statement filed with the SEC. Copies of the Registration Statement, including items omitted from the Prospectus and this Statement of Additional Information, may be obtained from the SEC by paying the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE COMPANY AND ITS SHARES
The Company was organized on January 22, 1993, as a Maryland corporation, and is registered with the SEC as an open-end, series, management investment company. The Company currently consists of fifteen separate Funds as follows: the AIM V.I. Aggressive Growth Fund ("Aggressive Growth Fund"), the AIM V.I. Balanced Fund ("Balanced Fund"), the AIM V.I. Capital Appreciation Fund ("Capital Appreciation Fund"), the AIM V.I. Capital Development Fund ("Capital Development Fund"), the AIM Diversified Income Fund ("Diversified Income Fund"), the AIM V.I. Global Growth and Income Fund ("Global Growth and Income Fund"), the AIM V.I. Global Utilities Fund ("Global Utilities Fund") (formerly known as the AIM V.I. Utilities Fund), the AIM V.I. Government Securities Fund ("Government Fund"), the AIM Growth Fund ("Growth Fund"), the AIM V.I. Growth and Income Fund ("Growth and Income Fund"), the AIM V.I. High Yield Fund ("High Yield Fund), the AIM V.I. International Equity Fund ("International Fund"), the AIM V.I. Telecommunications Fund ("Telecommunications Fund"), the AIM V.I. Money Market Fund ("Money Market Fund"), the AIM V.I. Value Fund ("Value Fund").
Each share of a Fund is entitled to one vote, to participate equally in dividends and distributions declared by the Board of Directors with respect to the Fund and, upon liquidation of the Fund, to participate in its proportionate share of the net assets allocable to the Fund remaining after satisfaction of outstanding liabilities of the Fund. Fund shares are fully paid, non-assessable and fully transferable when issued and have no preemptive, conversion or exchange rights. Fractional shares have proportionately the same rights, including voting rights, as are provided for a full share.
Shareholders of the Funds do not have cumulative voting rights, and therefore the holders of more than 50% of the outstanding shares of all Funds voting together for election of directors may elect all of the
members of the Board of Directors of the Company. In such event, the remaining holders cannot elect any directors of the Company. See "General Information" in the Prospectus.
PERFORMANCE
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the applicable Fund's return, including the effect of reinvesting dividends and capital gain distributions, and any change in such Fund's net asset value per share (NAV) over the period. Average annual returns are calculated by determining the growth or decline in value of a hypothetical investment in a particular Fund over a stated period, and then calculating the annually compounded percentage rate that would have produced the same result if the rate of growth or decline in value had been constant over the period. While average annual returns are a convenient means of comparing investment alternatives, investors should realize that a Fund's performance is not constant over time, but changes from year to year, and that average annual returns do not represent the actual year-to-year performance of such Fund.
In addition to average annual returns, each Fund may quote unaveraged or cumulative total returns reflecting the simple change in value of an investment over a stated period. Average annual and cumulative total returns may be quoted as a percentage or as a dollar amount, and may be calculated for a single investment, a series of investments, and/or a series of redemptions, over any time period. Total returns may be broken down into their components of income and capital (including capital gains and changes in share price) in order to illustrate the relationship of these factors and their contributions to total return. Total returns and other performance information may be quoted numerically or in a table, graph, or similar illustration.
HISTORICAL PORTFOLIO RESULTS
The Funds' (except the Aggressive Growth Fund, the Balanced Fund, the Capital Development Fund and the High Yield Fund) average annual and cumulative total return for the fiscal year ended December 31, 1997 and average annual and cumulative total returns for the period May 5, 1993 (commencement of operations) through December 31, 1997, were as follows:
Since
Inception
------------------------
Year Ended Average
December 31, Annual Cumulative
1997 Return Return
---- ------ ------
AIM V.I. Capital Appreciation Fund 13.50% 18.65% 121.79%
AIM V.I. Diversified Income Fund 9.39% 8.22% 44.44%
AIM V.I. Global Utilities Fund* 21.63% 15.15% 67.72%
AIM V.I. Government Securities Fund 8.16% 5.35% 27.45%
AIM V.I. Growth Fund 26.87% 18.20% 117.90%
AIM V.I. Growth and Income Fund* 25.72% 21.11% 101.84%
AIM V.I. International Equity Fund 6.94% 12.91% 76.06%
AIM V.I. Money Market Fund 5.14% 4.49% 22.67%
AIM V.I. Value Fund 23.69% 19.76% 131.55%
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* The inception date of the AIM V.I. Global Utilities Fund and the AIM V.I. Growth and Income Fund was May 2, 1994.
The total returns quoted above do not reflect charges levied at the insurance company separate account level. For a complete description of the applicable charges, see the fee table in the prospectus for the appropriate insurance company separate account.
Each Fund's performance may be compared in advertising to the performance of other mutual funds in general, or of particular types of mutual funds, especially those with similar objectives. Such performance data may be prepared by Lipper Analytical Services, Inc., Morningstar, Inc. and other independent services which monitor the performance of mutual funds. The Funds may also advertise mutual fund performance rankings which have been assigned to each respective Fund by such monitoring services.
Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the Consumer Price Index ("CPI"), the Standard & Poor's ("S&P") 500 Stock Index, and fixed-price investments such as bank certificates of deposit and/or savings accounts.
The International Fund's performance may also be compared in advertising to performance of comparative benchmarks such as The Financial Times--Actuaries World Indices (a wide range of comprehensive measures of stock price performance for the major stock markets and regional areas), Morgan Stanley Capital International Indices, including the EAFE Index, Pacific Basin Index and Pacific Ex Japan Index (a widely recognized series of indices in international market performance), and indices of stocks comparable to those in which the Fund invests.
Each Fund's advertising may from time to time include historical discussions of general economic conditions such as inflation rates and changes in the stock market, foreign and domestic interest rates and foreign and domestic political circumstances and events.
In addition, each Fund's long-term performance may be described in advertising in relation to historical, political and/or economic events.
From time to time, the Funds' sales literature and/or advertisements may discuss generic topics pertaining to the mutual fund industry. This includes, but is not limited to, literature addressing general information about mutual funds, variable annuities, variable life insurance, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation.
YIELD INFORMATION
Quotations of yield on the Money Market Fund may appear from time to time in the financial press and in advertisements.
The Money Market Fund's yield is its investment income, less expenses, expressed as a percentage of assets on an annualized basis for an identified period, usually seven days. The yield is expressed as a simple annualized yield and as a compounded effective yield. The yield does not reflect the fees and charges imposed on the assets of the insurance company separate account.
The standard formulas prescribed by the SEC for calculating yield and effective yield for the Money Market Fund are described below:
The simple annualized yield is computed by determining the net change (exclusive of realized gains and losses from the sale of securities, unrealized appreciation and depreciation, and income other than investment income) in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, dividing the net change in account value by the value of the account at the beginning of the period, and annualizing the resulting quotient (base period return) on a 365-day basis. The net change in account value reflects the value of additional shares purchased with dividends from the original shares in
the account during the period, dividends declared on such additional shares during the period, and expenses accrued during the period.
The compounded effective yield is computed by determining the unannualized base period return, adding one to the base period return, raising the sum to a power equal to 365 divided by the number of days in the period, and subtracting one from the result. Historical yields are not necessarily indicative of future yields. Rates of return will vary as interest rates and other conditions affecting money market instruments change. Yields also depend on the quality, length of maturity and type of instruments in the Fund's portfolio and the Fund's operating expenses. Quotations of yield will be accompanied by information concerning the average weighted maturity of the Fund. Comparison of the quoted yields of various investments is valid only if yields are calculated in the same manner and for identical limited periods. When comparing the yield for a Fund with yields quoted with respect to other investments, shareholders should consider (a) possible differences in time periods, (b) the effect of the methods used to calculate quoted yields, (c) the quality and average-weighted maturity of portfolio investments, expenses, convenience, liquidity and other important factors, and (d) the taxable or tax-exempt character of all or part of dividends received.
The simple annualized yield and compounded effective yield for the Money Market Fund for the 7 days ended December 31, 1997 were 5.29% and 5.43%, respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Directors of the Company, A I M Advisors, Inc. ("AIM") is responsible for decisions to buy and sell securities for each Fund, for the selection of broker-dealers, for the execution of the Fund's investment portfolio transactions, for the allocation of brokerage fees in connection with such transactions and, where applicable, for the negotiation of commissions and spreads on transactions. AIM's primary consideration in effecting a security transaction is to obtain the best net price and the most favorable execution of the order. While AIM generally seeks reasonably competitive commission rates, each Fund does not necessarily pay the lowest commission or spread available.
Purchases and sales of portfolio securities for the Diversified Income Fund, the Money Market Fund and the Government Fund are generally transacted with the issuer or a primary market maker. In addition, a portion of the securities in which the Funds invest may be traded in over-the-counter ("OTC") markets. In such transactions, the Fund deals directly with the dealers who make markets in the securities involved, except in those circumstances where better prices and executions are available elsewhere. Portfolio transactions placed through dealers serving as primary market makers are effected at net prices, without commissions as such, but which include compensation to the dealer in the form of mark up or mark down.
Traditionally, commission rates have not been negotiated on stock markets outside the United States. In recent years, however, an increasing number of overseas stock markets have adopted a system of negotiated rates, although a number of markets continue to be subject to an established schedule of minimum commission rates.
Foreign equity securities may be held by the Fund in the form of American Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers, or securities convertible into foreign equity securities. These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. Generally, ADRs, in registered form, are designed for use in the United States securities markets, and EDRs, in bearer form, are designed for use in European securities markets. ADRs and EDRs
may be listed on stock exchanges, or traded in OTC markets in the United States or Europe, as the case may be. ADRs, like other securities traded in the United States, will be subject to negotiated commission rates.
The Funds are not under any obligation to deal with any broker or group of brokers in the execution of transactions in portfolio securities. Brokers who provide supplemental investment research to AIM may receive orders for transactions by a Fund. Information so received will be in addition to and not in lieu of the services required to be performed by AIM under its agreements with the Fund, and the expenses of AIM will not necessarily be reduced as a result of the receipt of such supplemental information. Certain research services furnished by broker-dealers may be useful to AIM in connection with its services to other advisory clients, including the other mutual funds advised by AIM (collectively with the Funds, the "AIM Funds"). Also, a Fund may pay a higher price for securities or higher commissions in recognition of research services furnished by broker-dealers.
AIM may from time to time determine target levels of commission business for AIM to transact with various brokers on behalf of its clients (including the Funds) over a certain time period. The target levels will be determined based upon the following factors, among others: (1) the execution services provided by the broker; (2) the research services provided by the broker; (3) certain products and/or services provided to the Funds, the cost of which will be included in Fund expenses reported to shareholders; and (4) the broker's attitude toward an interest in mutual funds in general and in the Funds and the other AIM Funds in particular. No specific formula will be used in connection with any of the foregoing considerations in determining the target levels. However, if a broker has indicated a certain level of desired commissions in return for certain research services provided by the broker, this factor will be taken into consideration by AIM.
Subject to the overall objective of obtaining best price and execution for the Funds, AIM may also consider sales of shares by broker-dealers of each Fund and of the other AIM Funds as well as sales of variable annuity contracts ("Contracts") and variable life insurance policies ("Policies") funded through the Funds ("selling dealers"), as a factor in the selection of broker-dealers to execute portfolio transactions for a Fund. Such portfolio transactions may be executed directly by selling dealers or by other broker-dealers with which selling dealers have clearing arrangements.
AIM will seek, whenever possible, to recapture for the benefit of a Fund any commissions, fees, brokerage or similar payments paid by the Fund on portfolio transactions. Normally, the only fees which may be recaptured are the soliciting dealer fees on the tender of a Fund's portfolio securities in a tender or exchange offer.
AIM and its affiliates manage several other investment accounts, some of which may have investment objectives similar to those of the Funds. It is possible that, at times, identical securities will be appropriate for investment by one or more of such investment accounts. The position of each account, however, in the securities of the same issue may vary and the length of time that each account may choose to hold its investment in the securities of the same issue may likewise vary. The timing and amount of purchases 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 a Fund(s) and one or more of these accounts is considered at or about the same time. AIM may combine such transactions, in accordance with applicable laws and regulations, in order to obtain the best net price and most favorable execution. Simultaneous transactions could, however, adversely affect the ability of a Fund to obtain or dispose of the full amount of a security which it seeks to purchase or sell.
These combined transactions, and related brokerage charges, will be allocated among the Fund(s) and such accounts in a manner consistent with guidelines and procedures approved by the Company's Board of Directors that are designed to achieve an equitable manner of allocation. In some cases the procedure for allocating portfolio transactions among the various investment accounts advised by AIM could have an adverse effect on the price or amount of securities available to a Fund. In making such allocations, the main factors considered by AIM are the respective investment objectives and policies of its advisory clients, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the judgments of the persons responsible for recommending the investment.
From time to time, an identical security may be sold by an AIM Fund or another investment account advised by AIM or A I M Capital Management, Inc. ("AIM Capital") and simultaneously purchased by another investment account advised by AIM or AIM Capital, when such transactions comply with applicable rules and regulations and are deemed consistent with the investment objective(s) and policies of the investment accounts advised by AIM or AIM Capital. Procedures pursuant to Rule 17a-7 under the Investment Company Act of 1940, as amended (the "1940 Act") regarding transactions between investment accounts advised by AIM or AIM Capital have been adopted by the Boards of Directors/Trustees of the various AIM Funds, including the Company. Although such transactions may result in custodian, tax or other related expenses, no brokerage commissions or other direct transaction costs are generated by transactions among the investment accounts advised by AIM or AIM Capital.
SECTION 28(e) STANDARDS
As permitted by Section 28(e) of the Securities Exchange Act of 1934, AIM may cause a Fund to pay a broker that provides brokerage and research services to AIM an amount of commission for effecting a securities transaction for the Fund in excess of the commission another broker would have charged for effecting that transaction. To obtain the benefit of Section 28(e), 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 [its] overall responsibilities with respect to the accounts as to which [it] exercises investment discretion" and that the services provided by a broker provide AIM with lawful and appropriate assistance in the performance of its investment decision-making responsibilities. Accordingly, the price to a Fund in any transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified by other aspects of the portfolio execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and other information or services which are deemed by AIM to be beneficial to the Funds' investment programs. Research services received from brokers supplement AIM's own research (and the research of sub-advisors to other clients of AIM) and may include the following types of information: statistical and background information on industry groups and individual companies; forecasts and interpretations with respect to U.S. and foreign economies, securities markets, specific industry groups and individual companies; information on political developments; portfolio management strategies; performance information on securities and information concerning prices of securities; and information supplied by specialized services to AIM and to the Company's directors with respect to the performance, investment activities and fees and expenses of other mutual funds. Such information may be communicated electronically, orally or in written form. Research services may also include the providing of equipment used to communicate research information, the arranging of meetings with management of companies and the providing of access to consultants who supply research information.
The outside research assistance is useful to AIM since the brokers utilized by AIM as a group tend to follow a broader universe of securities and other matters than AIM's staff can follow. In addition, this research provides AIM with a diverse perspective on financial markets. Research services which are provided to AIM by brokers are available for the benefit of all accounts managed or advised by AIM (or by sub-advisors to accounts managed or advised by AIM). In some cases, the research services are available only from the broker providing such services. In other cases, the research services may be obtainable from alternative sources in return for cash payments. AIM is of the opinion that because the broker research supplements rather than replaces its research, the receipt of such research does not tend to decrease its expenses, but tends to improve the quality of its investment advice. However, to the extent that AIM would have purchased any such research services had such services not been provided by brokers, the expenses of such services to AIM could be considered to have been reduced accordingly.
For the fiscal year ended December 31, 1997, certain Funds paid brokerage commissions to certain brokers for research services. The amount of such transactions and related commissions paid by each Fund were as follows:
Commissions Transactions
----------- ------------
AIM V. I. Capital Appreciation Fund $ 50,129 $ 52,417,583
AIM V. I. Global Utilities Fund $ 414 $ 259,823
AIM V. I. Growth Fund $ 32,840 $ 39,304,964
AIM V. I. Growth and Income Fund $ 67,602 $ 80,441,980
AIM V. I. International Equity Fund $ 740 $ 851,690
AIM V. I. Value Fund $ 67,610 $ 85,609,060
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As of December 31, 1997, the following Funds entered into repurchase agreements with the following regular brokers, as that term is defined in Rule 10b-1 under the 1940 Act, having the noted market values.
Goldman, Smith Barney,
FUNDS Sachs & Co. Inc.
----- ----------- -------------
AIM V.I. Capital Appreciation Fund $ 509,896 $ 18,650,989
AIM V.I. Diversified Fund $ -- $ 966,742
AIM V.I. Global Utilities Fund $ -- $ 3,813,559
AIM V.I. Government Securities Fund $1,493,291 $ --
AIM V.I. Growth Fund $ -- $ 33,186,429
AIM V.I. Growth and Income Fund $ -- $ 28,276,446
AIM V.I. International Equity Fund $ -- $ 8,056,299
AIM V.I. Money Market Fund $4,744,146 $ 10,000,000
AIM V.I. Value Fund $ -- $102,063,243
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The following information regarding securities acquired by the Funds of their regular brokers, as defined in Rule 10b-1 under the 1940 Act, is as of December 31, 1997. AIM V.I. Growth and Income Fund held an amount of common stock issued by Merrill Lynch & Co., Inc. and Morgan Stanley Group, Inc. having a market value of $6,564,375 and $9,755,625, respectively. AIM V.I. Capital Appreciation Fund held an amount of common stock issued by Paine Webber Group, Inc. having a market value of $1,036,875. AIM V.I. Money Market Fund had entered into master note agreements with Goldman, Sachs & Co., Merrill Lynch & Co., Inc., J. P. Morgan Securities, Inc. and Morgan Stanley Group Inc. having market values of $2,060,000, $3,000,000, $2,100,000 and $3,000,000, respectively. AIM V.I. Value Fund held an amount of common stock issued by Merrill Lynch & Co., Inc. and Morgan Stanley Group, Inc., having a market value of $7,585,500 and
$5,262,125, respectively. AIM V.I. Growth Fund held an amount of common stock issued by Merrill Lynch & Co., Inc. and Morgan Stanley Group, Inc. having a market value of $3,063,375 and $886,875, respectively.
PORTFOLIO TURNOVER
The portfolio turnover rate of each Fund is shown under "Financial Highlights" in the Prospectus. In any particular year, however, market conditions could result in portfolio activity at a rate greater or lesser than anticipated. Higher portfolio turnover increases transaction costs to the Fund.
BROKERAGE COMMISSIONS PAID
Brokerage commissions paid by each of the Funds listed below were as follows for the fiscal years ended December 31, 1997, December 31, 1996, the eleven months ended December 31, 1995, and for the fiscal year ended January 31, 1995 and for the period May 5, 1993 (date operations commenced) through January 31, 1994.
December 31, December 31, December 31, January 31,
1997 1996 1995 1995
---- ---- ---- ----
AIM V.I. Capital Appreciation Fund $ 644,279 $ 405,056 $400,895 $161,528
AIM V.I. Diversified Income Fund $ 2,818 $ 1,670 $ 74,475 $ 17,471
AIM V.I. Global Utilities Fund $ 12,208 $ 16,365 $ 24,107 $ 9,280*
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ 621,467 $ 578,444 $315,627 $173,691
AIM V.I. Growth and Income Fund $1,190,597 $ 417,167 $177,420 $ 20,436*
AIM V.I. International Equity Fund $ 605,318 $ 557,527 $312,071 $ 89,187
AIM V.I. Money Market Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Value Fund $1,503,734 $1,126,384 $862,938 $362,126
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* Commissions paid are for the period May 2, 1994 (date operations commenced) through January 31, 1995.
INVESTMENT PROGRAMS
Information concerning each Fund's fundamental investment objective is set forth in the Prospectus under the heading "Investment Objectives and Programs." There can be no assurance that any Fund will achieve its objective. The principal features of each Fund's investment program and the primary risks associated with that investment program are discussed in the Prospectus under the heading "Investment Objectives and Programs--Certain Investment Strategies and Techniques." The following discussion of investment policies supplements the discussion of the investment objectives and policies set forth in the Prospectus.
MONEY MARKET OBLIGATIONS
As set forth in the Prospectus, the Money Market Fund will limit its purchases of Money Market Obligations to U.S. dollar denominated securities which are "First Tier" securities, as such term is defined from time to time in Rule 2a-7 under the Investment Company Act of 1940 (the "1940 Act"). A First Tier Security is generally a security that: (i) has received a short-term rating, or is subject to a guarantee that has received a short-term rating, or, in either
case, is issued by an issuer with a short-term rating from the Requisite NRSROs(1) in the highest short-term rating category for debt obligations; (ii) is an unrated security that the Fund's investment adviser has determined are of comparable quality to a rated security described in (i); (iii) is a security issued by a registered investment company that is a money market fund; or (iv) is a Government Security.
Subsequent to its purchase by the Fund, an issue of Money Market Obligations may cease to be a First Tier security. Subject to certain exceptions set forth in Rule 2a-7, such an event will not require the elimination of the security from the Fund, but AIM will consider such an event to be relevant in its determination of whether the Fund should continue to hold the security.
REPURCHASE AGREEMENTS
The Funds may each enter into repurchase agreements. A repurchase agreement is an instrument under which a Fund acquires ownership of a debt security and the seller (usually a broker or bank) agrees, at the time of the sale, to repurchase the obligation at a mutually agreed upon time and price, thereby determining the yield during the Fund's holding period.
Although the underlying collateral for repurchase agreements may have maturities exceeding one year, the Funds will not enter into repurchase agreements expiring in more than seven days. The 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. Repurchase agreements are considered to be loans by the Fund under the 1940 Act. Securities subject to repurchase agreements will be held in the custodian's account with the Federal Book-Entry System on behalf of the Fund.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Fund (except the Money Market Fund) may lend portfolio securities in amounts not to exceed 33 1/3% of a Fund's total assets. Securities loans are made to banks, brokers and other financial institutions pursuant to agreements requiring that the loans be continuously secured by collateral at least equal at all times to the value of the securities lent, marked to market on a daily basis. The collateral received will consist of cash, U.S. Government securities, letters of credit or such other collateral as may be permitted under each such Fund's investment program. While the securities are being lent, a Fund will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities, as well as interest on the investment of the collateral or a fee from the borrower. A Fund has a right to call each loan and obtain the securities on five business days' notice or, in connection with securities trading on foreign markets, within such longer period of time which coincides with the normal settlement period for purchases and sales of such securities in such foreign markets. A Fund will not have the right to vote securities while they are being lent, but it will call a loan in anticipation of any important vote. The risks in lending portfolio securities, as with other extensions of secured credit, consist of possible delay in receiving additional collateral or in the recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. Loans will only be made to persons deemed by AIM to be of good standing and will not be made unless, in the judgment of AIM, the consideration to be earned from such loans would justify the risk.
(1) "Requisite NRSRO" shall mean (a) any two nationally recognized statistical rating organizations 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 the fund acquires the security; that NRSRO. At present the NRSROs are: Standard & Poors Corp., Moody s Investors Service, Inc., Thomson Bankwatch, One, Duff and Phelps, Inc., Fitch Investors Services, Inc. and, with respect to certain types of securities, IBCA Ltd and its subsidiary, IBCA, Inc. Subcategories or gradations in ratings (such as "+" or "-" ) do not count as rating categories.
REVERSE REPURCHASE AGREEMENTS
Each of the Funds may enter into reverse repurchase agreements, which involve the sale of securities (i.e., money market instruments in the case of the Money Market Fund) held by the Fund, with an agreement that the Fund will repurchase the securities at an agreed upon price and date. The Funds may employ reverse repurchase agreements when necessary to meet unanticipated net redemptions so as to avoid liquidating other portfolio securities during unfavorable market conditions and only in amounts up to 33 1/3% of the value of each Fund's total assets at the time any such Fund enters into a reverse repurchase agreement. 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. The segregated securities will be marked-to-market, and additional securities will be segregated if necessary to maintain adequate coverage. The Funds will utilize reverse repurchase agreements when the interest income to be earned from portfolio investments which would otherwise have to be liquidated to meet redemptions is greater than the interest expense incurred as a result of the reverse repurchase transactions.
DELAYED DELIVERY AGREEMENTS
Each of the Funds may enter into delayed delivery agreements, which involve commitments by each such Fund to dealers or issuers to acquire securities or instruments at a specified future date beyond the customary settlement date for such securities. These commitments fix the payment price and interest rate to be received on the investment. Delayed delivery agreements will not be used as a speculative or leverage technique. Rather, from time to time, AIM can anticipate that cash for investment purposes will result from scheduled maturities of existing portfolio instruments or from net sales of shares of the Fund. Until the settlement date, the Fund will segregate cash or other liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery securities. The delayed delivery securities, which will not begin to accrue interest until the settlement date, will be recorded as an asset of the Fund and will be subject to the risks of market fluctuation. The purchase price of the delayed delivery securities is a liability of the Fund until settlement. If cash is not available to the Fund at the time of settlement, the Fund may be required to dispose of portfolio securities that it would otherwise hold to maturity in order to meet its obligation to accept delivery under a delayed delivery agreement. The Board of Directors has determined that entering into delayed delivery agreements does not present a materially increased risk of loss to shareholders, but the Board of Directors may restrict the use of delayed delivery agreements if the risk of loss is determined to be material or if it affects the constant net asset value of the Money Market Fund.
WHEN-ISSUED SECURITIES
Each of the Funds may purchase securities on a "when-issued" basis. Many new issues of debt securities are offered on a "when-issued" basis, that is, 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 (normally within forty-five days after the date of the transaction). The payment obligation and the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. The Funds will only make commitments to purchase such debt securities with the intention of actually acquiring such securities, but the Funds may each sell these securities before the settlement date if it is deemed advisable. The Fund holds, and maintains until the settlement date segregated liquid assets of a dollar value sufficient at all times to make payment for the when-issued securities. The securities will be marked-to-market and additional assets will be segregated if necessary to maintain adequate coverage of the when-issued commitments.
Securities purchased on a when-issued basis and the securities held in the Funds' portfolios are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and changes in the level of interest rates (which will generally result in all of those securities changing in value in the same way, i.e., all those securities experiencing appreciation when interest rates rise). Therefore, if, in order to achieve higher interest income, 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 securities, by the 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 applicable Fund's payment obligation).
A sale of securities to meet such obligations carries with it a greater potential for the realization of net short-term capital gains, which are not exempt from federal income taxes. The value of when-issued securities on the settlement date may be more or less than the purchase price.
SPECIAL SITUATIONS
Although the Capital Appreciation Fund does not currently intend to do so, it may invest in "special situations." A special situation arises when, in the opinion of the Fund's management, the securities of a particular company will, within a reasonably estimable period of time, be accorded market recognition at an appreciated value solely by reason of a development applicable to that company, and regardless of general business conditions or movements of the market as a whole. Developments creating special situations might include, among others: liquidations, reorganizations, recapitalizations, mergers, material litigation, technical breakthroughs and new management or management policies. Although large and well known companies may be involved, special situations more often involve comparatively small or unseasoned companies. Investments in unseasoned companies and special situations often involve much greater risk than is inherent in ordinary investment securities.
WARRANTS
The Aggressive Growth Fund, the Capital Development Fund, the Global Growth and Income Fund, the Growth and Income Fund and the Telecommunications Fund may, from time to time, invest in 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. Of course, 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 a warrant, the current market value of the underlying security, the life of the warrant and various other investment factors.
SHORT SALES
Each of the Funds (except the Money Market Fund) may enter into short sales transactions from time to time. None of these Funds will make short sales of securities nor maintain a short position unless at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short. This is a technique known as selling short "against the box." Such short sales will be used by each of the Funds for the purpose of deferring recognition of gain or loss for federal income tax purposes. In no event may more than 10% of the value of any such Fund's total assets be deposited or pledged as collateral for such sales at any time.
RULE 144A SECURITIES
Each of the Funds may purchase securities which, while privately placed, are eligible for purchase and sale pursuant to Rule 144A under the Securities Act of 1933 (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 Company's Board of Directors, will consider whether securities purchased under Rule 144A are illiquid and thus subject to the Fund's restriction of investing no more than
15% of its net assets (10% in the case of the Money Market Fund) 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). The liquidity of Rule 144A securities will also be monitored by AIM and, if as a result of changed conditions, it is determined that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid securities will be reviewed to determine what, if any, action is required to assure that the Fund does not invest more than 15% of its net assets (10% in the case of the Money Market Fund) in illiquid securities. Investing in Rule 144A securities could have the effect of increasing the amount of each Fund's investments in illiquid securities if qualified institutional buyers are unwilling to purchase such securities.
ASSET ALLOCATION AMONG COUNTRIES
The Fund currently contemplates that it will invest principally in securities of issuers in the United States, Canada, Japan, the Western European nations, New Zealand and Australia. The Fund may invest in securities denominated in more than one currency.
UTILITIES INDUSTRY
The following is a general description of the particular types of utilities industries in which the Global Utilities Fund may invest.
Electric Utility Industry. Electric utilities are heavily regulated. Local rates are subject to the review of state commissions, and sales either between companies or that cross state lines are subject to review by the Federal Energy Regulatory Commission. The industry is also subject to regulation by the SEC under the Public Utility Holding Company Act of 1935. In addition, companies constructing or operating nuclear powered generating stations are subject to extensive regulation by the Nuclear Regulatory Commission.
Electric utility companies are also subject to extensive local regulation in environmental and site location matters. Future legislation with regard to the issues of acid rain and toxic and radioactive wastes could have a significant impact on the manner in which utility companies conduct their business, and the costs that they incur. Since the late 1970s, investor-owned utilities have experienced a number of unfavorable regulatory trends, including increased regulatory resistance to price increases and new legislation encouraging competition.
Electric utilities have recently become subject to competition in varying degrees. This competition can have the effect of decreasing revenues and profit margins.
Natural Gas Industry. The natural gas industry is comprised primarily of many small distribution companies and a few large interstate pipeline companies. The Public Utility Holding Company Act of 1935 has generally acted as a bar to the consolidation of pipeline and distribution companies. Regulation of these companies is similar to that of electric companies. The performance of natural gas utilities may also be substantially affected by fluctuations in energy prices. Competition in the natural gas industry has resulted in the consolidation of the industry.
Communications Industry. Most of the communications industry capacity is concentrated in the hands of a few very large publicly-held companies, unlike the situation in the electric and gas industries. Significant risks for the investor to overcome still exist, however, including risk relating to pricing at marginal versus embedded cost. New entrants may have lower costs of material due to newer technologies or lower standards of reliability than those heretofore imposed by American Telephone & Telegraph ("AT&T") on the industry. Accordingly, the marginal cost of incremental service is much lower than the costs embedded in an existing network. Communications companies are not subject to the Public Utility Holding Company Act of 1935.
Interstate communications service may be subject to Federal Communications Commission regulation. Local service may be regulated by the states. In addition, AT&T and its former subsidiaries are still subject to judicial review pursuant to the settlement of the antitrust case brought against them by the Department of Justice.
Water Utility Industry. The water utility industry is composed of regulated public utilities that are involved in the distribution of drinking water to densely populated areas. The industry is geographically diverse and subject to
the same rate base and rate of return regulations as are other public utilities. Demand for water is most heavily influenced by the local weather, population growth in the service area and new construction. Supplies of clean, drinkable water are limited and are primarily a function of the amount of past rainfall.
Other. In addition to the particular types of utilities industries
described above, the Fund may invest in developing utility technology companies
(such as cellular telephone, fiber optics and satellite communications firms)
and in holding companies which derive a substantial portion of their revenues
from utility-related activities.
FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with foreign currencies, and consequently the Funds (except the Government Fund and the Money Market Fund) may from time to time hold cash balances in the form of foreign currencies and multinational currency units. Such foreign currencies and multinational currency units will usually be acquired on a spot (i.e. cash) basis at the spot rate prevailing in foreign exchange markets and will result in currency conversion costs to the Fund. A Fund attempts to purchase and sell foreign currencies on as favorable a basis as practicable; however, some price spread on foreign exchange transactions (to cover service charges) may be incurred, particularly when the Fund changes investments from one country to another, or when U.S. Dollars are used to purchase foreign securities. Certain countries could adopt policies which would prevent the Fund from transferring cash out of such countries, and the Fund may be affected either favorably or unfavorably by fluctuations in relative exchange rates while the Fund holds foreign currencies.
HEDGING AND OTHER INVESTMENT TECHNIQUES
As described in the Prospectus under "Certain Investment Strategies and Techniques," each of the Funds, other than the Money Market Fund, may enter into transactions in options, futures and forward contracts on a variety of instruments and indexes, in order to protect against declines in the value of portfolio securities and increases in the cost of securities to be acquired as well as to increase a Fund's return. The discussion below supplements the discussion in the Prospectus.
Options. A Fund may write covered call options both to reduce the risks associated with certain of its investments and to increase total investment return through the receipt of premiums. In return for the premium income, the Fund loses any opportunity to profit from an increase in the market price of the underlying securities, above the exercise price, while the contract is outstanding, except to the extent the premium represents a profit. The Fund also retains the risk of loss if the price of the security declines, although the premium is intended to offset that loss in whole or in part. As long as its obligations under the option continue, a Fund must assume that the call may be exercised at any time and that the net proceeds realized from the sale of the underlying securities pursuant to the call may be substantially below the prevailing market price.
A Fund may enter into a "closing purchase transaction", by purchasing an option identical to the one it has written, and terminate its obligations under the covered call. The Fund will realize a gain (or loss) from a closing purchase transaction if the amount paid to purchase a call option is less (or more) than the premium received upon writing the corresponding call option. Any loss resulting from the exercise or closing out of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by the Fund primarily because a price increase of a call option generally reflects an increase in the market price of the securities on which the option is based. In order to sell portfolio securities that cover a call option, a Fund will effect a closing purchase transaction so as to close out any existing covered call option on those securities. A closing purchase transaction for exchange-traded options may be made only on a national securities exchange. A liquid secondary market on an exchange may not always exist for any particular option, or at any particular time, and, for some options, such as over-the-counter options, no secondary market on an exchange may exist. If a Fund is unable to effect a closing purchase transaction, the Fund will not sell the underlying security until the option expires or the Fund delivers the underlying security upon exercise.
A Fund may write put options to earn additional income in the form of option premiums if it expects the price of the underlying securities to remain stable or rise during the option period so that the option will not be exercised. A Fund may also write put options if it expects a decline in the price of the underlying securities and intends to exercise the option at a price which, offset by the option premium, is less than the current price. The risk of either strategy is that the price of the underlying securities may decline by an amount greater than the premium received.
A Fund may effect a closing purchase transaction to realize a profit on an outstanding put option or to prevent an outstanding put option from being exercised. If a Fund is able to enter into a closing purchase transaction, the Fund will realize a profit (or loss) from that transaction if the cost of the transaction is less (or more) than the premium received from the writing of the option. After writing a put option, a Fund may incur a loss equal to the difference between the exercise price of the option and the sum of the market value of the underlying securities plus the premiums received from the sale of the option.
The purchase of put options on securities enables a Fund to preserve, at least partially, unrealized gains in an appreciated security in its portfolio without actually selling the security. In addition, the Fund may continue to receive interest or dividend income on the security.
An option on a securities index, unlike a stock option (which gives
the holder the right to purchase or sell a specified stock at a specified
price) gives the holder the right to receive a cash "exercise settlement
amount" equal to (i) the difference between the exercise price of the option
and the value of the underlying stock index on the exercise date, multiplied by
(ii) a fixed "index multiplier." A securities index fluctuates with changes in
the market values of the securities included in the index. For example, some
securities index options are based on a broad market index such as the S&P 500
or the NYSE Composite Index, or a narrower market index such as the S&P 100.
Indexes may also be based on an industry or market segment such as the AMEX Oil
and Gas Index or the Computer and Business Equipment Index. Options on stock
indexes are currently traded on the following exchanges, among others: The
Chicago Board Options Exchange, New York Stock Exchange, and American Stock
Exchange. Options on indexes of debt securities and other types of securities
indexes are not currently available. If such options are introduced and traded
on exchanges in the future, the Funds may use them.
The value of securities index options in any investment strategy depends upon the extent to which price movements in the portion of the underlying securities correlate with price movements in the selected securities index. Perfect correlation is not possible because the securities held or to be acquired by a Fund will not exactly match the composition of the securities indexes on which options are written. In the purchase of securities index options the principal risk is that the premium and transaction costs paid by a Fund in purchasing an option will be lost if the changes (increase in the case of a call, decrease in the case of a put) in the level of the index do not exceed the cost of the option. In writing securities index options, the principal risk is that a Fund could bear a loss on the options that would be only partially offset (or not offset at all) by the increased value or reduced cost of the hedged securities. Moreover, in the event the Fund were unable to close an option it had written, it might be unable to sell the securities used as cover.
The Fund, for hedging purposes, may purchase and write options in combination with each other to adjust the risk and return characteristics of the Fund's overall position. For example, the Fund may purchase a put option and write a covered call option on the same underlying instrument, in order to construct a combined position whose risk and return characteristics are similar to selling a futures contract. This technique, called a "collar," enables the Fund to offset the cost of purchasing a put option with the premium received from writing the call option. However, by selling the call option, the Fund gives up the ability for potentially unlimited profit from the put option. Another 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.
Futures Contracts. A futures contract is a bilateral agreement to buy or sell a security (or deliver a cash settlement price, in the case of an index future) for a set price in the future. When the contract is entered into, a good
faith deposit, known as initial margin, is made with the broker. Subsequent daily payments, known as variation margin, are made to and by the broker reflecting changes in the value of the security or level of the index. Futures contracts are authorized by boards of trade designated as "contracts markets" by the Commodity Futures Trading Commission ("CFTC"). Certain results may be accomplished more quickly, and with lower transaction costs, in the futures market (because of its greater liquidity) than in the cash market.
In cases of purchases of futures contracts, an amount of liquid assets, equal to the cost of the futures contracts (less any related margin deposits), will be segregated with a Fund's custodian to collateralize the position and ensure that the use of such futures contracts is unleveraged. Unlike when a Fund purchases or sells a security, no price is paid or received by a Fund upon the purchase or sale of a future contract. Initially, a Fund will be required to deposit with its custodian for the account of the broker a stated amount, as called for by the particular contract, of liquid assets. This amount is known as "initial margin." The nature of initial margin in futures transactions is different from that of margin in securities transactions in that futures contract margin does not involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith deposit on the contract which is returned to the Fund upon termination of the futures contract assuming all contractual obligations have been satisfied. Subsequent payments, called "variation margin," to and from the broker will be made on a daily basis as the price of the futures contract fluctuates, making the long and short positions in the futures contract more or less valuable. This process is known as "marking-to-market." For example, when a Fund has purchased a stock index futures contract and the price of the underlying stock index has risen, that position will have increased in value and the Fund will receive from the broker a variation margin payment with respect to that increase in value. Conversely, where a Fund has purchased a stock index futures contract and the price of the underlying stock index has declined, that position would be less valuable and the Fund would be required to make a variation margin payment to the broker. Variation Margin payments would be made in a similar fashion when a Fund has purchased an interest rate futures contract. At any time prior to expiration of the futures contract, a Fund may elect to close the position by taking an opposite position which will operate to terminate the Fund's position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the Fund and the Fund realizes a loss or a gain.
A Fund will incur brokerage fees when it purchases and sells futures contracts, and it will be required to maintain margin deposits. Positions taken in the futures markets are typically liquidated through offsetting transactions, which may result in a gain or a loss, before delivery or cash settlement is required. However, a Fund may close out a position by making or taking delivery of the underlying securities wherever it appears economically advantageous to do so.
Purchases of options on futures contracts may present less risk than the purchase and sale of the underlying futures contracts, since the potential loss is limited to the amount of the premium plus related transaction costs. A call option on a futures contract gives the purchaser the right, in return for the premium paid, to purchase a futures contract (assume a "long" position) at a specified exercise price at any time before the option expires. A put option gives the purchaser the right, in return for the premium paid, to sell a futures contract (assume a "short" position), for a specified exercise price, at any time before the option expires.
Positions in futures contracts may be closed out only on an exchange or a board of trade which provides the market for such futures. Although the Funds intend to purchase or sell futures only on exchanges or boards of trade where there appears to be an active market, there may not always be a liquid market, and it may not be possible to close a futures position at that time; in the event of adverse price movements, a Fund would continue to be required to make daily cash payments of maintenance margin. Whenever futures positions are used to hedge portfolio securities, however, any increase in the price of the underlying securities held by the Fund may partially or completely offset losses on the futures contracts.
If a broker or clearing member of an options or futures clearing corporation were to become insolvent, the Funds could experience delays and might not be able to trade or exercise options or futures purchased through that broker. In addition, the Funds could have some or all of their positions closed out without their consent. If substantial and widespread, these insolvencies could ultimately impair the ability of the clearing corporations themselves. While the principal purpose of engaging in these transactions is to limit the effects of adverse market movements, the attendant expense may cause the Funds' returns to be less than if the transactions had not occurred. Their overall effectiveness, therefore, depends on AIM's accuracy in predicting future changes in interest rate levels or securities price movements, as well as on the expense of engaging in these transactions.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
The following restrictions apply to all of the Funds and are fundamental. Unless permitted by law, they will not be changed for any Fund without approval of that Fund's voting securities.
None of the Funds will:
(1) invest for the purpose of exercising control over or management over a company except that each Fund may purchase securities of other investment companies to the extent permitted by applicable law or exemptive order;
(2) act as an underwriter, except to the extent that, in connection with the disposition of portfolio securities, the fund may be deemed to be an underwriter for purposes of the 1933 Act;
(3) purchase or sell real estate or any interest therein, except that each Fund may, as appropriate and consistent with its investment policies and other investment restrictions, invest in securities of corporate or governmental entities secured by real estate or marketable interests therein or securities of issuers that engage in real estate operations or interests therein, and may hold and sell real estate acquired as a result of ownership in such securities;
(4) purchase or sell commodity contracts, except that each Fund may, as appropriate and consistent with its investment policies and other investment restrictions, enter into futures contracts on securities, securities indices and currency, options on such futures contracts, forward foreign currency exchange contracts, forward commitments and repurchase agreements;
(5) make loans, except for collateralized loans of portfolio securities in an amount not exceeding 33 1/3% of the applicable Fund's total assets. This restriction does not prevent a Fund from purchasing government obligations, short-term commercial paper, or publicly traded debt, including bonds, notes, debentures, certificates of deposit, bankers acceptances and equipment trust certificates, nor does this restriction apply to loans made under insurance policies, or through entry into repurchase agreements, to the extent they may be viewed as loans;
(6) purchase the securities of issuers conducting their principal business activity in the same industry if, immediately after such purchase, the value of its investments in such industry would exceed 25% of its total assets at market value at the time of each investment, except that the Money Market Fund may invest up to 100% of its assets in obligations issued by banks. This limitation does not apply to the Global Utilities Fund or to investments in obligations of the U.S. Government or any of its agencies or instrumentalities but will apply to foreign government obligations unless the Securities and Exchange Commission permits their exclusion;
(7) issue senior securities, except to the extent permitted by the 1940 Act, including permitted borrowings;
(8) purchase securities of an issuer (other than investments in obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities or except that each Fund may purchase securities of other investment companies to the extent permitted by applicable law or exemptive order), if as a result with respect to 75% of the value of the Fund's total assets, taken at market value, (i) more than 5% of the Fund's total assets taken at market value would be invested in the securities of such issuer, except that up to 25% of the Fund's total assets may be invested in securities issued or guaranteed by any foreign government or its agencies or instrumentalities, or (ii) such purchase would at the time result in more than 10% of the outstanding voting securities of such issuer being held by the Fund. As a matter of operating policy, the Money Market Fund will invest no more than 5% of the value of that Fund's total assets in securities, other than U.S. Government securities of any one issuer, except that the Money Market Fund may invest up to 25% of its total assets in First Tier Securities (as defined in Rule 2a-7 under the 1940 Act) of a single issuer for a period of up to three business days after the purchase of such security. This restriction does not apply to the Global Utilities Fund; and
(9) Each Fund may, not withstanding 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.
NON-FUNDAMENTAL RESTRICTIONS
The following investment restrictions apply to all of the Funds but are not fundamental. They may be changed for any Fund without approval of that Fund's voting securities.
(1) None of the Funds will invest more than 15% (10% for the Money Market Fund) of its assets in securities restricted as to disposition under federal securities laws, or securities otherwise considered illiquid or not readily marketable, including repurchase agreements having a maturity of more than seven days.
(2) None of the Funds will purchase or retain the securities of any issuer if, to the knowledge of AIM, those officers and Directors of the Company, its adviser or distributor owning individually more than 1/2 of 1% of the securities of such issuer together own more than 5% of the securities of such issuer.
(3) The Company does not currently intend to invest all of the assets
of any Fund in the securities of a single open-end management investment company
with the same fundamental investment objectives, policies and limitations as
that Fund.
(4) The Fund may not invest in securities issued by other investment
companies except as part of a merger, reorganization or other acquisition and
except to the extent permitted by (i) the 1940 Act, as amended from time to
time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act,
as amended from time to time, or (iii) an exemption or other relief from the
provisions of the 1940 Act.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal occupations during at least the last five years are set forth below. Unless otherwise indicated, the address of each director and executive officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046.
Positions Held
NAME, ADDRESS AND AGE with Registrant PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
*CHARLES T. BAUER (79) Director and Chairman of the Board of Directors, A I M
Chairman Management Group Inc., A I M Advisors, Inc.,
A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services,
Inc., and Fund Management Company; and Vice
Chairman and Director, AMVESCAP PLC.
BRUCE L. CROCKETT (54) Director Director, ACE Limited (insurance company),
906 Frome Lane Formerly, Director, President and Chief
McLean, VA 22102 Executive Officer, COMSAT Corporation
and Chairman, Board of Governors of
INTELSAT; (international communications
company).
OWEN DALY II (73) Director Director, Cortland Trust Inc. (investment
Six Blythewood Road company). Formerly, Director, CF & I Steel
Baltimore, MD 21210 Corp., Monumental Life Insurance Company
and Monumental General Insurance
Company; and Chairman of the Board of
Equitable Bancorporation.
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Positions Held
NAME, ADDRESS AND AGE with Registrant PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
EDWARD K. DUNN, JR. (63) Director Chairman of the Board of Directors,
2 Hopkins Plaza, 20th Floor Mercantile Mortgage Corp. Formerly, Vice
Baltimore, MD 21201 Chairman of the Board of Directors and
President, Mercantile-Safe Deposit & Trust
Co.; and President, Mercantile Bankshares.
JACK FIELDS (46) Director Chief Executive Officer, Texana Global, Inc.
8810 Will Clayton Parkway (foreign trading company). Formerly,
Jetero Plaza, Suite E Member of the U.S. House of
Humble, TX 77338 Representatives.
**CARL FRISCHLING (61) Director Partner, Kramer, Levin, Naftalis & Frankel
919 Third Avenue (law firm); and Director, ERD Waste, Inc.
New York, NY 10022 (waste management company), Aegis Consumer
Finance (auto leasing company) and Lazard
Funds, Inc. (investment companies).
Formerly, Partner, Reid & Priest (law firm);
and, prior thereto, Partner, Spengler
Carlson Gubar Brodsky & Frischling (law
firm).
*ROBERT H. GRAHAM (51) Director and Director, President and Chief Executive
President Officer, A I M Management Group Inc.;
Director and President, A I M Advisors,
Inc.; Director and Senior Vice President,
A I M Capital Management, Inc., A I M
Distributors, Inc., A I M Fund Services,
Inc., and Fund Management Company; Director,
AMVESCAP PLC.
PREMA MATHAI-DAVIS (49) Director Chief Executive Officer, YWCA of the
350 Fifth Avenue, Suite 301 U.S.A.; Commissioner, New York City
New York, NY 10118 Department for the Aging; and Member,
Board of Directors, Metropolitan
Transportation Authority of New York State.
LEWIS F. PENNOCK (55) Director Attorney in private practice in Houston,
6363 Woodway, Suite 825 Texas.
Houston, TX 77057
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Positions Held
NAME, ADDRESS AND AGE with Registrant PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
IAN W. ROBINSON (75) Director Formerly, Executive Vice President and Chief
183 River Drive Financial Officer, Bell Atlantic Management
Tequesta, FL 33469 Services, Inc. (provider of centralized
management services to telephone companies);
Executive Vice President, Bell Atlantic
Corporation (parent of seven telephone
companies); and Vice President and Chief
Financial Officer, Bell Telephone Company of
Pennsylvania and Diamond State Telephone
Company.
LOUIS S. SKLAR (58) Director Executive Vice President, Development and
Transco Tower, 50th Floor Operations, Hines Interests Limited
2800 Post Oak Blvd. Partnership (real estate development).
Houston, TX 77056
***JOHN J. ARTHUR (53) Senior Vice Director, Senior Vice President and
President and Treasurer, A I M Advisors, Inc.; and Vice
Treasurer President and Treasurer, A I M Management
Group Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund
Services, Inc., and Fund Management Company.
GARY T. CRUM (50) Senior Vice Director and President, A I M Capital
President Management, Inc.; Director and Senior Vice
President, A I M Management Group Inc.
and A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and AMVESCAP
PLC.
***CAROL F. RELIHAN (43) Senior Vice Director, Senior Vice President, General
President and Counsel and Secretary, A I M Advisors, Inc.;
Secretary Vice President, General Counsel and
Secretary, A I M Management Group Inc.;
Director, Vice President and General
Counsel, Fund Management Company;
General Counsel and Vice President,
A I M Fund Services, Inc.; and Vice
President, A I M Capital Management, Inc.,
A I M Distributors, Inc.
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Positions Held
NAME, ADDRESS AND AGE with Registrant PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
DANA R. SUTTON (39) Vice President and Vice President and Fund Controller,
Assistant Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
ROBERT G. ALLEY (49) Vice President Senior Vice President, A I M Capital
Management, Inc.; and Vice President,
A I M Advisors, Inc.
STUART W. COCO (43) Vice President Senior Vice President, A I M Capital
Management, Inc. and Vice President,
A I M Advisors, Inc.
MELVILLE B. COX (54) Vice President Vice President and Chief Compliance
Officer, A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc., and Fund
Management Company.
KAREN DUNN KELLEY (37) Vice President Senior Vice President, A I M Capital
Management, Inc. and Vice President,
A I M Advisors, Inc.
JONATHAN C. SCHOOLAR Vice President Senior Vice President, A I M Capital
(36) Management, Inc.; and Vice President,
A I M Advisors, Inc.
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The standing committees of the Board of Directors are the Audit Committee, the Investments Committee and the Nominating and Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn, Fields, Frischling, Pennock, Robinson (Chairman) and Sklar. The Audit Committee is responsible for meeting with the Company's auditors to review audit procedures and results and to consider any matters arising from an audit to be brought to the attention of the directors as a whole with respect to the Company's fund accounting or its internal accounting controls, or for considering such matters as may from time to time be set forth in a Charter adopted by the Board of Directors and such Committee.
The members of the Investments Committee are Messrs. Bauer, Crockett, Daly, Dunn, Fields, Frischling, Pennock, Robinson and Sklar (Chairman). The Investments Committee is responsible for reviewing portfolio compliance, brokerage allocation, portfolio investment pricing issues, interim dividend and distribution issues, or considering such matters as may from time to time be set forth in a charter adopted by the Board of Directors and such Committee.
The members of the Nominating and Compensation Committee are Messrs. Crockett (Chairman), Daly, Dunn, Fields, Pennock, Robinson and Sklar. The Nominating and Compensation Committee is responsible for considering and nominating individuals to stand for election as directors who are not interested persons, reviewing from time to
time the compensation payable to the disinterested directors, or considering such matters as may from time to time be set forth in a charter adopted by the Board of Directors of such Committee.
All of the Company's Directors also serve as directors or trustees of some or all of the other investment companies managed or advised by AIM. All of the Directors' executive officers hold similar offices with some or all of the other investment companies managed or advised by AIM.
Remuneration of Directors
Each director is reimbursed for expenses incurred in connection with each meeting of the Board of Directors or any Committee thereof. Each director of the Company who is not also an officer of the Company is compensated for his services according to a fee schedule which recognizes the fact that such director also serves as a director or trustee of certain other investment companies advised or managed by AIM. Each such director receives a fee, allocated among the AIM Funds for which he serves as a director or trustee, which consists of an annual retainer component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued during the fiscal year ended December 31, 1997 for each director of the Company:
RETIREMENT
BENEFITS
AGGREGATE ACCRUED TOTAL
COMPENSATION BY ALL AIM COMPENSATION
DIRECTOR FROM COMPANY(1) FUNDS(2) FROM ALL AIM FUNDS(3)
-------- --------------- -------- ---------------------
Charles T. Bauer $ 0 $ 0 $ 0
Bruce L. Crockett 10,290 67,774 84,000
Owen Daly II 10,290 103,542 84,000
Edward K. Dunn, Jr.(4) 0 0 0
Jack Fields 8,529 0 71,000
Carl Frischling(5) 10,290 96,520 84,000
Robert H. Graham 0 0 0
John F. Kroeger(6) 10,118 94,132 82,500
Prema Mathai-Davis (4) 0 0 0
Lewis F. Pennock 10,290 55,777 84,000
Ian W. Robinson 10,290 85,912 84,000
Louis S. Sklar 10,233 84,370 83,500
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(1) The total amount of compensation deferred by all Directors of the Company during the fiscal year ended December 31, 1997, including interest earned thereon, was $50,274.
(2) During the fiscal year ended December 31, 1997, the total amount of expenses allocated to the Company in respect of such retirement benefits was $15,926. Data reflects compensation estimated for the calendar year ended December 31, 1997.
(3) Each Director serves as a Director or Trustee of a total of 12 registered investment companies advised by AIM (comprised of over 50 portfolios). Data reflects compensation estimated for the calendar year ended December 31, 1997.
(4) Mr. Dunn and Ms. Mathai-Davis did not serve as a Director during the calendar year ended December 31, 1997.
(5) See page 23 for fees paid to Mr. Frischling's law firm.
(6) Mr. Kroeger resigned as a Director of the Company on June 11, 1998 and on that date became a consultant of the Company.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible Directors/Trustees (the "Plan"), each director (who is not a employee of any of the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be entitled to certain benefits upon retirement from the Board of Directors. Pursuant to the Plan, the normal retirement date is the date on which the eligible director has attained age 65 and has completed at least five years of continuous service with one or more of the regulated investment companies managed, administered or distributed by AIM or its affiliates (the "Applicable AIM Funds"). Each eligible director is entitled to receive an annual benefit from the Applicable AIM Funds commencing on the first day of the calendar quarter coincident with or following his date of retirement equal to 75% of the retainer paid or accrued by the Applicable AIM Funds for such director during the twelve-month period immediately preceding the director's retirement (including amounts deferred under a separate agreement between the Applicable AIM Funds and the director) for the number of such director's years of service (not in excess of 10 years of service) completed with respect to any of the Applicable AIM Funds. Such benefit is payable to each eligible director in quarterly installments. If an eligible director dies after attaining the normal retirement date but before receipt of any benefits under the Plan commences, the director's surviving spouse (if any) shall receive a quarterly survivor's benefit equal to 50% of the amount payable to the deceased director, for no more than ten years beginning the first day of the calendar quarter following the date of the director's death. Payments under the Plan are not secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits payable to an eligible director upon retirement assuming a specified level of compensation and years of service classifications. The estimated credited years of service as of December 31, 1997 for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Kroeger, Mathai-Davis, Pennock, Robinson and Sklar are 10, 11, 0, 1, 20, 20, 0, 16, 10 and 8 years, respectively.
ANNUAL BENEFITS UPON RETIREMENT
Number of Annual Retainer
Years of Paid By All AIM Funds
Service With
the Applicable
AIM Funds $90,000
-------------- ---------------------
10 $67,500
9 $60,750
8 $54,000
7 $47,250
6 $40,500
5 $33,750
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Deferred Compensation Agreements
Messrs. Daly, Frischling, Kroeger, Robinson and Sklar (for purposes of this paragraph only, the "deferring directors") have each executed a Deferred Compensation Agreement (collectively, the "Agreements"). Pursuant to the Agreements, the deferring directors elected to defer receipt of 100% of their compensation payable by the Company, and such amounts are placed into a deferral account. Currently, the deferring directors may select various AIM Funds in which all or part of their deferral account shall be deemed to be invested. Distributions from the deferring directors' deferral accounts will be paid in cash, in generally equal quarterly installments over a period of
five (5) or ten (10) years (depending on the Agreement) beginning on the date the deferring director's retirement benefits commence under the Plan. The Company's Board of Directors, in its sole discretion, may accelerate or extend the distribution of such deferral accounts after the deferring director's termination of service as a director of the Company. If a deferring director dies prior to the distribution of amounts in his deferral account, the balance of the deferral account will be distributed to his designated beneficiary in a single lump sum payment as soon as practicable after such deferring director's death. The Agreements are not funded and, with respect to the payments of amounts held in the deferral accounts, the deferring directors have the status of unsecured creditors of the Company and of each other AIM Fund from which they are deferring compensation.
During the fiscal year ended December 31, 1997, AIM V.I. Capital Appreciation Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Utilities Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. International Equity Fund, AIM V.I. Money Market Fund and AIM V.I. Value Fund each paid $5,296, $4,400, $4,254, $4,280, $4,727, $4,950, $4,684, $4,396 and $5,309, respectively, in legal fees to Kramer, Levin, Naftalis & Frankel, the law firm in which Mr. Frischling, a director of the Company, is a partner, as counsel to the Board of Directors.
INVESTMENT ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS
Each Fund has entered into a master investment advisory agreement (the "Advisory Agreement") dated February 28, 1997, and a master administrative services agreement (the "Administrative Services Agreement"), dated May 1, 1998, with AIM. A prior investment advisory agreement with substantially identical terms to the Advisory Agreement was in effect prior to February 28, 1997. A prior master administrative services agreement ("Prior Administrative Services Agreement") with substantially similar terms to the Administrative Services Agreement, was in effect prior to May 1, 1998. In addition, AIM has entered into a Sub-Advisory Agreement, dated ____________________, (the "Sub-Advisory Agreement") with INVESCO Asset Management Limited ("INVESCO"), an indirect wholly owned subsidiary of AMVESCAP PLC, with respect to Global Growth and Income Fund. The address of INVESCO is 11 Devonshire Square, London, England EC2 M4YR. See "Management" in the Prospectus.
AIM was organized in 1976, and along with its subsidiaries, manages or advises approximately 90 investment company portfolios encompassing a broad range of investment objectives. AIM is a wholly owned subsidiary of A I M Management Group, Inc. ("AIM Management"), a holding company that has been engaged in the financial services business since 1976. The address of AIM is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM Management is an indirect wholly owned subsidiary of AMVESCAP PLC, 11 Devonshire Square, London, EC2M 4YR, United Kingdom. AMVESCAP PLC and its subsidiaries are an independent investment management group engaged in the business of investment management on an international basis. Certain of the directors and officers of AIM are also executive officers of the Fund and their affiliations are shown under "Directors and Officers."
AIM and the Company have adopted a Code of Ethics (the "Code of
Ethics") which requires investment personnel and certain other employees (a) to
pre-clear all personal securities transactions subject to the Code of Ethics,
(b) to file reports or duplicate confirmations regarding such transactions, (c)
to refrain from personally engaging in (i) short-term trading of a security,
(ii) transactions involving a security within seven days of an AIM Fund
transaction involving the same security, and (iii) transactions involving
securities being considered for investment by an AIM Fund and (d) abide by
certain other provisions under the Code of Ethics. The Code of Ethics also
prohibits investment personnel and all other employees from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews quarterly and annual
reports (including information on any substantial violations of the Code of
Ethics). Sanctions for violations of the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
The Advisory Agreement for the Funds provides that each Fund will pay all expenses of the Fund, 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 directors and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other
expenses incurred by the Company on behalf of the Funds in connection with membership in investment company organizations, the cost of printing copies of prospectuses and statements of additional information distributed to the Fund's shareholders; and all other charges and costs of the Fund's operations unless otherwise explicitly provided.
The Advisory Agreement for the Funds and the Sub-Advisory Agreement for Global Growth and Income Fund provides that the agreement will remain in effect for the initial term and continue in effect from year to year thereafter only if such continuance is specifically approved at least annually (i) by the Company's Board of Directors or by the vote of a majority of the outstanding voting securities of the Funds (as defined in the 1940 Act); and (ii) by the affirmative vote of a majority of the directors who are not parties to the agreement or "interested persons" of any such party (the "Non-Interested Directors") by votes cast in person at a meeting called for such purpose. The Advisory Agreement was initially approved by the Company's Board of Directors (including the affirmative vote of all of the Non-Interested Directors) on December 11, 1996 and was approved by the Funds' shareholders on February 7, 1997. The Board of Directors of the Company approved the continuance of the Agreement until June 30, 1998. The Advisory Agreement became effective on February 28, 1997. The Sub-Advisory Agreement was initially approved by the Company's Board of Directors (including the affirmative vote of all of the Non-Interested Directors) on September 26, 1998. The Sub-Advisory Agreement became effective , 1998. The Advisory Agreement provides that the Company, AIM (in the case of the Advisory Agreement) or INVESCO (in the case of the Sub-Advisory Agreement) may terminate such agreement with respect to any Fund(s) on sixty (60) days' written notice without penalty. Each agreement terminates automatically in the event of its assignment. As compensation for its services, AIM pays 0.40% of the advisory fees it receives pursuant to the Advisory Agreement with respect to Global Growth and Income Fund to INVESCO.
Pursuant to the Advisory Agreement, AIM receives a fee from each of AIM V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. Capital Development Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Utilities Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. High Yield Fund, AIM V.I. International Equity Fund, AIM V.I. Money Market Fund and AIM V.I. Value Fund calculated at the following annual rate, based on the average daily net assets of the Fund during the year:
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. GROWTH FUND
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. VALUE FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million................................................................. 0.65%
Over $250 million ................................................................. 0.60%
|
AIM V.I. AGGRESSIVE GROWTH FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $150 million................................................................. 0.80%
Over $150 million.................................................................. 0.625%
|
AIM V.I. BALANCED FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $150 million................................................................. 0.75%
Over $150 million.................................................................. 0.50%
|
AIM V.I. CAPITAL DEVELOPMENT FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $350 million................................................................. 0.75%
Over $350 million.................................................................. 0.625%
|
AIM V.I. DIVERSIFIED INCOME FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million................................................................. 0.60%
Over $250 million.................................................................. 0.55%
|
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. TELECOMMUNICATIONS FUND
ANNUAL
NET ASSETS RATE
---------- ----
Average Daily Net Assets........................................................... 1.00%
|
AIM V.I. GOVERNMENT SECURITIES FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million................................................................. 0.50%
Over $250 million.................................................................. 0.45%
|
AIM V.I. HIGH YIELD FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $200 million ................................................................ 0.625%
Next $300 million.................................................................. 0.55%
Next $500 million.................................................................. 0.50%
Amount over $1 billion............................................................. 0.45%
|
AIM V.I. INTERNATIONAL EQUITY FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million................................................................. 0.75%
Over $250 million.................................................................. 0.70%
|
AIM V.I. MONEY MARKET FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million ................................................................ 0.40%
Over $250 million.................................................................. 0.35%
|
Each Fund paid to AIM a management fee (net of fee waivers) for the fiscal years ended December 31, 1997, December 31, 1996, the eleven months ended December 31, 1995 and the fiscal year ended January 31, 1995, under the Advisory Agreement and a prior, substantially identical advisory agreement, as follows:
December 31, December 31, December 31, January 31,
1997 1996 1995 1995
---- ---- ---- ----
AIM V.I. Capital Appreciation Fund $3,083,708 $1,884,838 $ 882,870 $402,307
AIM V.I. Diversified Income Fund $ 447,539 $ 306,235 $ 193,008 $ 98,044
AIM V.I. Global Utilities Fund $ 106,309 $ 57,054 $ -0- $ -0-*
AIM V.I. Government Securities Fund $ 138,550 $ 107,471 $ 71,080 $ 42,430
AIM V.I. Growth Fund $1,453,488 $ 916,484 $ 434,620 $231,152
AIM V.I. Growth and Income Fund $2,609,695 $ 678,242 $ 46,017 $ -0-*
AIM V.I. International Equity Fund $1,519,323 $ 924,578 $ 457,559 $317,747
AIM V.I. Money Market Fund $ 254,546 $ 264,855 $ 168,901 $ 85,967
AIM V.I. Value Fund $3,303,799 $1,955,091 $1,078,007 $489,030
|
* Fees paid were for the period May 2, 1994 (date operations commenced) through January 31, 1995.
For the fiscal years ended December 31, 1997, December 31, 1996, the eleven months ended December 31, 1995 and the fiscal year ended January 31, 1995, AIM waived management fees for each Fund as follows:
December 31, December 31, December 31, January 31,
1997 1996 1995 1995
---- ---- ---- ----
AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0- $ 5,046
AIM V.I. Global Utilities Fund $ -0- $ 15,954 $ 32,703 $ 9,264*
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0- $ 18,907
AIM V.I. Growth Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Growth and Income Fund $ -0- $ -0- $ 67,802 $ 20,806*
AIM V.I. International Equity Fund $ -0- $ -0- $ -0- $ 5,010
AIM V.I. Money Market Fund $ -0- $ -0- $ -0- $ 18,531
AIM V.I. Value Fund $ -0- $ -0- $ -0- $ -0-
|
* Fees waived were for the period May 2, 1994 (date operations commenced) through January 31, 1995.
In addition to the management fees paid by each Fund for the fiscal years ended December 31, 1997, December 31, 1996, the eleven months ended December 31, 1995 and for the fiscal year ended January 31, 1995, AIM absorbed other expenses as follows:
December 31, December 31, December 31, January 31,
1997 1996 1995 1995
---- ---- ---- ----
AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Global Utilities Fund $ -0- $ -0- $ 13,800 $ 12,000*
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Growth and Income Fund $ -0- $ -0- $ -0- $ -0-*
AIM V.I. International Equity Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Money Market Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Value Fund $ -0- $ -0- $ -0- $ -0-
|
* Fee amounts are for the period May 2, 1994 (date operations commenced) through January 31, 1995.
The Administrative Services Agreement for the Funds provides that AIM may perform certain accounting and other administrative services to each Fund which are not required to be performed by AIM under the Advisory Agreement. For such services, AIM would be entitled to receive from each Fund reimbursement of its expenses. In addition, AIM provides, or assures that Participating Insurance Companies will provide, certain services implementing the Company's funding arrangements with Participating Insurance Companies. Effective May 1, 1998, the Funds reimburse AIM for its costs in providing, or assuring that Participating Insurance Companies provide, these services, currently in an amount up to 0.25% of the average net asset value of each Fund in excess of the net asset value of each Fund on April 30, 1998.
The Administrative Services Agreement for the Funds provides that the agreement will remain in effect for the initial term and continue in effect from year to year thereafter only if such continuance is specifically approved at least annually (i) by the Company's Board of Directors or by the vote of a majority of the outstanding voting securities of the Funds (as defined in the 1940 Act); and (ii) by the affirmative vote of a majority of the Non-Interested Directors, by votes cast in person at a meeting called for such purpose. The agreement terminates automatically in the event of its assignment or in the event of termination of the Master Investment Advisory Agreement.
For the fiscal years ended December 31, 1997, December 31, 1996, the eleven months ended December 31, 1995 and for the fiscal year ended January 31, 1995, AIM received reimbursement of administrative services costs from each of the Funds pursuant to the Prior Administrative Services Agreement as follows:
December 31, December 31, December 31, January 31,
1997 1996 1995 1995
---- ---- ---- ----
AIM V.I. Capital Appreciation Fund $43,588 $46,623 $33,560 $23,992
AIM V.I. Diversified Income Fund $48,683 $49,500 $36,406 $35,441
AIM V.I. Global Utilities Fund $47,128 $47,729 $33,582 $13,577*
AIM V.I. Government Securities Fund $37,872 $38,695 $30,769 $23,230
AIM V.I. Growth Fund $44,692 $39,552 $32,425 $23,537
AIM V.I. Growth and Income Fund $43,065 $38,784 $31,484 $13,596*
AIM V.I. International Equity Fund $59,724 $58,644 $21,068 $12,000
AIM V.I. Money Market Fund $38,289 $29,412 $22,997 $21,019
AIM V.I. Value Fund $53,632 $47,116 $35,540 $21,568
|
* Fees paid were for the period May 2, 1994 (date operations commenced) through January 31, 1995.
THE DISTRIBUTION AGREEMENT
The Funds have entered into a master distribution agreement (the "Distribution Agreement") with AIM Distributors, dated February 28, 1997. Information concerning AIM Distributors and the continuous offering of the Funds' shares is set forth in the Prospectus under the heading "Management." The Distribution Agreement provides that AIM Distributors will bear the expenses of printing from the final proof and distributing prospectuses and statements of additional information of the Funds relating to the sale of Fund shares. The Distribution Agreement provides that the Funds shall bear the expenses of qualification of shares of the Fund for sale in connection with the public offering in any jurisdictions where qualification is required by law. AIM Distributors has not undertaken to sell any specified number of shares of the Funds.
The Distribution Agreement for the Funds provides that it will continue in effect for its initial term and from year to year thereafter only if such continuance is specifically approved at least annually (i) by the Company's Board of Directors or by the vote of a majority of the outstanding voting securities of the Funds (as defined in the 1940 Act); and (ii) by the affirmative vote of a majority of Non-Interested Directors by votes cast in person at a meeting called for such purpose. The Company or AIM Distributors may terminate its Distribution Agreement on sixty (60) days' written notice without penalty. The Distribution Agreement will terminate automatically in the event of its assignment.
DETERMINATION OF NET ASSET VALUE
For the Money Market Fund: The net asset value per share of the Fund is determined daily as of the close of trading on the New York Stock Exchange ("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 a Fund share 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), less all its liabilities (including accrued expenses and dividends payable), by the number of shares outstanding of the Fund and rounding the resulting per share net asset value to the nearest one cent. Determination of the Fund's net asset value per share is made in accordance with generally accepted accounting principles.
The securities of the Fund are valued on the basis of amortized cost. This method values a security at its cost on the date of purchase and thereafter assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of the security. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Fund would receive if the security were sold. During such periods, the daily yield on shares of the Fund computed as described under "Yield Information" may differ somewhat from an identical computation made by another investment company with identical investments utilizing available indications as to the market value of its portfolio securities.
The valuation of the portfolio instruments based upon their amortized cost and the concomitant maintenance of the net asset value per share of $1.00 for the Fund is permitted in accordance with applicable rules and regulations of the SEC which require the Fund to adhere to certain conditions. The Fund will invest only in "Eligible Securities," as defined in Rule 2a-7 of the 1940 Act, which the Fund's Board of Directors has determined present minimal credit risk. Rule 2a-7 also requires, among other things, that the Fund maintain a dollar-weighted average portfolio maturity of 90 days or less and purchase only instruments having remaining maturities of 397 calendar days or less.
The Board of Directors is required to establish procedures designed to stabilize, to the extent reasonably practicable, the Fund's price per share at $1.00 for the Fund as computed for the purpose of sales and redemptions. Such procedures include review of the Fund's holdings by the Board of Directors at such intervals as they may deem appropriate, to determine whether the net asset value calculated by using available market quotations or other reputable sources for the Fund deviates from $1.00 per share and, if so, whether such deviation may result in material dilution or is otherwise unfair to existing holders of the Fund's shares. In the event the Board of Directors determines that such a deviation exists for the Fund, it will take such corrective action as the Board of Directors deems necessary and appropriate with respect to the Fund, including the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten the average portfolio maturity; the withholding of dividends; redemption of shares in kind; or the establishment of a net asset value per share by using available market quotations.
The 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.
For All Other Funds: The net asset value per share of each Fund is
normally determined daily as of the close of trading on the NYSE (generally 4:00
p.m. Eastern time) on each business day of the Company. 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 a Fund share is determined as of the close of the NYSE on such
day. For purposes of determining net asset value per share, futures and options
contracts closing prices which are available 15 minutes after the close of
trading of the NYSE will generally be used. 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), less all its liabilities
(including accrued expenses and dividends payable), by the total number of
shares outstanding. Determination of the Fund's net asset value per share is
made in accordance with generally accepted accounting principles.
Each equity security held by the Fund is valued at its last sales price on the exchange where the security is principally traded or, lacking any sales on a particular day, the security is valued at the mean between the closing bid and asked prices on that day. Each security traded in the over-the-counter market (but not including securities reported on the NASDAQ National Market System) is valued at the mean between the last bid and asked prices based upon quotes furnished by market makers for such securities. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the mean between the closing bid and asked prices on that day. Debt securities are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service 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, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued on the basis of amortized cost. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the NYSE.
Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such foreign securities used in computing the net asset value of each Fund's shares are determined at such times as trading is completed. Foreign currency exchange rates are also generally determined prior the close of the NYSE. Occasionally, events affecting the values of such foreign securities and such foreign securities exchange rates may occur after the time at which such values are determined and prior to the close of the NYSE that will not be reflected in the computation of a Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
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. Accordingly, 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. B. Each Fund must diversify its holdings so that, at the end of each fiscal quarter or within 30 days thereafter: (i) at least 50% of the market value of the Fund's assets is represented by cash, cash items (including receivables), U.S. Government securities, securities of other RICs, and other securities, with such other securities limited, with respect to any one issuer, to an amount not greater than 5% of the Fund's assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities of any one issuer (other than U.S. Government securities or securities of other RICs).
The Code imposes a nondeductible 4% excise tax on a RIC that fails to distribute during each calendar year at least 98% of its ordinary income for the calendar year and at least 98% of its capital gain net income for the 12-month period ending on October 31 of the calendar year. Each Fund intends to make sufficient distributions to avoid imposition of the excise tax. Some Funds meet an exception which results in their not being subject to excise tax.
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).
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. 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. Section 817(h) provides, as a safe harbor, that a separate account will be treated as being adequately diversified if the diversification requirements under
Subchapter M are satisfied and no more than 55% of the value of the account's total assets are cash and cash items, government securities and securities of other RICs. 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 division other than as described in the applicable prospectuses of the various insurance company separate accounts.
MISCELLANEOUS INFORMATION
AUDIT REPORTS
The Company furnishes semi-annual reports containing information about the Funds and their operations, including a list of the investments held in each Fund's portfolio and their respective financial statements. Financial statements, audited by independent auditors, will be issued annually. The firm of Tait, Weller & Baker, Two Penn Center Plaza, Philadelphia, PA 19102, serves as the auditors of each Fund.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C. has advised the Company on certain federal securities law matters.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110, is custodian of all securities and cash of the Funds. The custodian attends to the collection of principal and income, pays and collects all monies for securities bought and sold by the Portfolios, and performs certain other ministerial duties. State Street also acts as transfer and dividend disbursing agent for the Funds. These services do not include any supervisory function over management or provide any protection against any possible depreciation of assets. The Funds pay State Street such compensation as may be agreed upon from time to time.
PRINCIPAL HOLDERS OF SECURITIES
To the best of the knowledge of each Fund, the names of the record holders of 5% or more of the outstanding shares of the Fund as of September 15, 1998, and the percentage of the outstanding shares of such Fund owned by such shareholders as of such date are set out below. The address of A I M Advisors, Inc. is 11 Greenway Plaza, Suite 100, Houston, TX 77046. The address of Connecticut General Life Insurance Company is 900 Cottage Grove Road, Hartford, CT 06152-2321. The address of Glenbrook Life and Annuity Company is 3100 Sanders Road, N4C, Northbrook, IL 60062. The address of IDS Life Insurance Company is IDS Tower 10, T27/52, Minneapolis, MN 55440. The address of Merrill Lynch Life Insurance Company is 800 Scudders Mill Road, Plainsboro, NJ 08536. The address of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey is Gateway Center Three, 13th Floor, Newark, NJ 07102. The address of First Citicorp Life Insurance Company is One Court Square, Long Island City, NY 11120. The address of Union Central Life Insurance Company is 1876 Waycross Road, Cincinnati, OH 45240. The address for Hartford Life Insurance Company is 200 Hopmeadow Street, Simsburg, CT 06089.
AIM V.I. AGGRESSIVE GROWTH FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Glenbrook Life & Annuity Company -0- -0- 67.39%*
A I M Advisors, Inc. -0- -0- 32.61%*
AIM V.I. BALANCED FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Glenbrook Life & Annuity Company -0- -0- 64.76%*
A I M Advisors, Inc. -0- -0- 23.91%
Union Central Life Insurance Company -0- -0- 11.34%
AIM V.I. CAPITAL APPRECIATION FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Connecticut General Life
Insurance Company -0- -0- 55.39%*
Glenbrook Life & Annuity Company -0- -0- 20.92%
Merrill Lynch Life Insurance Company -0- -0- 15.55%
|
* A shareholder who beneficially owns more than 25% of the voting securities of a Fund may be presumed to "control" the Fund. The Funds understand that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with instructions received from Contract owners, annuitants and beneficiaries. If an insurance company determines, however, that it is permitted to vote any such shares of the 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.
AIM V.I. CAPITAL DEVELOPMENT FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Glenbrook Life & Annuity Company -0- -0- 54.53%*
A I M Advisors, Inc. -0- -0- 45.47%*
AIM V.I. DIVERSIFIED INCOME FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Connecticut General Life
Insurance Company -0- -0- 64.81%*
Glenbrook Life & Annuity Company -0- -0- 30.85%*
AIM V.I. GLOBAL UTILITIES FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Connecticut General Life
Insurance Company -0- -0- 59.83%*
Glenbrook Life & Annuity Company -0- -0- 35.92%*
|
* A shareholder who beneficially owns more than 25% of the voting securities of a Fund may be presumed to "control" the Fund. The Funds understand that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with instructions received from Contract owners, annuitants and beneficiaries. If an insurance company determines, however, that it is permitted to vote any such shares of the 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.
AIM V.I. GOVERNMENT SECURITIES FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Connecticut General Life
Insurance Company -0- -0- 54.77%*
Glenbrook Life & Annuity Company -0- -0- 19.81%
First Citicorp Life
Insurance Company -0- -0- 13.33%
AIM V.I. GROWTH FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Connecticut General Life
Insurance Company -0- -0- 67.53%*
Glenbrook Life & Annuity Company -0- -0- 27.18%
AIM V.I. GROWTH AND INCOME FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
IDS Life Insurance Company -0- -0- 59.46%*
Connecticut General Life
Insurance Company -0- -0- 14.64%
Glenbrook Life & Annuity Company -0- -0- 11.33%
Pruco Life Insurance Company -0- -0- 7.67%
|
* A shareholder who beneficially owns more than 25% of the voting securities of a Fund may be presumed to "control" the Fund. The Funds understand that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with instructions received from Contract owners, annuitants and beneficiaries. If an insurance company determines, however, that it is permitted to vote any such shares of the 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.
AIM V.I. HIGH YIELD FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
A I M Advisors, Inc. -0- -0- 55.09%*
Glenbrook Life & Annuity Company -0- -0- 36.86%*
Hartford Life Insurance Company -0- -0- 8.05%
AIM V.I. INTERNATIONAL EQUITY FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Connecticut General Life
Insurance Company -0- -0- 65.86%*
Glenbrook Life & Annuity Company -0- -0- 23.34%
First Citicorp Life Insurance Company -0- -0- 5.47%
AIM V.I. MONEY MARKET FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Connecticut General Life
Insurance Company -0- -0- 74.23%*
Glenbrook Life & Annuity Company -0- -0- 24.60%
|
* A shareholder who beneficially owns more than 25% of the voting securities of a Fund may be presumed to "control" the Fund. The Funds understand that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with instructions received from Contract owners, annuitants and beneficiaries. If an insurance company determines, however, that it is permitted to vote any such shares of the 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.
AIM V.I. VALUE FUND
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
Connecticut General Life
Insurance Company -0- -0- 43.37%*
Merrill Lynch Life Insurance Company -0- -0- 25.12%*
Glenbrook Life & Annuity Company -0- -0- 14.39%
Pruco Life Insurance Company of New Jersey -0- -0- 9.05%
|
As of September 15, 1998, the directors and officers of the Company as a group owned beneficially less than 1% of the outstanding shares of the Company.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit certain information contained in the Registration Statement which the Funds have filed with the SEC under the Securities Act of 1933 and reference is hereby made to the Registration Statement for further information with respect to the Funds and the securities offered hereby. The Registration Statement is available for inspection by the public at the SEC in Washington, D.C.
* A shareholder who beneficially owns more than 25% of the voting securities of a Fund may be presumed to "control" the Fund. The Funds understand that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with instructions received from Contract owners, annuitants and beneficiaries. If an insurance company determines, however, that it is permitted to vote any such shares of the 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.
FINANCIAL STATEMENTS
FS
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
MARKET
SHARES VALUE
COMMON STOCKS - 35.52%
AEROSPACE/DEFENSE - 0.53%
AAR Corp. 200 $ 5,913
--------------------------------------------------------------------
Aviation Sales Co.(a) 100 3,962
--------------------------------------------------------------------
9,875
--------------------------------------------------------------------
AIR FREIGHT - 0.18%
Eagle USA Airfreight, Inc.(a) 100 3,468
--------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.47%
Heftel Broadcasting Corp.(a) 200 8,950
--------------------------------------------------------------------
BUILDING MATERIALS - 0.20%
Group Maintenance America Corp.(a) 100 1,800
--------------------------------------------------------------------
Pameco Corp.(a) 100 2,000
--------------------------------------------------------------------
3,800
--------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.63%
Brightpoint, Inc.(a) 400 5,800
--------------------------------------------------------------------
Comverse Technology, Inc.(a) 100 5,187
--------------------------------------------------------------------
Glenayre Technologies, Inc.(a) 100 1,075
--------------------------------------------------------------------
12,062
--------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.24%
IDX Systems Corp.(a) 100 4,606
--------------------------------------------------------------------
COMPUTERS (NETWORKING) - 0.38%
Broadcom Corp.(a) 100 7,362
--------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 4.05%
Applied Voice Technology, Inc.(a) 200 4,600
--------------------------------------------------------------------
Citrix Systems, Inc.(a) 100 6,837
--------------------------------------------------------------------
Concord EFS, Inc.(a) 300 7,838
--------------------------------------------------------------------
EarthLink Network, Inc.(a) 100 7,675
--------------------------------------------------------------------
Engineering Animation, Inc.(a) 100 6,100
--------------------------------------------------------------------
HNC Software Inc.(a) 100 4,081
--------------------------------------------------------------------
Jack Henry & Associates 100 3,438
--------------------------------------------------------------------
Legato Systems, Inc.(a) 200 7,800
--------------------------------------------------------------------
Medical Manager Corp.(a) 100 2,763
--------------------------------------------------------------------
Mobius Management Systems, Inc.(a) 100 1,500
--------------------------------------------------------------------
PC Connection, Inc.(a) 100 1,525
--------------------------------------------------------------------
Peerless Systems Corp.(a) 300 6,225
--------------------------------------------------------------------
Rational Software Corp.(a) 200 3,050
--------------------------------------------------------------------
ScanSource, Inc.(a) 100 1,925
--------------------------------------------------------------------
Technisource, Inc.(a) 100 1,100
--------------------------------------------------------------------
Veritas Software Corp.(a) 150 6,206
--------------------------------------------------------------------
Visio Corp.(a) 100 4,775
--------------------------------------------------------------------
77,438
--------------------------------------------------------------------
|
MARKET
SHARES VALUE
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.68%
Action Performance Companies, Inc.(a) 200 $ 6,437
-------------------------------------------------------------------
Blyth Industries, Inc.(a) 200 6,650
-------------------------------------------------------------------
13,087
-------------------------------------------------------------------
CONSUMER FINANCE - 0.37%
AmeriCredit Corp.(a) 100 3,568
-------------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 100 3,600
-------------------------------------------------------------------
7,168
-------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.16%
Sanmina Corp.(a) 200 8,675
-------------------------------------------------------------------
Symbol Technologies, Inc. 100 3,775
-------------------------------------------------------------------
Uniphase Corp.(a) 100 6,278
-------------------------------------------------------------------
Watsco, Inc. 100 3,518
-------------------------------------------------------------------
22,246
-------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.31%
Waters Corp.(a) 100 5,894
-------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.26%
Applied Micro Circuits Corp.(a) 100 2,587
-------------------------------------------------------------------
Artisan Components, Inc.(a) 200 2,700
-------------------------------------------------------------------
Flextronics International Ltd.(a) 200 8,700
-------------------------------------------------------------------
Microchip Technology, Inc.(a) 100 2,613
-------------------------------------------------------------------
Transwitch Corp.(a) 100 1,375
-------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 200 6,175
-------------------------------------------------------------------
24,150
-------------------------------------------------------------------
ENTERTAINMENT - 0.48%
SFX Entertainment, Inc. - Class A(a) 200 9,175
-------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTORS) - 0.23%
Photronics, Inc.(a) 200 4,413
-------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 0.12%
NCO Group, Inc.(a) 100 2,200
-------------------------------------------------------------------
FOODS - 0.25%
Ralcorp Holdings, Inc.(a) 100 1,888
-------------------------------------------------------------------
United Natural Foods, Inc.(a) 100 2,850
-------------------------------------------------------------------
4,738
-------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.19%
Medicis Pharmaceutical Corp.(a) 100 3,650
-------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.93%
Health Management Associates, Inc. - Class A(a) 200 6,688
-------------------------------------------------------------------
Quorum Health Group, Inc.(a) 200 5,300
-------------------------------------------------------------------
Universal Health Services, Inc. - Class B(a) 100 5,837
-------------------------------------------------------------------
17,825
-------------------------------------------------------------------
|
AIM V.I. AGGRESSIVE GROWTH FUND
FS-1
MARKET
SHARES VALUE
HEALTH CARE (LONG TERM CARE) - 0.48%
Assisted Living Concepts, Inc.(a) 300 $ 5,175
---------------------------------------------------------------------
Health Care and Retirement Corp.(a) 100 3,944
---------------------------------------------------------------------
9,119
---------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.27%
Concentra Managed Care, Inc.(a) 200 5,200
---------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.61%
Henry Schein, Inc.(a) 200 9,225
---------------------------------------------------------------------
Sybron International Corp.(a) 100 2,525
---------------------------------------------------------------------
11,750
---------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 1.92%
Advance Paradigm, Inc.(a) 100 3,675
---------------------------------------------------------------------
Boron, LePore & Associates, Inc.(a) 200 7,600
---------------------------------------------------------------------
Hooper Holmes, Inc. 100 2,100
---------------------------------------------------------------------
Ocular Sciences, Inc.(a) 100 3,250
---------------------------------------------------------------------
Omnicare, Inc. 200 7,625
---------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 300 6,281
---------------------------------------------------------------------
Superior Consultant Holdings Corp.(a) 100 4,313
---------------------------------------------------------------------
Veterinary Centers of America, Inc.(a) 100 1,881
---------------------------------------------------------------------
36,725
---------------------------------------------------------------------
HOMEBUILDING - 0.38%
American Homestar Corp.(a) 300 7,181
---------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCE - 0.06%
International Comfort Products Corp. (Canada)(a) 100 1,213
---------------------------------------------------------------------
HOUSEWARES - 0.83%
Helen of Troy Ltd.(a) 400 8,800
---------------------------------------------------------------------
Windmere-Durable Holdings Inc.(a) 200 7,163
---------------------------------------------------------------------
15,963
---------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.16%
Penn Treaty American Corp.(a) 100 3,150
---------------------------------------------------------------------
INSURANCE (PROPERTY - CASUALTY) - 0.32%
CMAC Investment Corp. 100 6,150
---------------------------------------------------------------------
LODGING - HOTELS - 0.42%
Royal Caribbean Cruises Ltd. 100 7,950
---------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.18%
Applied Power, Inc. - Class A 100 3,438
---------------------------------------------------------------------
MANUFACTURING - SPECIALIZED - 0.32%
Coflexip S.A. - ADR (France) 100 6,113
---------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 1.33%
Daisytek International Corp.(a) 300 7,631
---------------------------------------------------------------------
Herman Miller, Inc. 200 4,863
---------------------------------------------------------------------
Mail-Well, Inc.(a) 300 6,506
---------------------------------------------------------------------
United Stationers, Inc.(a) 100 6,475
---------------------------------------------------------------------
25,475
---------------------------------------------------------------------
|
MARKET
SHARES VALUE
OIL & GAS (DRILLING & EQUIPMENT) - 0.74%
Cal Dive International, Inc.(a) 100 $ 2,756
------------------------------------------------------------
EVI Weatherford, Inc.(a) 100 3,713
------------------------------------------------------------
National-Oilwell, Inc.(a) 100 2,681
------------------------------------------------------------
Veritas DGC, Inc.(a) 100 4,994
------------------------------------------------------------
14,144
------------------------------------------------------------
PERSONAL CARE - 0.60%
Rexall Sundown, Inc.(a) 200 7,050
------------------------------------------------------------
Twinlab Corp.(a) 100 4,369
------------------------------------------------------------
11,419
------------------------------------------------------------
RESTAURANTS - 0.21%
Showbiz Pizza Time, Inc.(a) 100 4,031
------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.52%
CDW Computer Centers, Inc.(a) 200 10,000
------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.59%
Ames Department Stores, Inc.(a) 200 5,262
------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 150 6,094
------------------------------------------------------------
11,356
------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.22%
Fred Meyer, Inc.(a) 100 4,250
------------------------------------------------------------
RETAIL (SPECIALTY) - 2.93%
Finish Line, Inc. (The) - Class A(a) 200 5,625
------------------------------------------------------------
Footstar, Inc.(a) 100 4,800
------------------------------------------------------------
Inacom Corp.(a) 200 6,350
------------------------------------------------------------
Just for Feet, Inc.(a) 200 5,700
------------------------------------------------------------
Linens 'N Things, Inc.(a) 200 6,112
------------------------------------------------------------
Michaels Stores, Inc.(a) 200 7,056
------------------------------------------------------------
Party City Corp.(a) 100 2,937
------------------------------------------------------------
Pier 1 Imports, Inc. 100 2,388
------------------------------------------------------------
Renters Choice, Inc.(a) 300 8,512
------------------------------------------------------------
Sunglass Hut International, Inc.(a) 200 2,213
------------------------------------------------------------
Trans World Entertainment Corp.(a) 100 4,313
------------------------------------------------------------
56,006
------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 1.10%
Abercrombie & Fitch Co. - Class A(a) 138 6,072
------------------------------------------------------------
Buckle, Inc. (The)(a) 50 1,475
------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 150 4,950
------------------------------------------------------------
Pacific Sunwear of California(a) 150 5,250
------------------------------------------------------------
Wet Seal, Inc. - Class A(a) 100 3,200
------------------------------------------------------------
20,947
------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.17%
Bay View Capital Corp. 100 3,175
------------------------------------------------------------
|
AIM V.I. AGGRESSIVE GROWTH FUND
FS-2
MARKET
SHARES VALUE
SERVICES (ADVERTISING/MARKETING) - 0.45%
Market Facts, Inc.(a) 100 $ 2,175
-----------------------------------------------------------------
Metris Companies Inc. 100 6,375
-----------------------------------------------------------------
8,550
-----------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.71%
Cerner Corp.(a) 200 5,662
-----------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 300 7,988
-----------------------------------------------------------------
13,650
-----------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.56%
Analysts International Corp. 200 5,675
-----------------------------------------------------------------
Computer Task Group, Inc. 200 6,700
-----------------------------------------------------------------
Insight Enterprises, Inc.(a) 200 8,000
-----------------------------------------------------------------
InterVoice, Inc.(a) 100 1,775
-----------------------------------------------------------------
SunGard Data Systems Inc.(a) 200 7,675
-----------------------------------------------------------------
29,825
-----------------------------------------------------------------
SERVICES (DATA PROCESSING) - 2.52%
Affiliated Computer Services, Inc.(a) 200 7,700
-----------------------------------------------------------------
Billing Information Concepts Corp.(a) 300 4,650
-----------------------------------------------------------------
Computer Horizons Corp.(a) 100 3,706
-----------------------------------------------------------------
CSG Systems International, Inc.(a) 200 9,375
-----------------------------------------------------------------
Envoy Corp.(a) 100 4,738
-----------------------------------------------------------------
Hyperion Software Corp.(a) 200 5,700
-----------------------------------------------------------------
National Computer Systems, Inc. 100 2,400
-----------------------------------------------------------------
Saville Systems Ireland PLC-ADR (Ireland)(a) 200 10,025
-----------------------------------------------------------------
48,294
-----------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.39%
Robert Half International, Inc.(a) 100 5,588
-----------------------------------------------------------------
Vincam Group, Inc. (The)(a) 100 1,962
-----------------------------------------------------------------
7,550
-----------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.22%
Cornell Corrections, Inc.(a) 200 4,200
-----------------------------------------------------------------
TEXTILES (APPAREL) - 0.31%
Quicksilver, Inc.(a) 100 1,993
-----------------------------------------------------------------
St. John Knits, Inc. 100 3,863
-----------------------------------------------------------------
5,856
-----------------------------------------------------------------
TEXTILES (HOME FURNISHINGS) - 0.68%
Mohawk Industries, Inc.(a) 200 6,338
-----------------------------------------------------------------
WestPoint Stevens, Inc.(a) 200 6,600
-----------------------------------------------------------------
12,938
-----------------------------------------------------------------
TRUCKS & PARTS - 0.40%
Wabash National Corp. 300 7,725
-----------------------------------------------------------------
|
MARKET
SHARES VALUE
WASTE MANAGEMENT - 1.26%
Allied Waste Industries, Inc.(a) 200 $ 4,800
-----------------------------------------------------------------------------
American Disposal Services, Inc.(a) 200 9,375
-----------------------------------------------------------------------------
Eastern Environmental Services, Inc.(a) 100 3,400
-----------------------------------------------------------------------------
KTI, Inc.(a) 300 6,488
-----------------------------------------------------------------------------
24,063
-----------------------------------------------------------------------------
Total Common Stocks (Cost $661,235) 679,513
-----------------------------------------------------------------------------
|
PRINCIPAL
AMOUNT
U.S. TREASURY BILLS(b) - 29.46%
5.00%, 09/24/1998 (Cost $563,440) $570,000(c) 563,553
-----------------------------------------------------------------------------
Total Investments, excluding repurchase agreements
(Cost $1,224,675) 1,243,066
-----------------------------------------------------------------------------
REPURCHASE AGREEMENTS(d) - 35.73%
Dean Witter Reynolds, Inc., 6.10% 07/01/98(e) 400,000 400,000
-----------------------------------------------------------------------------
SBC Capital Markets, Inc., 5.85% 07/01/98(f) 283,282 283,282
-----------------------------------------------------------------------------
Total Repurchase Agreements (Cost $683,282) 683,282
-----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.71% 1,926,348
-----------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.71)% (13,576)
-----------------------------------------------------------------------------
NET ASSETS - 100.00% $1,912,772
=============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover
margin requirements for open future contracts. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
(f) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$1,000,162,500. Collateralized by $3,590,870,000 U.S. Government
obligations, 0% due 08/15/00 to 11/15/24 with an aggregate market value at
06/30/98 of $1,148,593,549.
Investment Abbreviations:
ADR - American Depositary Receipt
See Notes to Financial Statements.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-3
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, excluding repurchase agreements, at market value (cost $1,224,675) $ 1,243,066 --------------------------------------------------------------------- Repurchase agreements (cost $683,282) 683,282 --------------------------------------------------------------------- Receivables for: Capital stock sold 2,964 --------------------------------------------------------------------- Investments sold 4,569 --------------------------------------------------------------------- Dividends and interest 116 --------------------------------------------------------------------- Variation margin 4,700 --------------------------------------------------------------------- Reimbursement from advisor 14,345 --------------------------------------------------------------------- Total assets 1,953,042 --------------------------------------------------------------------- LIABILITIES: Payables for investments purchased 26,229 --------------------------------------------------------------------- Accrued advisory fees 948 --------------------------------------------------------------------- Accrued directors' fees 1,383 --------------------------------------------------------------------- Accrued administrative services fees 7,600 --------------------------------------------------------------------- Accrued operating expenses 4,110 --------------------------------------------------------------------- Total liabilities 40,270 --------------------------------------------------------------------- Net assets applicable to shares outstanding $ 1,912,772 ===================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 --------------------------------------------------------------------- Outstanding 197,246 ===================================================================== Net asset value, offering and redemption price per share $9.70 ===================================================================== |
STATEMENT OF OPERATIONS
For the period May 1, 1998 (date operations commenced)
through June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Interest $ 7,485
--------------------------------------------------------------------------
Dividends 24
--------------------------------------------------------------------------
Total investment income 7,509
--------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,609
--------------------------------------------------------------------------
Administrative services fees 7,600
--------------------------------------------------------------------------
Custodian fees 3,719
--------------------------------------------------------------------------
Directors' fees and expenses 1,383
--------------------------------------------------------------------------
Legal fees 1,333
--------------------------------------------------------------------------
Other 1,056
--------------------------------------------------------------------------
Total expenses 16,700
--------------------------------------------------------------------------
Less: Fees waived and reimbursed by advisor (14,345)
--------------------------------------------------------------------------
Expenses paid indirectly (51)
--------------------------------------------------------------------------
Net expenses 2,304
--------------------------------------------------------------------------
Net investment income 5,205
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (235)
--------------------------------------------------------------------------
Futures contracts (41,290)
--------------------------------------------------------------------------
(41,525)
--------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 18,391
--------------------------------------------------------------------------
Futures contracts 13,425
--------------------------------------------------------------------------
31,816
--------------------------------------------------------------------------
Net gain (loss) from investment securities and futures contracts (9,709)
--------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(4,504)
==========================================================================
|
See Notes to Financial Statements.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-4
STATEMENT OF CHANGES IN NET ASSETS
For the period May 1, 1998 (date operations commenced) through June 30, 1998
(Unaudited)
OPERATIONS:
Net investment income $ 5,205
------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and futures
contracts (41,525)
------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and futures
contracts 31,816
------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (4,504)
------------------------------------------------------------------------------
Net increase from capital stock transactions 1,917,276
------------------------------------------------------------------------------
Net increase in net assets 1,912,772
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
------------------------------------------------------------------------------
End of period $1,912,272
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,917,276
------------------------------------------------------------------------------
Undistributed net investment income 5,205
------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment securities
and futures contracts (41,525)
------------------------------------------------------------------------------
Unrealized appreciation of investment securities and futures
contracts 31,816
------------------------------------------------------------------------------
$1,912,772
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Aggressive Growth Fund (the "Fund"). The Fund's investment
objective is to achieve long-term growth of capital. The Fund commenced
operations on May 1, 1998. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If no mean is
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices
are not provided by any of the above methods are valued at the mean between
last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined
prior to the close of the New York Stock Exchange. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the New
York Stock Exchange which
AIM V.I. AGGRESSIVE GROWTH FUND
FS-5
will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
G. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million. During the
period May 1, 1998 (date operations commenced) through June 30, 1998, AIM
reimbursed expenses of $14,345.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the period May 1, 1998 (date operations commenced) through June 30,
1998, AIM was reimbursed $7,600 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $51 under an expense offset arrangement. The effect of the above arrangement resulted in a reduction of the Fund's total expenses of $51 during the period May 1, 1998 (date operations commenced) through June 30, 1998.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-6
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees,
if so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the period May 1, 1998 (date operations
commenced) through June 30, 1998 was $694,990 and $33,535, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $ 44,147 ----------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (25,756) ----------------------------------------------------------------------- Net unrealized appreciation of investment securities $ 18,391 ======================================================================= |
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period May 1, 1998 (date
operations commenced) through June 30, 1998 were as follows:
JUNE 30, 1998
-------------------
SHARES AMOUNT
------- ----------
Sold 197,931 $1,923,755
--------------------------------
Reacquired (685) (6,479)
--------------------------------
197,246 $1,917,276
================================
|
NOTE 7- FUTURES CONTRACTS
On June 30, 1998, $42,000 principal amount of U.S. Treasury obligations were pledged as collateral to cover margin requirements for open futures contracts. Open futures contracts were as follows:
NO. OF MONTH/ UNREALIZED
CONTRACTS COMMITMENT APPRECIATION
CONTRACT --------- ---------------- ------------
Russell 2000 Index 4 September 98/Buy $13,425
=========================================================================================
|
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period May 1, 1998 (date operations commenced) through June 30,
1998.
JUNE 30,
1998
--------
Net asset value, beginning of period $ 10.00
-----------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03
-----------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) (0.33)
-----------------------------------------------------------------------
Total from investment operations (0.30)
-----------------------------------------------------------------------
Net asset value, end of period $ 9.70
================================================================= =======
Total return(a) (3.00)%
================================================================= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $ 1,913
================================================================= =======
Ratio of expenses to average net assets(b) 1.17%(c)
================================================================= =======
Ratio of net investment income to average net assets(d) 2.59%(c)
================================================================= =======
Portfolio turnover rate 8%
================================================================= =======
Average brokerage commission rate paid(e) $0.0408
================================================================= =======
|
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
8.30% (annualized).
(c) Ratios are annualized and based on average net assets of $1,203,280.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement was (4.54)% (annualized).
(e) The average commission rate paid is the total brokerage commissions paid
on applicable purchases and sales of securities for the period divided by
the total number of related shares purchased and sold.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-7
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS - 4.18%
TELEPHONE - 4.18%
SBC Communications, Inc., Deb., 7.375%, 07/15/43 $ 70,000 $ 74,157
-------------------------------------------------------------------------------
Total Corporate Bonds (Cost $74,025) 74,157
-------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 30.85%
Fannie Mae, Notes, 6.18%, 03/15/01 300,000 303,690
-------------------------------------------------------------------------------
Private Export Funding, Sec. Deb., 8.35%, 01/31/01 230,000 244,283
-------------------------------------------------------------------------------
Total U.S. Government Agency Securities (Cost $547,569) 547,973
-------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 58.61%
Bills, 5.00%, 09/24/98(a) 440,000 435,023
-------------------------------------------------------------------------------
Notes, 5.75%, 04/30/03 600,000 605,934
-------------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $1,039,906) 1,040,957
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 9.64%(b)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98(c)
(Cost $171,279) 171,279 171,279
-------------------------------------------------------------------------------
TOTAL INVESTMENTS - 103.28% 1,834,366
-------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (3.28)% (58,201)
-------------------------------------------------------------------------------
NET ASSETS - 100.00% $1,776,165
===============================================================================
|
(a) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See note 7.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000. U.S. Government obligations,
0% to 9.375%, due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Abbreviations:
Deb. - Debentures
Sec. - Secured
See Notes to Financial Statements.
AIM V.I. BALANCED FUND
FS-8
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, at market value (cost $1,832,779) $ 1,834,366 --------------------------------------------------------------------- Receivables for: Reimbursement from advisor 13,306 --------------------------------------------------------------------- Capital stock sold 3,196 --------------------------------------------------------------------- Dividends and interest 21,737 --------------------------------------------------------------------- Total assets 1,872,605 --------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 76,406 --------------------------------------------------------------------- Variation margin 6,375 --------------------------------------------------------------------- Accrued advisory fees 888 --------------------------------------------------------------------- Accrued directors' fees 1,383 --------------------------------------------------------------------- Accrued administrative services fees 7,600 --------------------------------------------------------------------- Accrued operating expenses 3,788 --------------------------------------------------------------------- Total liabilities 96,440 --------------------------------------------------------------------- Net assets applicable to shares outstanding $ 1,776,165 ===================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 --------------------------------------------------------------------- Outstanding 174,947 ===================================================================== Net asset value, offering and redemption price per share $10.15 ===================================================================== |
STATEMENT OF OPERATIONS
For the period May 1, 1998 (date operations commenced)
through June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Interest $10,788
----------------------------------------------------------------------------
Total investment income 10,788
----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,528
----------------------------------------------------------------------------
Administrative services fees 7,600
----------------------------------------------------------------------------
Custodian fees 2,831
----------------------------------------------------------------------------
Directors' fees and expenses 1,383
----------------------------------------------------------------------------
Legal fees 1,333
----------------------------------------------------------------------------
Other 1,050
----------------------------------------------------------------------------
Total expenses 15,725
----------------------------------------------------------------------------
Less: Expenses paid indirectly (20)
----------------------------------------------------------------------------
Fees waived and reimbursed by advisor (13,306)
----------------------------------------------------------------------------
Net expenses 2,399
----------------------------------------------------------------------------
Net investment income 8,389
----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND
FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (37)
----------------------------------------------------------------------------
Futures contracts 3
----------------------------------------------------------------------------
(34)
----------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 1,587
----------------------------------------------------------------------------
Futures contracts 17,950
----------------------------------------------------------------------------
19,537
----------------------------------------------------------------------------
Net gain from investment securities and futures contracts 19,503
----------------------------------------------------------------------------
Net increase in net assets resulting from operations $27,892
============================================================================
|
See Notes to Financial Statements.
AIM V.I. BALANCED FUND
FS-9
STATEMENT OF CHANGES IN NET ASSETS
For the period May 1, 1998 (date operations commenced) through June 30, 1998
(Unaudited)
OPERATIONS:
Net investment income $ 8,389
------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and futures
contracts (34)
------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and futures
contracts 19,537
------------------------------------------------------------------------------
Net increase in net assets resulting from operations 27,892
------------------------------------------------------------------------------
Net increase from capital stock transactions 1,748,273
------------------------------------------------------------------------------
Net increase in net assets 1,776,165
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
------------------------------------------------------------------------------
End of period $1,776,165
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,748,273
------------------------------------------------------------------------------
Undistributed net investment income 8,389
------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment securities
and futures contracts (34)
------------------------------------------------------------------------------
Unrealized appreciation of investment securities and futures
contracts 19,537
------------------------------------------------------------------------------
$1,776,165
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Balanced Fund (the "Fund"). The Fund's investment objective is
to achieve as high a total return to investors as possible, consistent with
preservation of capital. The Fund commenced operations on May 1, 1998.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices
are not provided by any of the above methods are valued at the mean between
last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined
prior to the close of the New York Stock Exchange. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the New
York Stock Exchange which
AIM V.I. BALANCED FUND
FS-10
will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Bond Premiums - It is the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes.
G. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
H. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $150 million of the Fund's average daily net assets, plus 0.50% of
the Fund's average daily net assets in excess of $150 million. During the
period May 1, 1998 (date operations commenced) through June 30, 1998, AIM
voluntarily reimbursed expenses of $13,306.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the period May 1, 1998 (date operations commenced) through June 30,
1998, AIM was reimbursed $7,600 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $20 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $20 during the period May 1, 1998 (date
operations commenced) through June 30, 1998.
AIM V.I. BALANCED FUND
FS-11
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased during the period May 1, 1998 (date operations commenced)
through June 30, 1998 was $1,226,610.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $1,587 -------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities -- -------------------------------------------------------------------- Net unrealized appreciation of investment securities $1,587 ==================================================================== |
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period May 1, 1998 (date
operations commenced) through June 30, 1998 were as follows:
JUNE 30, 1998
-------------------
SHARES AMOUNT
------- ----------
Sold 182,647 $1,825,825
--------------------------------
Reacquired (7,700) (77,552)
--------------------------------
174,947 $1,748,273
================================
|
NOTE 7 - OPEN FUTURES CONTRACTS
On June 30, 1998, $36,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
NUMBER OF UNREALIZED
CONTRACTS MONTH/COMMITMENT APPRECIATION
-----------------------------------
S&P 500 Index 3 Sep 98/Buy $17,950
======================================================
|
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period May 1, 1998 (date operations commenced) through June 30,
1998.
JUNE 30,
1998
--------
Net asset value, beginning of period $10.00
-------------------------------------------------------- ------
Income from investment operations:
Net investment income 0.05
-------------------------------------------------------- ------
Net gains on securities (both realized and unrealized) 0.10
-------------------------------------------------------- ------
Total from investment operations 0.15
-------------------------------------------------------- ------
Net asset value, end of period $10.15
======================================================== ======
Total return(a) 1.50%
======================================================== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $1,776
======================================================== ======
Ratio of expenses to average net assets(b) 1.19%(c)
======================================================== ======
Ratio of net investment income to average net assets(d) 4.12%(c)
======================================================== ======
Portfolio turnover rate 0%
======================================================== ======
|
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
7.72% (annualized).
(c) Ratios are annualized and based on average net assets of $1,219,104.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement was (2.41)% (annualized).
AIM V.I. BALANCED FUND
FS-12
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
MARKET
SHARES VALUE
COMMON STOCKS - 90.09%
AEROSPACE/DEFENSE - 0.94%
AAR Corp. 50,000 $ 1,478,125
---------------------------------------------------------------------
BE Aerospace, Inc.(a) 20,000 582,500
---------------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 40,000 1,860,000
---------------------------------------------------------------------
Precision Castparts Corp. 9,300 496,388
---------------------------------------------------------------------
Sundstrand Corp. 22,900 1,311,025
---------------------------------------------------------------------
5,728,038
---------------------------------------------------------------------
AIR FREIGHT - 0.04%
AirNet Systems, Inc.(a) 16,000 258,000
---------------------------------------------------------------------
AIRLINES - 0.50%
Continental Airlines, Inc.(a) 40,000 2,435,000
---------------------------------------------------------------------
Southwest Airlines Co. 20,000 592,500
---------------------------------------------------------------------
3,027,500
---------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.04%
Danaher Corp. 5,800 212,787
---------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.16%
Summit Bancorp 20,000 950,000
---------------------------------------------------------------------
BANKS (REGIONAL) - 1.48%
AmSouth Bancorporation 30,000 1,179,375
---------------------------------------------------------------------
Crestar Financial Corp. 20,200 1,102,162
---------------------------------------------------------------------
Golden State Bancorp, Inc.(a) 40,000 1,190,000
---------------------------------------------------------------------
National Commerce Bancorporation 15,000 628,125
---------------------------------------------------------------------
North Fork Bancorporation, Inc. 60,000 1,466,250
---------------------------------------------------------------------
Star Banc Corp. 25,000 1,596,875
---------------------------------------------------------------------
TCF Financial Corp. 40,000 1,180,000
---------------------------------------------------------------------
Zions Bancorp. 11,600 616,250
---------------------------------------------------------------------
8,959,037
---------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 0.26%
Coca-Cola Enterprises Inc. 40,000 1,570,000
---------------------------------------------------------------------
BIOTECHNOLOGY - 0.39%
Biogen, Inc.(a) 31,000 1,519,000
---------------------------------------------------------------------
Curative Health Services, Inc.(a) 29,700 846,500
---------------------------------------------------------------------
2,365,500
---------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 1.79%
CanWest Global Communications Corp. (Canada) 57,600 925,200
---------------------------------------------------------------------
Chancellor Media Corp.(a) 7,272 361,100
---------------------------------------------------------------------
Clear Channel Communications, Inc.(a) 16,600 1,811,475
---------------------------------------------------------------------
Comcast Corp. - Class A 55,000 2,232,656
---------------------------------------------------------------------
Cox Communications, Inc. - Class A(a) 28,000 1,356,250
---------------------------------------------------------------------
Heftel Broadcasting Corp. 22,100 988,975
---------------------------------------------------------------------
Jacor Communications, Inc.(a) 27,500 1,622,500
---------------------------------------------------------------------
|
MARKET
SHARES VALUE
BROADCASTING (TELEVISION, RADIO & CABLE) - (CONTINUED)
Liberty Media Group(a) 40,000 $ 1,552,500
----------------------------------------------------------------------------
10,850,656
----------------------------------------------------------------------------
CHEMICALS - 0.35%
IMC Global, Inc. 35,000 1,054,375
----------------------------------------------------------------------------
NL Industries, Inc. 4,800 96,000
----------------------------------------------------------------------------
Potash Corp. of Saskatchewan Inc. (Canada) 12,500 944,531
----------------------------------------------------------------------------
2,094,906
----------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.31%
ADC Telecommunications, Inc.(a) 74,200 2,710,618
----------------------------------------------------------------------------
Andrew Corp.(a) 41,000 740,562
----------------------------------------------------------------------------
Aspect Telecommunications Corp.(a) 40,000 1,095,000
----------------------------------------------------------------------------
Brightpoint, Inc.(a) 67,200 974,400
----------------------------------------------------------------------------
Comverse Technology, Inc.(a) 37,100 1,924,562
----------------------------------------------------------------------------
ECI Telecommunications Ltd. (Israel) 19,000 719,625
----------------------------------------------------------------------------
General Instrument Corp.(a) 35,000 951,562
----------------------------------------------------------------------------
Nokia Oyj A.B. - Class A (Finland) 8,600 635,520
----------------------------------------------------------------------------
Nokia Oyj A.B. - Class A - ADR (Finland) 60,400 4,382,775
----------------------------------------------------------------------------
REMEC, Inc.(a) 27,500 312,812
----------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - Class B (Sweden) 33,400 975,824
----------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR (Sweden) 64,600 1,849,175
----------------------------------------------------------------------------
Tellabs, Inc.(a) 39,800 2,850,675
----------------------------------------------------------------------------
20,123,110
----------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 1.63%
Apple Computer, Inc.(a) 40,000 1,147,500
----------------------------------------------------------------------------
Comdisco, Inc. 165,200 3,138,800
----------------------------------------------------------------------------
Dell Computer Corp.(a) 51,000 4,733,437
----------------------------------------------------------------------------
IDX Systems Corp.(a) 19,000 875,187
----------------------------------------------------------------------------
9,894,924
----------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 2.03%
Ascend Communications, Inc.(a) 100,000 4,956,250
----------------------------------------------------------------------------
Cisco Systems, Inc.(a) 19,850 1,827,440
----------------------------------------------------------------------------
FORE Systems, Inc.(a) 117,000 3,100,500
----------------------------------------------------------------------------
Newbridge Networks Corp. (Canada)(a) 38,500 921,593
----------------------------------------------------------------------------
3Com Corp.(a) 50,000 1,534,375
----------------------------------------------------------------------------
12,340,158
----------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.62%
EMC Corp.(a) 111,200 4,983,150
----------------------------------------------------------------------------
Lexmark International Group, Inc.(a) 40,200 2,452,200
----------------------------------------------------------------------------
Storage Technology Corp.(a) 55,800 2,420,325
----------------------------------------------------------------------------
9,855,675
----------------------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-13
MARKET
SHARES VALUE
COMPUTERS (SOFTWARE & SERVICES) - 11.27%
Advanced Fibre Communications, Inc.(a) 30,000 $ 1,201,875
-------------------------------------------------------------
America Online, Inc. 71,000 7,526,000
-------------------------------------------------------------
Aspect Development, Inc.(a) 20,000 1,512,500
-------------------------------------------------------------
BMC Software, Inc.(a) 133,400 6,928,462
-------------------------------------------------------------
Cadence Design Systems, Inc.(a) 135,900 4,246,875
-------------------------------------------------------------
CBT Group PLC - ADR (Ireland)(a) 1,800 96,300
-------------------------------------------------------------
Citrix Systems, Inc.(a) 28,700 1,962,362
-------------------------------------------------------------
Computer Associates International, Inc. 29,950 1,664,096
-------------------------------------------------------------
Computer Sciences Corp.(a) 50,800 3,251,200
-------------------------------------------------------------
Compuware Corp.(a) 93,300 4,769,962
-------------------------------------------------------------
Concord EFS, Inc.(a) 177,300 4,631,962
-------------------------------------------------------------
Electronic Arts, Inc.(a) 39,000 2,106,000
-------------------------------------------------------------
Gemstar International Group Ltd.(a) 25,000 935,937
-------------------------------------------------------------
HBO & Co. 189,376 6,675,504
-------------------------------------------------------------
HNC Software Inc.(a) 25,000 1,020,312
-------------------------------------------------------------
Intuit, Inc.(a) 27,000 1,653,750
-------------------------------------------------------------
J.D. Edwards & Co.(a) 40,000 1,717,500
-------------------------------------------------------------
Microsoft Corp.(a) 17,600 1,907,400
-------------------------------------------------------------
Parametric Technology Co.(a) 117,100 3,176,337
-------------------------------------------------------------
Platinum Technology(a) 45,800 1,308,162
-------------------------------------------------------------
Sterling Commerce Inc.(a) 75,055 3,640,167
-------------------------------------------------------------
Sterling Software, Inc.(a) 63,600 1,880,175
-------------------------------------------------------------
Symantec Corp.(a) 20,000 522,500
-------------------------------------------------------------
Synopsys, Inc.(a) 51,000 2,333,250
-------------------------------------------------------------
Tecnomatix Technologies Ltd. (Israel)(a) 16,900 338,000
-------------------------------------------------------------
Wind River Systems(a) 40,000 1,435,000
-------------------------------------------------------------
68,441,588
-------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.25%
Action Performance Companies, Inc.(a) 16,000 515,000
-------------------------------------------------------------
Blyth Industries, Inc.(a) 30,400 1,010,800
-------------------------------------------------------------
1,525,800
-------------------------------------------------------------
CONSUMER FINANCE - 3.23%
Capital One Financial Corp. 39,100 4,855,731
-------------------------------------------------------------
Countrywide Credit Industries, Inc. 23,400 1,187,550
-------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 51,300 1,846,800
-------------------------------------------------------------
Household International, Inc. 101,400 5,044,650
-------------------------------------------------------------
IMC Mortgage Co.(a) 52,000 549,250
-------------------------------------------------------------
MBNA Corp. 78,987 2,606,571
-------------------------------------------------------------
Providian Financial Corp. 20,000 1,571,250
-------------------------------------------------------------
SLM Holding Corp. 40,050 1,962,450
-------------------------------------------------------------
19,624,252
-------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 1.75%
Bergen Brunswig Corp. - Class A 37,700 1,748,337
-------------------------------------------------------------
Cardinal Health, Inc. 48,625 4,558,593
-------------------------------------------------------------
|
MARKET
SHARES VALUE
DISTRIBUTORS (FOOD & HEALTH) - (CONTINUED)
McKesson Corp. 53,200 $ 4,322,500
--------------------------------------------------------------
10,629,430
--------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.74%
American Power Conversion Corp.(a) 49,800 1,494,000
--------------------------------------------------------------
Avid Technology, Inc.(a) 18,700 626,450
--------------------------------------------------------------
Berg Electronics Corp.(a) 27,200 532,100
--------------------------------------------------------------
Molex, Inc. 4,300 107,500
--------------------------------------------------------------
Sanmina Corp.(a) 42,600 1,847,775
--------------------------------------------------------------
SCI Systems, Inc.(a) 59,400 2,234,925
--------------------------------------------------------------
Solectron Corp.(a) 49,200 2,069,475
--------------------------------------------------------------
Symbol Technologies, Inc. 44,250 1,670,437
--------------------------------------------------------------
10,582,662
--------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS) - 0.13%
Arrow Electronics, Inc.(a) 37,300 811,275
--------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.09%
General Motors Corp. - Class H(a) 12,300 579,637
--------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.36%
Perkin-Elmer Corp. 16,200 1,007,437
--------------------------------------------------------------
Waters Corp.(a) 20,000 1,178,750
--------------------------------------------------------------
2,186,187
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 2.52%
Advanced Micro Devices, Inc.(a) 40,000 682,500
--------------------------------------------------------------
Altera Corp.(a) 30,900 913,481
--------------------------------------------------------------
Burr-Brown Corp.(a) 41,550 872,550
--------------------------------------------------------------
Linear Technology Corp. 40,000 2,412,500
--------------------------------------------------------------
LSI Logic Corp.(a) 30,600 705,712
--------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 92,800 2,940,600
--------------------------------------------------------------
Microchip Technology, Inc.(a) 75,500 1,972,437
--------------------------------------------------------------
PMC-Sierra, Inc.(a) 39,500 1,851,562
--------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 56,000 1,729,000
--------------------------------------------------------------
Xilinx, Inc.(a) 36,300 1,234,200
--------------------------------------------------------------
15,314,542
--------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 0.18%
KLA-Tencor Corp.(a) 40,000 1,107,500
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.58%
FINOVA Group, Inc. 40,000 2,265,000
--------------------------------------------------------------
MGIC Investment Corp. 53,100 3,030,018
--------------------------------------------------------------
Newcourt Credit Group, Inc. (Canada) 41,600 2,046,200
--------------------------------------------------------------
SunAmerica, Inc. 38,800 2,228,575
--------------------------------------------------------------
9,569,793
--------------------------------------------------------------
FOODS - 0.25%
Suiza Foods Corp.(a) 25,500 1,522,031
--------------------------------------------------------------
FOOTWEAR - 0.33%
Adidas Salomon A.G. (Germany) 7,000 1,220,817
--------------------------------------------------------------
Wolverine World Wide, Inc. 37,900 821,956
--------------------------------------------------------------
2,042,773
--------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-14
MARKET
SHARES VALUE
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.20%
International Game Technology 50,000 $ 1,212,500
--------------------------------------------------------------------
GOLD & PRECIOUS METALS MINING - 0.17%
Barrick Gold Corp. (Canada) 28,000 537,250
--------------------------------------------------------------------
Battle Mountain Gold Co. 85,000 504,687
--------------------------------------------------------------------
1,041,937
--------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 2.25%
Alpharma, Inc. 12,750 280,500
--------------------------------------------------------------------
Biovail Corporation International (Canada)(a) 10,000 320,000
--------------------------------------------------------------------
Columbia Laboratories, Inc.(a) 20,000 115,000
--------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 35,000 783,125
--------------------------------------------------------------------
Elan Corp. PLC-ADR (Ireland)(a) 49,100 3,157,743
--------------------------------------------------------------------
Forest Laboratories, Inc.(a) 42,400 1,515,800
--------------------------------------------------------------------
Jones Medical Industries, Inc. 62,500 2,070,312
--------------------------------------------------------------------
Mylan Laboratories, Inc. 84,000 2,525,250
--------------------------------------------------------------------
Parexel International Corp.(a) 13,300 483,787
--------------------------------------------------------------------
R.P. Scherer Corp.(a) 6,100 540,612
--------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 40,000 1,867,500
--------------------------------------------------------------------
13,659,629
--------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 2.30%
Health Management Associates, Inc. - Class A(a) 194,668 6,509,211
--------------------------------------------------------------------
Quorum Health Group, Inc.(a) 69,500 1,841,750
--------------------------------------------------------------------
Tenet Healthcare Corp.(a) 52,065 1,627,031
--------------------------------------------------------------------
Universal Health Services, Inc. - Class B(a) 68,400 3,992,850
--------------------------------------------------------------------
13,970,842
--------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 1.33%
Beverly Enterprises, Inc.(a) 57,200 790,075
--------------------------------------------------------------------
Health Care and Retirement Corp.(a) 49,900 1,967,931
--------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 199,500 5,324,156
--------------------------------------------------------------------
8,082,162
--------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 1.28%
Concentra Managed Care, Inc.(a) 53,500 1,391,000
--------------------------------------------------------------------
Express Scripts, Inc. - Class A(a) 21,800 1,757,625
--------------------------------------------------------------------
First Health Group Corporation(a) 40,000 1,140,000
--------------------------------------------------------------------
PacifiCare Health Systems, Inc. - Class B(a) 27,500 2,430,312
--------------------------------------------------------------------
Trigon Healthcare, Inc.(a) 28,500 1,031,343
--------------------------------------------------------------------
7,750,280
--------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 2.82%
Alza Corp.(a) 40,000 1,730,000
--------------------------------------------------------------------
Covance, Inc.(a) 82,525 1,856,812
--------------------------------------------------------------------
Lincare Holdings, Inc.(a) 78,400 3,297,700
--------------------------------------------------------------------
Omnicare, Inc. 130,400 4,971,500
--------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 15,000 314,062
--------------------------------------------------------------------
Quintiles Transnational Corp.(a) 35,600 1,751,075
--------------------------------------------------------------------
|
MARKET
SHARES VALUE
HEALTH CARE (SPECIALIZED SERVICES) - (CONTINUED)
Total Renal Care Holdings, Inc.(a) 92,333 $ 3,185,488
---------------------------------------------------------------
Transition Systems, Inc.(a) 600 6,375
---------------------------------------------------------------
17,113,012
---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 3.19%
Allegiance Corp. 40,000 2,050,000
---------------------------------------------------------------
Arterial Vascular Engineering, Inc.(a) 37,400 1,337,050
---------------------------------------------------------------
Becton, Dickinson & Co. 35,500 2,755,685
---------------------------------------------------------------
Biomet, Inc. 50,900 1,682,881
---------------------------------------------------------------
Boston Scientific Corp.(a) 25,000 1,790,625
---------------------------------------------------------------
Guidant Corp. 47,300 3,373,081
---------------------------------------------------------------
Henry Schein, Inc.(a) 34,985 1,613,683
---------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 12,000 1,038,750
---------------------------------------------------------------
St. Jude Medical, Inc.(a) 32,000 1,178,000
---------------------------------------------------------------
Stryker Corp. 14,200 544,925
---------------------------------------------------------------
Sybron International Corp.(a) 79,400 2,004,850
---------------------------------------------------------------
19,369,530
---------------------------------------------------------------
HOMEBUILDING - 0.59%
Clayton Homes, Inc. 117,300 2,228,700
---------------------------------------------------------------
Fleetwood Enterprises, Inc. 14,000 560,000
---------------------------------------------------------------
Kaufman and Broad Home Corporation 24,600 781,050
---------------------------------------------------------------
3,569,750
---------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.29%
Leggett & Platt, Inc. 70,000 1,750,000
---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.23%
Fort James Corp. 31,400 1,397,300
---------------------------------------------------------------
HOUSEWARES - 0.27%
Central Garden and Pet Co.(a) 10,000 311,250
---------------------------------------------------------------
Rubbermaid, Inc. 40,000 1,327,500
---------------------------------------------------------------
1,638,750
---------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.83%
AFLAC Inc. 50,000 1,515,625
---------------------------------------------------------------
Provident Companies, Inc. 60,000 2,070,000
---------------------------------------------------------------
ReliaStar Financial Corp. 30,000 1,440,000
---------------------------------------------------------------
5,025,625
---------------------------------------------------------------
INSURANCE (MULTI-LINE) - 0.18%
Allmerica Financial Corp. 17,000 1,105,000
---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.76%
Executive Risk Inc. 17,900 1,320,125
---------------------------------------------------------------
Mercury General Corp. 33,200 2,135,175
---------------------------------------------------------------
Progressive Corp. 8,200 1,156,200
---------------------------------------------------------------
4,611,500
---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.39%
Edwards (A.G.), Inc. 25,000 1,067,187
---------------------------------------------------------------
Paine Webber Group Inc. 30,000 1,286,250
---------------------------------------------------------------
2,353,437
---------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-15
MARKET
SHARES VALUE
INVESTMENT MANAGEMENT - 0.62%
Franklin Resources, Inc. 37,600 $ 2,030,400
------------------------------------------------------------
T. Rowe Price Associates, Inc. 46,800 1,757,925
------------------------------------------------------------
3,788,325
------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 0.59%
Harley-Davidson, Inc. 74,000 2,867,500
------------------------------------------------------------
North Face, Inc. (The)(a) 12,500 300,000
------------------------------------------------------------
Speedway Motorsports, Inc.(a) 15,900 406,443
------------------------------------------------------------
3,573,943
------------------------------------------------------------
LODGING-HOTELS - 0.27%
Promus Hotel Corp.(a) 42,543 1,637,905
------------------------------------------------------------
Sunburst Hospitality Corp. (a) 3,700 25,669
------------------------------------------------------------
1,663,574
------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.74%
AMETEK, Inc. 9,000 263,812
------------------------------------------------------------
Crane Co. 11,600 563,325
------------------------------------------------------------
Hillenbrand Industries, Inc. 21,500 1,290,000
------------------------------------------------------------
Pentair, Inc. 14,500 616,250
------------------------------------------------------------
Tyco International Ltd. 27,936 1,759,968
------------------------------------------------------------
4,493,355
------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.66%
Avery Dennison Corp. 22,000 1,182,500
------------------------------------------------------------
Coflexip S.A. (France) 17,600 1,075,800
------------------------------------------------------------
US Filter Corp.(a) 63,100 1,770,743
------------------------------------------------------------
4,029,043
------------------------------------------------------------
METAL FABRICATORS - 0.17%
Kennametal, Inc. 25,000 1,043,750
------------------------------------------------------------
NATURAL GAS - 0.61%
Equitable Resources, Inc. 30,100 918,050
------------------------------------------------------------
KN Energy, Inc. 51,000 2,763,562
------------------------------------------------------------
3,681,612
------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.17%
Herman Miller, Inc. 28,000 680,750
------------------------------------------------------------
HON INDUSTRIES, Inc. 9,800 333,200
------------------------------------------------------------
1,013,950
------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 3.42%
Baker Hughes, Inc. 20,100 694,706
------------------------------------------------------------
BJ Services Co.(a) 64,700 1,880,343
------------------------------------------------------------
Cooper Cameron Corp.(a) 44,000 2,244,000
------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(a) 30,200 653,075
------------------------------------------------------------
EVI Weatherford, Inc.(a) 29,100 1,080,337
------------------------------------------------------------
Global Industries Ltd.(a) 95,000 1,603,125
------------------------------------------------------------
Input/Output, Inc.(a) 58,500 1,042,031
------------------------------------------------------------
|
MARKET
SHARES VALUE
OIL & GAS (DRILLING & EQUIPMENT) - (CONTINUED)
Marine Drilling Companies, Inc.(a) 62,000 $ 992,000
--------------------------------------------------------------------
National-Oilwell, Inc.(a) 36,600 981,337
--------------------------------------------------------------------
Noble Drilling Corp.(a) 35,200 847,000
--------------------------------------------------------------------
Patterson Energy, Inc.(a) 50,000 489,062
--------------------------------------------------------------------
Precision Drilling Corp. (Canada)(a) 60,000 1,177,500
--------------------------------------------------------------------
Pride International, Inc.(a) 73,000 1,236,437
--------------------------------------------------------------------
R&B Falcon Corporation(a) 36,000 814,500
--------------------------------------------------------------------
Smith International, Inc.(a) 35,300 1,228,881
--------------------------------------------------------------------
Varco International, Inc.(a) 100,000 1,981,250
--------------------------------------------------------------------
Veritas DGC, Inc.(a) 35,800 1,787,762
--------------------------------------------------------------------
20,733,346
--------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.89%
Apache Corp. 30,000 945,000
--------------------------------------------------------------------
Burlington Resources, Inc. 29,100 1,253,118
--------------------------------------------------------------------
Ocean Energy, Inc.(a) 60,840 1,190,182
--------------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 80,000 860,000
--------------------------------------------------------------------
Stolt Comex Seaway, S.A. (United Kingdom)(a) 40,000 775,000
--------------------------------------------------------------------
Stolt Comex Seaway, S.A.-ADR (United Kingdom)(a) 20,000 350,000
--------------------------------------------------------------------
5,373,300
--------------------------------------------------------------------
PERSONAL CARE - 0.40%
Rexall Sundown, Inc.(a) 68,400 2,411,100
--------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.35%
AES Corp.(a) 40,000 2,102,500
--------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.16%
A.H. Belo Corp. 40,000 975,000
--------------------------------------------------------------------
RESTAURANTS - 1.02%
Brinker International, Inc.(a) 55,000 1,058,750
--------------------------------------------------------------------
CKE Restaurants, Inc. 54,490 2,247,712
--------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 29,500 936,625
--------------------------------------------------------------------
Outback Steakhouse, Inc.(a) 21,000 819,000
--------------------------------------------------------------------
Starbucks Corp.(a) 20,700 1,106,156
--------------------------------------------------------------------
6,168,243
--------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.52%
Lowe's Companies, Inc. 77,200 3,131,425
--------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.52%
Best Buy Co., Inc.(a) 30,000 1,083,750
--------------------------------------------------------------------
CDW Computer Centers, Inc.(a) 38,500 1,925,000
--------------------------------------------------------------------
Circuit City Stores - Circuit City Group 28,000 1,312,500
--------------------------------------------------------------------
Ingram Micro, Inc. - Class A(a) 35,400 1,566,450
--------------------------------------------------------------------
Tandy Corp. 25,000 1,326,562
--------------------------------------------------------------------
Tech Data Corp.(a) 46,800 2,006,550
--------------------------------------------------------------------
9,220,812
--------------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-16
MARKET
SHARES VALUE
RETAIL (DEPARTMENT STORES) - 0.54%
Kohl's Corp.(a) 36,800 $ 1,909,000
---------------------------------------------------------
Proffitt's, Inc.(a) 34,200 1,380,825
---------------------------------------------------------
3,289,825
---------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.92%
Dollar General Corp. 30,002 1,186,954
---------------------------------------------------------
Dollar Tree Stores, Inc.(a) 56,475 2,294,296
---------------------------------------------------------
Family Dollar Stores, Inc. 66,000 1,221,000
---------------------------------------------------------
Ross Stores, Inc. 20,000 860,000
---------------------------------------------------------
5,562,250
---------------------------------------------------------
RETAIL (DRUG STORES) - 0.89%
CVS Corp. 37,546 1,461,947
---------------------------------------------------------
Rite Aid Corp. 104,560 3,927,535
---------------------------------------------------------
5,389,482
---------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.64%
Kroger Co.(a) 101,700 4,360,387
---------------------------------------------------------
Safeway, Inc.(a) 137,400 5,590,462
---------------------------------------------------------
9,950,849
---------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.97%
Costco Companies, Inc.(a) 23,400 1,475,662
---------------------------------------------------------
Dayton Hudson Corp. 40,400 1,959,400
---------------------------------------------------------
Fred Meyer, Inc.(a) 57,820 2,457,350
---------------------------------------------------------
5,892,412
---------------------------------------------------------
RETAIL (SPECIALTY) - 3.24%
AutoZone, Inc.(a) 55,000 1,756,562
---------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 35,500 1,839,343
---------------------------------------------------------
Finish Line, Inc. (The) - Class A(a) 19,100 537,187
---------------------------------------------------------
General Nutrition Companies, Inc.(a) 26,200 815,475
---------------------------------------------------------
Hollywood Entertainment Corp.(a) 67,800 919,537
---------------------------------------------------------
Inacom Corp.(a) 20,600 654,050
---------------------------------------------------------
Michaels Stores, Inc.(a) 48,500 1,711,140
---------------------------------------------------------
Office Depot, Inc.(a) 84,400 2,663,875
---------------------------------------------------------
OfficeMax, Inc.(a) 50,000 825,000
---------------------------------------------------------
PETsMART, Inc.(a) 119,400 1,194,000
---------------------------------------------------------
Staples, Inc.(a) 190,087 5,500,642
---------------------------------------------------------
Williams-Sonoma, Inc.(a) 40,000 1,272,500
---------------------------------------------------------
19,689,311
---------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 1.68%
Abercrombie & Fitch Co. - Class A(a) 30,100 1,324,400
---------------------------------------------------------
Gap, Inc. (The) 49,050 3,022,706
---------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 83,625 2,759,625
---------------------------------------------------------
Stage Stores, Inc.(a) 13,200 597,300
---------------------------------------------------------
TJX Companies, Inc. 103,000 2,484,875
---------------------------------------------------------
10,188,906
---------------------------------------------------------
|
MARKET
SHARES VALUE
SAVINGS & LOAN COMPANIES - 0.44%
Charter One Financial, Inc. 36,000 $1,212,750
-----------------------------------------------------------------
Dime Bancorp, Inc. 48,000 1,437,000
-----------------------------------------------------------------
2,649,750
-----------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 1.35%
Cognizant Corp. 25,000 1,575,000
-----------------------------------------------------------------
Omnicom Group, Inc. 61,300 3,057,337
-----------------------------------------------------------------
Outdoor Systems, Inc.(a) 57,000 1,596,000
-----------------------------------------------------------------
Snyder Communications, Inc.(a) 45,000 1,980,000
-----------------------------------------------------------------
8,208,337
-----------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 2.01%
ChoicePoint, Inc.(a) 12,500 632,812
-----------------------------------------------------------------
Cintas Corp. 33,000 1,683,000
-----------------------------------------------------------------
Equity Corp. International(a) 32,800 787,200
-----------------------------------------------------------------
Service Corp. International 129,000 5,530,875
-----------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 107,500 2,862,187
-----------------------------------------------------------------
Viad Corp. 25,000 693,750
-----------------------------------------------------------------
12,189,824
-----------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.37%
Cambridge Technology Partners, Inc.(a) 24,200 1,321,925
-----------------------------------------------------------------
Gartner Group, Inc. - Class A(a) 40,000 1,400,000
-----------------------------------------------------------------
Shared Medical Systems Corp. 37,000 2,717,188
-----------------------------------------------------------------
SunGard Data Systems Inc.(a) 75,200 2,885,800
-----------------------------------------------------------------
8,324,913
-----------------------------------------------------------------
SERVICES (DATA PROCESSING) - 3.19%
Affiliated Computer Services, Inc.(a) 30,500 1,174,250
-----------------------------------------------------------------
Billing Concepts Corp.(a) 62,000 961,000
-----------------------------------------------------------------
Ceridian Corp.(a) 37,700 2,214,875
-----------------------------------------------------------------
CSG Systems International, Inc.(a) 34,900 1,635,937
-----------------------------------------------------------------
DST Systems, Inc.(a) 30,300 1,696,800
-----------------------------------------------------------------
Equifax, Inc. 14,000 508,375
-----------------------------------------------------------------
Fiserv, Inc.(a) 77,850 3,306,192
-----------------------------------------------------------------
National Data Corp. 48,000 2,100,000
-----------------------------------------------------------------
Paychex, Inc. 72,975 2,969,170
-----------------------------------------------------------------
PMT Services, Inc.(a) 50,500 1,284,593
-----------------------------------------------------------------
Saville Systems Ireland PLC-ADR (Ireland)(a) 30,000 1,503,750
-----------------------------------------------------------------
19,354,942
-----------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.10%
AccuStaff, Inc.(a) 20,000 625,000
-----------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.15%
Corrections Corp. of America(a) 40,000 940,000
-----------------------------------------------------------------
SPECIALTY PRINTING - 0.22%
Valassis Communications, Inc.(a) 35,000 1,349,687
-----------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-17
MARKET
SHARES VALUE
TELECOMMUNICATIONS - 0.00%
ITC Deltacom, Inc. 100 $ 4,273
-----------------------------------------------------------------
TELEPHONE - 0.45%
Century Telephone Enterprises 35,800 1,642,325
-----------------------------------------------------------------
Cincinnati Bell, Inc. 37,800 1,082,025
-----------------------------------------------------------------
2,724,350
-----------------------------------------------------------------
TEXTILES (APPAREL) - 2.02%
Fruit of The Loom, Inc. - Class A(a) 20,000 663,750
-----------------------------------------------------------------
Jones Apparel Group, Inc.(a) 83,800 3,063,937
-----------------------------------------------------------------
Liz Claiborne, Inc. 24,100 1,259,225
-----------------------------------------------------------------
Nautica Enterprises, Inc.(a) 39,000 1,045,687
-----------------------------------------------------------------
St. John Knits, Inc. 26,700 1,031,287
-----------------------------------------------------------------
Tommy Hilfiger Corp.(a) 57,100 3,568,750
-----------------------------------------------------------------
Warnaco Group, Inc. (The) 38,000 1,612,625
-----------------------------------------------------------------
12,245,261
-----------------------------------------------------------------
TEXTILES (HOME FURNISHINGS) - 0.10%
Shaw Industries, Inc. 35,000 616,875
-----------------------------------------------------------------
TRUCKERS - 0.08%
J.B. Hunt Transport Services, Inc. 13,500 480,938
-----------------------------------------------------------------
WASTE MANAGEMENT - 1.32%
American Disposal Services, Inc.(a) 39,800 1,865,625
-----------------------------------------------------------------
Republic Services, Inc. 34,300 823,200
-----------------------------------------------------------------
Thermo Instrument Systems Inc.(a) 13,200 346,500
-----------------------------------------------------------------
USA Waste Services, Inc.(a) 101,675 5,020,203
-----------------------------------------------------------------
8,055,528
-----------------------------------------------------------------
Total Common Stocks (Cost $376,313,593) 546,955,006
-----------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 0.06%
FINANCIAL (DIVERSIFIED) - 0.06%
MGIC Investment Corp. - $3.12 Conv. Pfd. 3,500 334,687
-----------------------------------------------------------------
Total Convertible Preferred Stocks
(Cost $234,028) 334,687
-----------------------------------------------------------------
WARRANTS - 0.03%
BANKS (REGIONAL) - 0.03%
Golden State Bancorp, Litigation Wts.,
expiring 01/01/01(a) (Cost $227,318) 40,000 212,500
-----------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
CONVERTIBLE CORPORATE BONDS - 0.27%
COMPUTERS (PERIPHERALS) - 0.18%
EMC Corp., Conv. Sub. Notes, 3.25%, 03/15/02 $ 550,000 $ 1,130,822
-----------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.09%
Alza Corp., Conv. LYON, 5.25%, 07/14/14(b) 900,000 528,201
-----------------------------------------------------------------------------
Total Convertible Corporate Bonds
(Cost $1,300,637) 1,659,023
-----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 9.63%(c)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98(d) 29,346,225 29,346,225
-----------------------------------------------------------------------------
Dresdner Kleinwort Benson North America LLC, 5.58%,
07/01/98(e) 29,090,936 29,090,936
-----------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $58,437,161) 58,437,161
-----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.08% 607,598,377
-----------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.08%) (481,275)
-----------------------------------------------------------------------------
NET ASSETS - 100.00% $607,117,102
=============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(c) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(d) Joint repurchase agreements entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
(e) Joint repurchase agreements entered into 06/30/98 with a maturing value of
$70,011,375. Collateralized by $71,382,000 U.S. Government obligations, 0%
to 6.30% due 07/02/98 to 12/03/01 with an aggregate market value at
06/30/98 of $71,404,458.
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
LYON - Liquid Yield Option Notes
Pfd. - Preferred
Sub. - Subordinated
Wts. - Warrants
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-18
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, at market value (cost $436,512,737) $607,598,377 ---------------------------------------------------------------------- Foreign currencies, at value (cost $2,733) 2,696 ---------------------------------------------------------------------- Receivables for: Investments sold 1,437,335 ---------------------------------------------------------------------- Capital stock sold 623,479 ---------------------------------------------------------------------- Dividends and interest 150,805 ---------------------------------------------------------------------- Investment for deferred compensation plan 20,527 ---------------------------------------------------------------------- Other assets 769 ---------------------------------------------------------------------- Total assets 609,833,988 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 2,147,933 ---------------------------------------------------------------------- Capital stock reacquired 203,776 ---------------------------------------------------------------------- Deferred compensation plan 20,527 ---------------------------------------------------------------------- Accrued advisory fees 299,013 ---------------------------------------------------------------------- Accrued directors' fees 2,484 ---------------------------------------------------------------------- Accrued administrative services fees 3,506 ---------------------------------------------------------------------- Accrued operating expenses 39,647 ---------------------------------------------------------------------- Total liabilities 2,716,886 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $607,117,102 ====================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 24,738,893 ---------------------------------------------------------------------- Net asset value, offering and redemption price per share $ 24.54 ====================================================================== |
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Interest $ 1,397,812
-----------------------------------------------------------------------------
Dividends (net of $14,565 foreign withholding tax) 745,863
-----------------------------------------------------------------------------
Total investment income 2,143,675
-----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,756,898
-----------------------------------------------------------------------------
Administrative services fees 21,036
-----------------------------------------------------------------------------
Custodian fees 62,162
-----------------------------------------------------------------------------
Directors' fees and expenses 5,394
-----------------------------------------------------------------------------
Organizational costs 965
-----------------------------------------------------------------------------
Other 52,858
-----------------------------------------------------------------------------
Total expenses 1,899,313
-----------------------------------------------------------------------------
Less: Expenses paid indirectly (750)
-----------------------------------------------------------------------------
Net expenses 1,898,563
-----------------------------------------------------------------------------
Net investment income 245,112
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 8,483,731
-----------------------------------------------------------------------------
Foreign currencies 1,259
-----------------------------------------------------------------------------
Option contracts (255)
-----------------------------------------------------------------------------
8,484,735
-----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 59,303,550
-----------------------------------------------------------------------------
Foreign currencies (51)
-----------------------------------------------------------------------------
59,303,499
-----------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and
option contracts 67,788,234
-----------------------------------------------------------------------------
Net increase in net assets resulting from operations $68,033,346
=============================================================================
|
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-19
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
-----------------------
OPERATIONS:
Net investment income $ 245,112 $ 914,009
----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and option contracts 8,484,735 16,155,941
----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities 59,303,499 35,953,703
----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 68,033,346 53,023,653
----------------------------------------------------------------------------
Dividends to shareholders from net investment
income -- (536,874)
----------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (6,902,664)
----------------------------------------------------------------------------
Net increase from capital stock transactions 16,303,678 107,132,798
----------------------------------------------------------------------------
Net increase in net assets 84,337,024 152,716,913
----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 522,780,078 370,063,165
----------------------------------------------------------------------------
End of period $607,117,102 $522,780,078
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $410,712,399 $394,408,721
----------------------------------------------------------------------------
Undistributed net investment income 1,121,655 876,543
----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
option contracts 24,197,459 15,712,724
----------------------------------------------------------------------------
Unrealized appreciation of investment securities
and futures contracts 171,085,589 111,782,090
----------------------------------------------------------------------------
$607,117,102 $522,780,078
============================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Capital Appreciation Fund (the "Fund"). The Fund's investment
objective is to seek capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth companies.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date, or absent a last sales price, at the mean of the closing bid and
asked prices. Debt obligations (including convertible bonds) are valued on
the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market quotations are not readily available or are questionable are valued
at fair value as determined in good faith by or under the supervision of
the Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally
AIM V.I. CAPITAL APPRECIATION FUND
FS-20
determined prior to the close of the New York Stock Exchange. Occasionally,
events affecting the values of such securities and such exchange rates may
occur between the times at which they are determined and the close of the New
York Stock Exchange which will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value as determined in good faith by or under the supervision of
the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contract at the
end of each day's trading. Variation margin payments are made or received
depending upon whether unrealized gains or losses are incurred. When the
contracts are closed, the Fund recognizes a realized gain or loss equal to
the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $21,036 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,723 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $750 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $750 during the six months ended June 30, 1998.
AIM V.I. CAPITAL APPRECIATION FUND
FS-21
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the six months ended June 30, 1998 was
$185,658,989 and $200,827,179, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $181,424,235 --------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (10,546,510) --------------------------------------------------------------------------- Net unrealized appreciation of investment securities $170,877,725 =========================================================================== |
Cost of investments for tax purposes is $436,720,652.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------
Sold 2,431,492 $ 56,512,750 9,656,144 $202,278,514
-------------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 357,327 7,439,538
-------------------------------------------------------------------------------
Reacquired (1,723,989) (40,209,072) (5,025,910) (102,585,254)
-------------------------------------------------------------------------------
707,503 $ 16,303,678 4,987,561 $ 107,132,798
===============================================================================
|
NOTE 7 - CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
CALL OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------
Beginning of period -- $ --
----------------------------------------
Written 684 196,009
----------------------------------------
Closed (326) (88,187)
----------------------------------------
Expired (188) (11,648)
----------------------------------------
Exercised (170) (96,174)
----------------------------------------
End of period -- $ --
========================================
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-22
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
JUNE 30, ---------------------------- -----------------
1998 1997 1996 1995 1995 1994
-------- -------- -------- -------- ------- -------
Net asset value,
beginning of period $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58 $ 10.00
------------------------ -------- -------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.01 0.03 0.02 0.04 0.05 --
------------------------ -------- -------- -------- -------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 2.78 2.58 2.89 4.46 (0.54) 2.59
------------------------ -------- -------- -------- -------- ------- -------
Total from investment
operations 2.79 2.61 2.91 4.50 (0.49) 2.59
------------------------ -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net
investment income -- (0.02) (0.03) -- (0.04) (0.01)
------------------------ -------- -------- -------- -------- ------- -------
Dividends from net
realized gains -- (0.27) -- -- -- --
------------------------ -------- -------- -------- -------- ------- -------
Total distributions -- (0.29) (0.03) -- (0.04) (0.01)
------------------------ -------- -------- -------- -------- ------- -------
Net asset value, end of
period $ 24.54 $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58
======================== ======== ======== ======== ======== ======= =======
Total return(a) 12.83% 13.51% 17.58% 37.38% (3.91)% 25.90%
======================== ======== ======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $607,117 $522,642 $370,063 $212,152 $88,177 $35,354
======================== ======== ======== ======== ======== ======= =======
Ratio of expenses to
average net assets 0.67%(b) 0.68% 0.73% 0.75%(c) 0.84% 1.06%(c)
======================== ======== ======== ======== ======== ======= =======
Ratio of net investment
income to average net
assets 0.09%(b) 0.18% 0.18% 0.39%(c) 0.46% 0.07%(c)
======================== ======== ======== ======== ======== ======= =======
Portfolio turnover rate 36% 65% 59% 37% 81% 34%
======================== ======== ======== ======== ======== ======= =======
Average brokerage
commission rate(d) $ 0.0560 $ 0.0577 $ 0.0592 N/A N/A N/A
======================== ======== ======== ======== ======== ======= =======
|
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $569,652,555.
(c) Annualized.
(d) The average commission rate paid is the total brokerage commissions paid
on applicable purchases and sales of securities for the period divided by
the total number of related shares purchased and sold, which is required
to be disclosed for fiscal years beginning September 1, 1995 and
thereafter.
AIM V.I. CAPITAL APPRECIATION FUND
FS-23
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
MARKET
SHARES VALUE
COMMON STOCKS - 31.82%
BEVERAGES (NON-ALCOHOLIC) - 0.24%
Triarc Companies, Inc.(a) 200 $ 4,388
-----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.03%
Aspect Telecommunications Corp.(a) 200 5,475
-----------------------------------------------------------------
Comverse Technology, Inc.(a) 100 5,187
-----------------------------------------------------------------
NICE-Systems Ltd. - ADR (Israel)(a) 100 3,750
-----------------------------------------------------------------
Tekelec(a) 100 4,475
-----------------------------------------------------------------
18,887
-----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 6.53%
Advanced Fibre Communications, Inc.(a) 200 8,013
-----------------------------------------------------------------
Best Software, Inc.(a) 450 9,505
-----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 200 6,250
-----------------------------------------------------------------
Compuware Corp.(a) 100 5,113
-----------------------------------------------------------------
DAOU Systems, Inc.(a) 200 4,575
-----------------------------------------------------------------
Electronic Arts, Inc.(a) 100 5,400
-----------------------------------------------------------------
Evolving Systems, Inc.(a) 100 1,106
-----------------------------------------------------------------
Harbinger Corp.(a) 200 4,838
-----------------------------------------------------------------
Learning Company, Inc. (The)(a) 250 7,406
-----------------------------------------------------------------
Mastech Corp.(a) 300 8,438
-----------------------------------------------------------------
Medical Manager Corp.(a) 400 11,050
-----------------------------------------------------------------
Mercury Interactive Corp.(a) 100 4,463
-----------------------------------------------------------------
Network Associates, Inc.(a) 200 9,575
-----------------------------------------------------------------
Platinum Software Corp.(a) 200 4,875
-----------------------------------------------------------------
Platinum Technology, Inc.(a) 300 8,569
-----------------------------------------------------------------
Sterling Commerce, Inc.(a) 100 4,850
-----------------------------------------------------------------
Synopsys, Inc.(a) 100 4,575
-----------------------------------------------------------------
USWeb Corp.(a) 300 7,105
-----------------------------------------------------------------
Vantive Corp. (The)(a) 200 4,100
-----------------------------------------------------------------
119,806
-----------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.36%
Blyth Industries, Inc.(a) 200 6,650
-----------------------------------------------------------------
CONSUMER FINANCE - 0.17%
Cash American International, Inc. 200 3,050
-----------------------------------------------------------------
CONTAINERS (METAL & GLASS) - 0.38%
Silgan Holdings, Inc.(a) 250 7,000
-----------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.64%
AmeriSource Health Corp. - Class A(a) 100 6,568
-----------------------------------------------------------------
Weider Nutrition International, Inc. 300 5,100
-----------------------------------------------------------------
11,668
-----------------------------------------------------------------
|
MARKET
SHARES VALUE
ELECTRONICS (INSTRUMENTATION) - 0.81%
CellStar Corp.(a) 500 $ 6,469
---------------------------------------------------------------------
EFTC Corp.(a) 200 2,600
---------------------------------------------------------------------
Quanta Services, Inc.(a) 400 5,875
---------------------------------------------------------------------
14,944
---------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.49%
Aspec Technology, Inc.(a) 200 1,300
---------------------------------------------------------------------
Celecstica Inc.(a) 100 1,875
---------------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 100 3,169
---------------------------------------------------------------------
Microchip Technology, Inc.(a) 100 2,613
---------------------------------------------------------------------
8,957
---------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.13%
Amresco, Inc. 300 8,738
---------------------------------------------------------------------
FirstCity Financial Corp.(a) 200 5,800
---------------------------------------------------------------------
SEI Corp. 100 6,200
---------------------------------------------------------------------
20,738
---------------------------------------------------------------------
FOODS - 0.55%
American Italian Pasta Co. - Class A(a) 150 5,587
---------------------------------------------------------------------
Universal Foods Corp. 200 4,438
---------------------------------------------------------------------
10,025
---------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.39%
Forest Laboratories, Inc.(a) 200 7,150
---------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.95%
Cyberonics, Inc.(a) 300 3,188
---------------------------------------------------------------------
Henry Schein, Inc.(a) 100 4,613
---------------------------------------------------------------------
Lifecore Biomedical, Inc.(a) 200 3,300
---------------------------------------------------------------------
Steris Corp.(a) 100 6,359
---------------------------------------------------------------------
17,460
---------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 1.09%
Ocular Sciences, Inc.(a) 200 6,500
---------------------------------------------------------------------
Summit Holding Southeast Inc.(a) 250 7,969
---------------------------------------------------------------------
Ventana Medical Systems, Inc.(a) 200 5,600
---------------------------------------------------------------------
20,069
---------------------------------------------------------------------
HOMEBUILDING - 0.12%
M/I Schottenstein Homes, Inc. 100 2,163
---------------------------------------------------------------------
HOUSEWARES - 0.42%
Central Garden and Pet Co.(a) 250 7,780
---------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.56%
Nationwide Financial Services, Inc. - Class A 200 10,200
---------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.66%
Amerin Corp.(a) 150 4,377
---------------------------------------------------------------------
Transatlantic Holdings, Inc. 100 7,731
---------------------------------------------------------------------
12,108
---------------------------------------------------------------------
|
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-24
MARKET
SHARES VALUE
INVESTMENT MANAGEMENT - 0.46%
Affiliated Managers Group, Inc.(a) 100 $ 3,713
----------------------------------------------------------------------
Waddell & Reed Financial, Inc. 200 4,788
----------------------------------------------------------------------
8,501
----------------------------------------------------------------------
INVESTMENTS - 0.14%
Sirrom Capital Corp. 100 2,600
----------------------------------------------------------------------
IRON & STEEL - 0.29%
Texas Industries, Inc. 100 5,300
----------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.86%
Alpine Group, Inc. (The)(a) 200 4,150
----------------------------------------------------------------------
First Years, Inc. (The) 300 5,700
----------------------------------------------------------------------
Mettler-Toledo International Inc.(a) 300 6,018
----------------------------------------------------------------------
15,868
----------------------------------------------------------------------
METAL FABRICATORS - 0.56%
Metals USA, Inc.(a) 600 10,350
----------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.92%
Daisytek International Corp.(a) 300 7,631
----------------------------------------------------------------------
Knoll, Inc.(a) 200 5,900
----------------------------------------------------------------------
School Specialty, Inc.(a) 200 3,275
----------------------------------------------------------------------
16,806
----------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.31%
Atwood Oceanics, Inc.(a) 50 1,991
----------------------------------------------------------------------
EVI Weatherford, Inc.(a) 100 3,713
----------------------------------------------------------------------
5,704
----------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.58%
Forcenergy, Inc.(a) 200 3,563
----------------------------------------------------------------------
Stolt Comex Seaway, S.A. (United Kingdom)(a) 250 4,844
----------------------------------------------------------------------
Stolt Comex Seaway, S.A. - ADR (United Kingdom)(a) 125 2,188
----------------------------------------------------------------------
10,595
----------------------------------------------------------------------
PERSONAL CARE - 0.64%
Steiner Leisure Ltd.(a) 100 3,025
----------------------------------------------------------------------
Twinlab Corp.(a) 200 8,737
----------------------------------------------------------------------
11,762
----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 0.11%
AMRESCO Capital Trust Inc.(a) 150 1,941
----------------------------------------------------------------------
RESTAURANTS - 0.33%
Showbiz Pizza Time, Inc.(a) 150 6,047
----------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.55%
Family Dollar Stores, Inc. 300 5,550
----------------------------------------------------------------------
K & G Men's Center, Inc.(a) 200 4,525
----------------------------------------------------------------------
10,075
----------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.41%
Wild Oats Markets Inc.(a) 250 7,594
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
RETAIL (SPECIALTY) - 4.30%
Finish Line, Inc. (The)-Class A(a) 200 $ 5,625
------------------------------------------------------------
Just for Feet, Inc.(a) 500 14,250
------------------------------------------------------------
Linens 'N Things, Inc.(a) 400 12,225
------------------------------------------------------------
Michaels Stores, Inc.(a) 200 7,056
------------------------------------------------------------
Musicland Stores Corp.(a) 200 2,800
------------------------------------------------------------
Nutraceutical International Corp.(a) 250 2,625
------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 200 3,987
------------------------------------------------------------
PETsMART, Inc.(a) 800 8,000
------------------------------------------------------------
Pier 1 Imports, Inc. 200 4,775
------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 200 5,600
------------------------------------------------------------
Rainbow Rentals Inc.(a) 200 2,125
------------------------------------------------------------
West Marine, Inc.(a) 100 1,800
------------------------------------------------------------
Zale Corp.(a) 250 7,952
------------------------------------------------------------
78,820
------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.37%
Stage Stores, Inc.(a) 150 6,788
------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.87%
Hagler Bailly, Inc.(a) 200 5,176
------------------------------------------------------------
Information Resources, Inc.(a) 100 1,850
------------------------------------------------------------
Lamar Advertising Co.(a) 250 8,969
------------------------------------------------------------
15,995
------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.17%
American Residential Services, Inc.(a) 200 2,250
------------------------------------------------------------
Computer Learning Centers, Inc.(a) 250 6,219
------------------------------------------------------------
Metzler Group, Inc.(a) 200 7,324
------------------------------------------------------------
Pegasus Systems, Inc.(a) 100 2,563
------------------------------------------------------------
Primark Corp.(a) 100 3,131
------------------------------------------------------------
21,487
------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.03%
Gartner Group, Inc. - Class A(a) 100 3,500
------------------------------------------------------------
SunGard Data Systems Inc.(a) 400 15,350
------------------------------------------------------------
18,850
------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.74%
BISYS Group, Inc.(a) 250 10,250
------------------------------------------------------------
CCC Information Services Group(a) 200 3,300
------------------------------------------------------------
13,550
------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.50%
Syntel, Inc.(a) 200 6,250
------------------------------------------------------------
Vincam Group, Inc. (The)(a) 150 2,943
------------------------------------------------------------
9,193
------------------------------------------------------------
TOBACCO - 0.16%
Schweitzer-Mauduit International, Inc. 100 2,900
------------------------------------------------------------
Total Common Stocks (Cost $574,967) 583,769
------------------------------------------------------------
|
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-25
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY BILLS(b) - 48.13%
4.995%, 09/24/98 (Cost $882,632) $893,000(c) $ 882,900
---------------------------------------------------------------------------
Total Investments, excluding repurchase agreement
(Cost $1,457,599) 1,466,669
---------------------------------------------------------------------------
REPURCHASE AGREEMENT(d) - 21.63%
Dean Witter Reynolds Inc., 6.10%
07/01/98(e) (Cost $396,900) 396,900 396,900
---------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.58% 1,863,569
---------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.58)% (28,947)
---------------------------------------------------------------------------
NET ASSETS - 100.00% $1,834,622
===========================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover
margin requirements for open future contracts. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreeements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 6/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Abbreviations:
ADR - American Depositary Receipt
See Notes to Financial Statements.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-26
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, excluding repurchase agreements, at market value (cost $1,457,599) $ 1,466,669 --------------------------------------------------------------------- Repurchase agreements (cost $396,900) 396,900 --------------------------------------------------------------------- Receivables for: Capital stock sold 873 --------------------------------------------------------------------- Dividends and interest 88 --------------------------------------------------------------------- Variation margin 4,700 --------------------------------------------------------------------- Reimbursement from advisor 13,411 --------------------------------------------------------------------- Total assets 1,882,641 --------------------------------------------------------------------- LIABILITIES: Payable for investments purchased 34,356 --------------------------------------------------------------------- Accrued advisory fees 872 --------------------------------------------------------------------- Accrued directors' fees 1,383 --------------------------------------------------------------------- Accrued administrative services fees 7,600 --------------------------------------------------------------------- Accrued operating expenses 3,808 --------------------------------------------------------------------- Total liabilities 48,019 --------------------------------------------------------------------- Net assets applicable to shares outstanding $ 1,834,622 ===================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 --------------------------------------------------------------------- Outstanding 192,504 ===================================================================== Net asset value, offering and redemption price per share $9.53 ===================================================================== |
STATEMENT OF OPERATIONS
For the period May 1, 1998 (date operations commenced)
through June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Interest $ 8,299
---------------------------------------------------------------------------
Dividends 81
---------------------------------------------------------------------------
Total investment income 8,380
---------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,490
---------------------------------------------------------------------------
Administrative services fees 7,600
---------------------------------------------------------------------------
Custodian fees 3,145
---------------------------------------------------------------------------
Directors' fees and expenses 1,383
---------------------------------------------------------------------------
Legal fees 1,333
---------------------------------------------------------------------------
Other 1,025
---------------------------------------------------------------------------
Total expenses 15,976
---------------------------------------------------------------------------
Less: Fees waived and reimbursed by advisor (13,411)
---------------------------------------------------------------------------
Expenses paid indirectly (228)
---------------------------------------------------------------------------
Net expenses 2,337
---------------------------------------------------------------------------
Net investment income 6,043
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (638)
---------------------------------------------------------------------------
Futures contracts (77,685)
---------------------------------------------------------------------------
(78,323)
---------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 9,070
---------------------------------------------------------------------------
Futures contracts 37,425
---------------------------------------------------------------------------
46,495
---------------------------------------------------------------------------
Net gain (loss) from investment securities and futures contracts (31,828)
---------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(25,785)
===========================================================================
|
See Notes to Financial Statements.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-27
STATEMENT OF CHANGES IN NET ASSETS
For the period May 1, 1998 (date operations commenced) through June 30, 1998
(Unaudited)
OPERATIONS:
Net investment income $ 6,043
------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and futures
contracts (78,323)
------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and futures
contracts 46,495
------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (25,785)
------------------------------------------------------------------------------
Net increase from capital stock transactions 1,860,407
------------------------------------------------------------------------------
Net increase in net assets 1,834,622
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
------------------------------------------------------------------------------
End of period $1,834,622
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,860,407
------------------------------------------------------------------------------
Undistributed net investment income 6,043
------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment securities
and futures contracts (78,323)
------------------------------------------------------------------------------
Unrealized appreciation of investment securities and futures
contracts 46,495
------------------------------------------------------------------------------
$1,834,622
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Capital Development Fund (the "Fund"). The Fund's investment
objective is long-term capital appreciation. The Fund commenced operations on
May 1, 1998. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If no mean is
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or, absent a last sales price, at the mean of the closing bid and
asked prices. Debt obligations (including convertible bonds) are valued on
the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive
reliance on quoted prices and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued at
the mean between last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations either are not
readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in
foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-28
will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million. During the
period May 1, 1998 (date operations commenced) through June 30, 1998, AIM
waived advisory fees and reimbursed expenses of $13,411.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the period May 1, 1998 (date operations commenced) through June 30,
1998, AIM was reimbursed $7,600 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $228 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $228 during the period May 1, 1998 (date
operations commenced) through June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees,
if so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the period May 1, 1998 (date operations
commenced) through June 30, 1998 was $592,324 and $16,716, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $30,930 ---------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (21,860) ---------------------------------------------------------------------- Net unrealized appreciation of investment securities $ 9,070 ====================================================================== |
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period May 1, 1998 (date
operations commenced) through June 30, 1998 were as follows:
JUNE 30, 1998
-------------------
SHARES AMOUNT
------- ----------
Sold 192,522 $1,860,576
--------------------------------
Reacquired (18) (169)
--------------------------------
192,504 $1,860,407
================================
|
NOTE 7 - FUTURES CONTRACTS
On June 30, 1998, $30,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
NO. OF MONTH/ UNREALIZED
CONTRACTS COMMITMENT APPRECIATION
CONTRACT --------- ---------------- ------------
Russell 2000 Index 4 September 98/Buy $37,425
=========================================================================================
|
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-29
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period May 1, 1998 (date operations commenced) through June 30,
1998.
JUNE 30,
1998
--------
Net asset value, beginning of period $ 10.00
-----------------------------------------------------------------------
Income from investment operations:
Net investment income 0.03
-----------------------------------------------------------------------
Net gains (losses) on securities (both realized and unrealized) (0.50)
-----------------------------------------------------------------------
Total from investment operations (0.47)
-----------------------------------------------------------------------
Net asset value, end of period $ 9.53
================================================================= =======
Total return(a) (4.70)%
================================================================= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $ 1,835
================================================================= =======
Ratio of expenses to average net assets(b) 1.29%(c)(d)
================================================================= =======
Ratio of net investment income to average net assets(e) 3.04%(d)
================================================================= =======
Portfolio turnover rate 5%
================================================================= =======
Average brokerage commission rate paid(f) $0.0381
================================================================= =======
|
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
8.04% (annualized).
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been
1.18%.
(d) Ratios are annualized and based on average net assets of $1,188,919.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement was (3.71)% (annualized).
(f) The average commission rate paid is the total brokerage commission paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-30
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
PRINCIPAL MARKET
AMOUNT(a) VALUE
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS AND
NOTES - 70.08%
AIR FREIGHT - 0.40%
Atlas Air, Inc., Sr. Notes, 9.25%, 04/15/08 (Acquired
04/07/98; Cost $399,468)(b) $ 400,000 $ 402,000
-------------------------------------------------------------------------------
AIRLINES - 2.75%
Airlines Pass Thru Trust, Sub. Bonds,
10.875%, 03/15/19 300,000 330,940
-------------------------------------------------------------------------------
America West Airlines, Inc., Pass Thru Certificates,
6.86%, 07/02/04 882,000 877,299
-------------------------------------------------------------------------------
Delta Air Lines, Inc., Deb., 9.00%, 05/15/16 825,000 1,011,945
-------------------------------------------------------------------------------
United Air Lines, Inc., Pass Thru Certificates,
9.56%, 10/19/18 425,000 537,238
-------------------------------------------------------------------------------
2,757,422
-------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.41%
Advance Stores Co., Sr. Sub Notes, 10.25%,
04/15/08 (Acquired 04/07/98; Cost $390,000)(b) 390,000 407,551
-------------------------------------------------------------------------------
AUTOMOBILES - 0.51%
General Motors Corp., Deb., 8.80%, 03/01/21 400,000 503,009
-------------------------------------------------------------------------------
BANKS (MONEY CENTER) - 2.33%
Bankers Trust New York Corp., Gtd. Notes,
7.875%, 02/25/27 600,000 633,306
-------------------------------------------------------------------------------
Deutsche Bank Financial, Gtd. Unsec. Sub. Deb., 6.70%,
12/13/06 750,000 768,735
-------------------------------------------------------------------------------
First Union Bancorp, Sub. Deb., 7.50%, 04/15/35 800,000 926,200
-------------------------------------------------------------------------------
2,328,241
-------------------------------------------------------------------------------
BANKS (REGIONAL) - 1.37%
Mercantile Bank Inc., Sub. Notes, 6.375%, 01/15/04 300,000 302,586
-------------------------------------------------------------------------------
Mercantile Bancorp Inc., Unsec. Sub. Notes,
7.30%, 06/15/07 1,000,000 1,064,460
-------------------------------------------------------------------------------
1,367,046
-------------------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 1.21%
Coca-Cola Enterprises, Inc., Putable Notes,
7.24%, 06/20/20(c) 5,000,000 1,212,150
-------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 4.37%
Capstar Broadcasting Partners, Sr. Disc. Notes,
12.75%, 02/01/09(d) 490,000 377,300
-------------------------------------------------------------------------------
Comcast Cable Communications, Notes,
8.50%, 05/01/27 500,000 607,020
-------------------------------------------------------------------------------
CSC Holdings, Inc., Sr. Notes, 7.875%, 12/15/07 500,000 530,000
-------------------------------------------------------------------------------
Diamond Cable Communications PLC (United Kingdom), Sr.
Yankee Disc. Notes, 10.75%, 02/15/07(d) 1,160,000 858,400
-------------------------------------------------------------------------------
EchoStar DBS Corp., Sr. Sec. Gtd. Notes,
12.50%, 07/01/02 430,000 484,825
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
BROADCASTING (TELEVISION, RADIO & CABLE) -
(CONTINUED)
Knology Holdings, Inc., Sr. Disc. Notes,
11.875%, 10/15/07(d) $ 1,000,000 $ 582,500
-------------------------------------------------------------------------------
TCI Communications Inc., Sr. Notes,
8.00%, 08/01/05 850,000 930,640
-------------------------------------------------------------------------------
4,370,685
-------------------------------------------------------------------------------
CHEMICALS - 2.36%
Nova Chemicals Ltd. (Canada), Yankee Deb., 7.00%,
08/15/26 750,000 781,305
-------------------------------------------------------------------------------
Nova Gas Transmission Ltd. (Canada), Yankee Deb.,
8.50%, 12/15/12 500,000 597,045
-------------------------------------------------------------------------------
Solutia Inc., Bonds, 6.72%, 10/15/37 750,000 766,103
-------------------------------------------------------------------------------
Sterling Chemicals, Inc., Sr. Unsec. Sub. Notes,
11.75%, 08/15/06 220,000 221,100
-------------------------------------------------------------------------------
2,365,553
-------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.48%
Dialog Corp. PLC (United Kingdom), Series A Sr. Sub.
Notes, 11.00%, 11/15/07 350,000 385,000
-------------------------------------------------------------------------------
Northern Telecom (Canada), Yankee Notes, 6.00%,
09/01/03 100,000 100,172
-------------------------------------------------------------------------------
485,172
-------------------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.15%
Commemorative Brands, Sr. Sub. Notes,
11.00%, 01/15/07 148,000 151,330
-------------------------------------------------------------------------------
CONSUMER FINANCE - 1.87%
GMAC, Notes, 9.00%, 10/15/02 750,000 832,185
-------------------------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 1,000,000 1,043,090
-------------------------------------------------------------------------------
1,875,275
-------------------------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER) - 0.51%
MVE Inc., Sr. Sec. Notes, 12.50%, 02/15/02 190,000 192,850
-------------------------------------------------------------------------------
Tekni-Plex Inc., Sr. Sub. Notes,
11.25%, 04/01/07 285,000 313,500
-------------------------------------------------------------------------------
506,350
-------------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.33%
AmeriServ Food Co., Gtd. Sr. Sub. Notes,
10.125%, 07/15/07 320,000 330,800
-------------------------------------------------------------------------------
ELECTRIC COMPANIES - 3.73%
Commonwealth Edison Co., First Mortgage Notes, 7.50%,
07/01/13 800,000 882,000
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-31
PRINCIPAL MARKET
AMOUNT(a) VALUE
ELECTRIC COMPANIES - (CONTINUED)
El Paso Electric Co.,
Series D Sec. First Mortgage Bonds,
8.90%, 02/01/06 $ 500,000 $ 563,965
------------------------------------------------------------------------------
Series E Sec. First Mortgage Bonds,
9.40%, 05/01/11 150,000 173,441
------------------------------------------------------------------------------
Niagara Mohawk Power Corp.,
First Mortgage Notes, 9.25%, 10/01/01 1,000,000 1,083,740
------------------------------------------------------------------------------
Sr. Unsec. Notes, 7.75%, 10/01/08 1,000,000 1,031,280
------------------------------------------------------------------------------
3,734,426
------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.26%
Electronic Retailing Systems International, Inc., Sr.
Disc. Notes, 13.25%, 02/01/04(d) 590,000 262,550
------------------------------------------------------------------------------
ENTERTAINMENT - 2.88%
Ascent Entertainment Group, Sr. Sec. Disc. Notes,
11.875%, 12/15/04(d) 600,000 387,000
------------------------------------------------------------------------------
Time Warner, Inc.,
Deb., 9.125%, 01/15/13 500,000 616,980
------------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 750,000 835,688
------------------------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 500,000 509,705
------------------------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%, 06/01/05 500,000 533,895
------------------------------------------------------------------------------
2,883,268
------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.64%
Associates Corp. of North America, Series B Sr. Deb.,
7.95%, 02/15/10 750,000 842,828
------------------------------------------------------------------------------
Finova Capital Corp., Unsec. Notes,
7.40%, 05/06/06 750,000 802,612
------------------------------------------------------------------------------
1,645,440
------------------------------------------------------------------------------
FOODS - 1.81%
ConAgra Inc., Sr. Unsec. Notes, 7.125%, 10/01/26 1,300,000 1,388,959
------------------------------------------------------------------------------
Del Monte Corp./Foods Co., Sr. Unsec. Sub. Notes,
12.25%, 04/15/07 380,000 427,500
------------------------------------------------------------------------------
1,816,459
------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.41%
Venetian Casino Resort LLC, Gtd. Mortgage Notes,
12.25%, 11/15/04 400,000 415,000
------------------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.38%
Global Health Sciences, Sr. Notes, 11.00%, 05/01/08
(Acquired 04/17/98; Cost $368,839)(b) 380,000 378,100
------------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.77%
Tenet Healthcare Corp., Sr. Notes, 8.00%, 01/15/05 750,000 772,328
------------------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.47%
Paragon Health Networks Inc., Sr. Unsec. Disc. Sub.
Notes, 10.50%, 11/01/07(d) 700,000 465,500
------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.79%
Alaris Medical Systems, Sr. Unsec. Gtd. Sub. Deb.,
9.75%, 01/01/06 300,000 306,000
------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - (CONTINUED)
Dade International Inc., Series B Sr. Sub. Notes,
11.125%, 05/01/06 $ 80,000 $ 90,400
-------------------------------------------------------------------------------
Mediq, Inc., Sr. Unsec. Sub. Notes, 11.00%, 06/01/08
(Acquired 05/21/98; Cost $380,000)(b) 380,000 393,300
-------------------------------------------------------------------------------
789,700
-------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.11%
Dynacare Inc. (Canada), Sr. Yankee Notes,
10.75%, 01/15/06 105,000 111,562
-------------------------------------------------------------------------------
HOUSEWARES - 0.75%
Decora Industries, Inc., Sr. Sec. Notes, 11.00%,
05/01/05 (Acquired 04/24/98; Cost $488,185)(b) 500,000 487,500
-------------------------------------------------------------------------------
Zeta Consumer Products, Sr. Notes, 11.25%, 11/30/07
(Acquired 11/20/97; Cost $379,000)(b) 379,000 267,195
-------------------------------------------------------------------------------
754,695
-------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.89%
Americo Life Inc., Sr. Sub. Notes, 9.25%, 06/01/05 75,000 77,812
-------------------------------------------------------------------------------
Torchmark Corp., Notes, 7.875%, 05/15/23 750,000 817,177
-------------------------------------------------------------------------------
894,989
-------------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.42%
Travelcenters of America Inc., Sr. Unsec. Gtd. Sub.
Deb., 10.25%, 04/01/07 400,000 420,000
-------------------------------------------------------------------------------
IRON & STEEL - 0.77%
ACME Metal, Inc., Sr. Unsec. Gtd. Deb.,
10.875%, 12/15/07 458,000 391,590
-------------------------------------------------------------------------------
GS Industries, Inc., Sr. Gtd. Notes, 12.00%, 09/01/04 350,000 380,625
-------------------------------------------------------------------------------
772,215
-------------------------------------------------------------------------------
LODGING - HOTELS - 1.91%
Booth Creek Ski Holdings, Sr. Notes,
12.50%, 03/15/07 390,000 422,175
-------------------------------------------------------------------------------
Coast Hotels & Casinos Inc., Series B Sec. First
Mortgage Gtd. Notes, 13.00%, 12/15/02 180,000 207,900
-------------------------------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb., 7.375%, 11/15/15 750,000 707,670
-------------------------------------------------------------------------------
John Q. Hammons Hotels Inc., Sec. First Mortgage Notes,
9.75%, 10/01/05 550,000 574,750
-------------------------------------------------------------------------------
1,912,495
-------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.34%
Elgin National Industries, Sr. Unsec. Gtd. Sub. Notes,
11.00%, 11/01/07 320,000 340,800
-------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.74%
MMI Products Inc., Sr. Unsec. Sub. Notes,
11.25%, 04/15/07 380,000 418,000
-------------------------------------------------------------------------------
Simmons Co., Sr. Sub. Notes, 10.75%, 04/15/06 300,000 322,500
-------------------------------------------------------------------------------
740,500
-------------------------------------------------------------------------------
METAL FABRICATORS - 0.22%
Gulf States Steel Inc., First Mortgage Notes,
13.50%, 04/15/03 230,000 224,250
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-32
PRINCIPAL MARKET
AMOUNT(a) VALUE
METALS MINING - 0.38%
Rio Algom Ltd. (Canada), Yankee Unsec. Deb., 7.05%,
11/01/05 $ 370,000 $ 383,641
-------------------------------------------------------------------------------
NATURAL GAS - 1.77%
Enron Corp.,
Notes, 6.75%, 08/01/09 750,000 770,850
-------------------------------------------------------------------------------
Sr. Sub. Deb., 6.75%, 07/01/05 450,000 458,311
-------------------------------------------------------------------------------
Ferrellgas Partners, Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 525,000 543,375
-------------------------------------------------------------------------------
1,772,536
-------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.31%
United Stationer Supply, Sr. Sub. Notes,
12.75%, 05/01/05 275,000 314,875
-------------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 0.88%
Gulf Canada Resources, Ltd. (Canada), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 800,000 881,480
-------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.84%
Petroleum Geo-Services A.S.A. (Norway), Yankee Notes,
7.50%, 03/31/07 750,000 806,760
-------------------------------------------------------------------------------
R&B Falcon Corp., Sr. Notes, 7.375%, 04/15/18 (Acquired
04/08/98 - 06/04/98; Cost $996,978)(b) 1,000,000 1,036,880
-------------------------------------------------------------------------------
1,843,640
-------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 2.37%
Abraxas Petroleum Corp., Series D Sr. Unsec. Gtd.
Notes, 11.50%, 11/01/04 125,000 129,375
-------------------------------------------------------------------------------
Centaur Mining & Exploration, Ltd. (Australia), Sr.
Gtd. Notes, 11.00%, 12/01/07 (Acquired 11/24/97; Cost
$550,000)(b) 550,000 562,375
-------------------------------------------------------------------------------
Chesapeake Energy Corp., Sr. Notes, 9.625%, 05/01/05
(Acquired 04/17/98; Cost $300,000)(b) 300,000 301,500
-------------------------------------------------------------------------------
Kelley Oil & Gas Corp., Series B Sr. Gtd. Sub. Notes,
10.375%, 10/15/06 400,000 406,000
-------------------------------------------------------------------------------
Queen Sand Resources, Sr. Notes, 12.50%, 07/01/08
(Acquired 06/30/98; Cost $400,000)(b) 400,000 400,000
-------------------------------------------------------------------------------
Southwest Royalties, Inc., Sr. Gtd. Notes,
10.50%, 10/15/04 65,000 52,325
-------------------------------------------------------------------------------
Talisman Energy, Inc. (Canada), Yankee Deb.,
7.125%, 06/01/07 500,000 522,025
-------------------------------------------------------------------------------
2,373,600
-------------------------------------------------------------------------------
PERSONAL CARE - 1.00%
Alberto-Culver Corp., Notes, 6.375%, 06/15/28 1,000,000 1,002,270
-------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.19%
Panda Global Energy Co. (China), Sr. Yankee Sec. Gtd.
Notes, 12.50%, 04/15/04 210,000 192,150
-------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 1.44%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 750,000 919,875
-------------------------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%, 10/01/26 500,000 525,520
-------------------------------------------------------------------------------
1,445,395
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
RAILROADS - 0.70%
Norfolk Southern Corp., Putable Bonds,
7.05%, 05/01/37 $ 650,000 $ 700,745
-------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 1.58%
Glenborough Realty Trust, Sr. Notes, 7.625%, 03/15/05
(Acquired 03/18/98; Cost $798,696)(b) 800,000 803,824
-------------------------------------------------------------------------------
Spieker Properties LP, Unsec. Deb., 7.35%, 12/01/17 750,000 774,600
-------------------------------------------------------------------------------
1,578,424
-------------------------------------------------------------------------------
RESTAURANTS - 0.19%
Planet Hollywood International, Inc., Sr. Unsec. Sub.
Notes, 12.00%, 04/01/05 215,000 194,575
-------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.33%
Plainwell, Inc., Sr. Sub. Notes, 11.00%, 03/01/08
(Acquired 03/03/98 - 03/04/98; Cost $331,413)(b) 330,000 333,300
-------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.02%
CEX Holdings, Inc., Sr. Sub. Notes, 9.625%, 06/01/08
(Acquired 05/20/98; Cost $430,000)(b) 430,000 438,062
-------------------------------------------------------------------------------
CSK Auto Inc., Sr. Gtd. Sub. Deb., 11.00%, 11/01/06 260,000 286,650
-------------------------------------------------------------------------------
Icon Health & Fitness, Series B Sr. Sub. Notes, 13.00%,
07/15/02 150,000 150,750
-------------------------------------------------------------------------------
Wilsons - The Leather Experts Inc., Sr. Notes, 11.25%,
08/15/04 140,000 147,700
-------------------------------------------------------------------------------
1,023,162
-------------------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.75%
Big 5 Corp., Sr. Unsec. Notes, 10.875%, 11/15/07 500,000 516,250
-------------------------------------------------------------------------------
J Crew Operating Corp., Sr. Sub. Notes,
10.375%, 10/15/07 240,000 231,600
-------------------------------------------------------------------------------
747,850
-------------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.84%
Sovereign Bancorp, Inc., Sub. Notes,
8.00%, 03/15/03 800,000 839,568
-------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.32%
MDC Communications Corp. (Canada), Sr. Yankee Unsec.
Sub. Notes, 10.50%, 12/01/06 300,000 315,000
-------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.07%
Laidlaw Inc. (Canada), Yankee Deb.,
6.65%, 10/01/04 550,000 559,762
-------------------------------------------------------------------------------
Pegasus Shipping Hellas Co. (Bermuda), Sr. Sec. Gtd.
Mortgage Notes, 11.875%, 11/15/04 (Acquired 11/19/97;
Cost $483,000)(b) 500,000 508,750
-------------------------------------------------------------------------------
1,068,512
-------------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.39%
MSX International, Inc., Sr. Sub. Notes, 11.375%,
01/15/08 (Acquired 01/16/98; Cost $380,225)(b) 380,000 393,300
-------------------------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.42%
ATC Group Services, Inc., Sr. Sub. Notes, 12.00%,
01/15/08 (Acquired 01/22/98 - 01/28/98; Cost
$458,625)(b) 450,000 416,250
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-33
PRINCIPAL MARKET
AMOUNT(a) VALUE
SHIPPING - 1.87%
Holt Group, Sr. Notes, 9.75%, 01/15/06 (Acquired
01/14/98 - 01/15/98; Cost $290,525)(b) $ 290,000 $ 285,650
-------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Cayman Islands), Series D
Yankee Sr. Gtd. Unsec. Unsub. Deb., 6.988%, 08/01/37
(Acquired 10/02/97; Cost $753,008)(b) 750,000 636,112
-------------------------------------------------------------------------------
Pacific & Atlantic Holdings, First Mortgage Notes,
11.50%, 05/30/08 (Acquired 05/21/98; Cost $522,315)(b) 530,000 514,100
-------------------------------------------------------------------------------
Stena Line A.B. (Sweden), Sr. Yankee Notes, 10.625%,
06/01/08 430,000 438,063
-------------------------------------------------------------------------------
1,873,925
-------------------------------------------------------------------------------
SOVEREIGN DEBT - 2.50%
Province of Manitoba (Canada), Yankee Bonds, 7.75%,
07/17/16 700,000 822,619
-------------------------------------------------------------------------------
Province of Quebec (Canada), Yankee Deb.,
5.735%, 03/02/26 750,000 820,575
-------------------------------------------------------------------------------
6.29%, 03/06/26 800,000 862,496
-------------------------------------------------------------------------------
2,505,690
-------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.45%
KMC Telecom Holdings, Inc., Sr. Disc. Notes, 12.50%,
02/15/08 (Acquired 01/26/98 - 01/27/98; Cost
$413,850)(b)(d) 750,000 446,250
-------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 2.71%
360 Communications Co., Sr. Notes, 7.60%, 04/01/09 750,000 812,445
-------------------------------------------------------------------------------
Cable & Wireless Communications PLC (United Kingdom),
Yankee Notes, 6.75%, 03/06/08 750,000 760,755
-------------------------------------------------------------------------------
Clearnet Communications Inc. (Canada), Sr. Yankee
Unsec. Disc. Notes, 14.75%, 12/15/05(d) 110,000 92,950
-------------------------------------------------------------------------------
GST Telecommunications, Inc., Sr. Sec. Notes, 13.25%,
05/01/07 300,000 345,750
-------------------------------------------------------------------------------
PageMart Wireless, Inc., Sr. Sub. Disc. Notes, 11.25%,
02/01/08(d) 750,000 457,500
-------------------------------------------------------------------------------
Sygnet Wireless Inc., Sr. Unsec. Notes,
11.50%, 10/01/06 220,000 242,000
-------------------------------------------------------------------------------
2,711,400
-------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 2.61%
Bell Canada (Canada), Yankee Deb., 9.50%, 10/15/10 350,000 443,240
-------------------------------------------------------------------------------
Esprit Telecom Group PLC (United Kingdom), Sr. Yankee
Notes, 11.50%, 12/15/07 350,000 361,813
-------------------------------------------------------------------------------
Exodus Communications, Sr. Notes, 11.25%, 07/01/08
(Acquired 06/26/98; Cost $480,000)(b) 480,000 484,200
-------------------------------------------------------------------------------
MCI Communications Corp., Putable Sr. Unsec. Deb.,
7.125%, 06/15/27 1,000,000 1,057,900
-------------------------------------------------------------------------------
Versatel Telecom BV (Netherlands), Sr. Notes, 13.25%,
05/15/08 (Acquired 05/20/98; Cost $250,000)(b)(e) 250,000 263,750
-------------------------------------------------------------------------------
2,610,903
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
TELEPHONE - 1.14%
ESAT Holdings Ltd. (Ireland), Sr. Yankee Notes,
12.50%, 02/01/07(d) $ 470,000 $ 350,150
-------------------------------------------------------------------------------
SBC Communications, Inc., Deb., 7.375%, 07/15/43 750,000 794,535
-------------------------------------------------------------------------------
1,144,685
-------------------------------------------------------------------------------
TEXTILES (APPAREL) - 0.73%
Fruit of the Loom, Notes, 6.50%, 11/15/03 750,000 726,532
-------------------------------------------------------------------------------
TRUCKERS - 0.12%
AmeriTruck Distribution Corp., Series B Sr. Sub.
Notes, 12.25%, 11/15/05 209,000 122,264
-------------------------------------------------------------------------------
TRUCKS & PARTS - 0.12%
Blue Bird Body Co., Series B Sr. Sub. Notes, 10.75%,
11/15/06 110,000 120,450
-------------------------------------------------------------------------------
WASTE MANAGEMENT - 1.70%
Allied Waste Industries, Sr. Unsec. Disc. Notes,
11.30%, 06/01/07(d) 900,000 663,750
-------------------------------------------------------------------------------
WMX Technologies, Inc., Unsec. Notes, 7.10%, 08/01/26 1,000,000 1,033,150
-------------------------------------------------------------------------------
1,696,900
-------------------------------------------------------------------------------
Total U.S. Dollar Denominated Non- Convertible Bonds
& Notes
(Cost $67,875,781) 70,176,133
-------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS AND NOTES -
10.43%(f)
AUSTRALIA - 0.57%
Citibank Ltd. (Banks - Money Center), Unsec. Notes,
7.00%, 03/15/02 AUD 900,000 579,039
-------------------------------------------------------------------------------
CANADA - 6.29%
Bank of Montreal (Banks - Money Center), Sub. Deb.,
7.92%, 07/31/12 CAD 850,000 661,411
-------------------------------------------------------------------------------
Bell Mobility Cellular Inc. (Telecommunications -
Cellular/Wireless), Deb., 6.55%, 06/02/08 750,000 519,119
-------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Exploration &
Production), Deb., 11.00%, 10/31/00 450,000 343,071
-------------------------------------------------------------------------------
Clearnet Communications (Telecommunications-
Cellular/Wireless),
Sr. Disc. Notes, 11.75%, 08/13/07 (Acquired
07/31/97 - 11/04/97; Cost $630,905)(b)(d) 1,500,000 671,989
-------------------------------------------------------------------------------
Sr. Disc. Notes, 10.40%, 05/15/08(d) 1,600,000 643,078
-------------------------------------------------------------------------------
Microcell Telecommunications Inc.
(Telecommunications - Cellular/Wireless), Sr. Disc.
Notes, 11.125%, 10/15/07(d) 1,000,000 429,965
-------------------------------------------------------------------------------
NAV Canada (Services - Commercial & Consumer), Bonds,
7.40%, 06/01/27 1,000,000 822,875
-------------------------------------------------------------------------------
Poco Petroleums Ltd. (Oil & Gas - Exploration &
Production), Unsec. Deb., 6.60%, 09/11/07 750,000 515,685
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-34
PRINCIPAL MARKET
AMOUNT(a) VALUE
CANADA - (CONTINUED)
Teleglobe Canada, Inc. (Telephone), Unsec. Deb.,
8.35%, 06/20/03 CAD 850,000 $ 642,210
-----------------------------------------------------------------------------
Trans-Canada Pipelines (Natural Gas),
Series Q Deb., 10.625%, 10/20/09 500,000 470,974
-----------------------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 280,000 222,297
-----------------------------------------------------------------------------
Westcoast Energy, Inc. (Oil & Gas - Exploration
& Production), Deb., 6.45%, 12/03/06 (Acquired
12/18/96; Cost $369,585)(b) 500,000 355,243
-----------------------------------------------------------------------------
6,297,917
-----------------------------------------------------------------------------
GERMANY - 2.44%
International Bank for Reconstruction &
Development (Banks - Money Center), Unsec.
Global Bonds, 7.125%, 04/12/05(c) DEM 1,000,000 635,274
-----------------------------------------------------------------------------
LKB Global (Financial - Diversified), Gtd.
Notes, 6.00%, 01/25/06 3,000,000 1,804,016
-----------------------------------------------------------------------------
2,439,290
-----------------------------------------------------------------------------
NEW ZEALAND - 0.28%
International Bank for Reconstruction &
Development (Banks - Money Center),
Sr. Notes, 6.77%, 08/20/07(c) NZD 1,000,000 283,851
-----------------------------------------------------------------------------
UNITED KINGDOM - 0.85%
Sutton Bridge Financial Ltd. (Financial -
Diversified), Gtd. Eurobonds, 8.625%, 06/03/22
(Acquired 05/29/97; Cost $733,585)(b) GBP 450,000 848,611
-----------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Non-
Convertible Bonds & Notes (Cost $10,730,022) 10,448,708
-----------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES - 0.52%
SHIPPING - 0.52%
Hutchison Delta Finance (Cayman Islands), Yankee
Conv. Unsec. Notes, 7.00%, 11/08/02 (Cost
$527,500) $ 500,000 520,000
-----------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES - 2.25%(f)
GERMANY - 0.61%
Daimler-Benz A.G. (Automobiles), Conv. Gtd.
Unsub. Eurobonds, 4.125%, 07/05/03 DEM 570,000 605,307
-----------------------------------------------------------------------------
JAPAN - 0.60%
Matsushita Electric Industrial Co. Ltd.
(Electrical Equipment), Conv. Bonds, 1.30%,
03/29/02 JPY 50,000,000 511,479
-----------------------------------------------------------------------------
Sony Corp. (Electrical Equipment), Conv. Deb.,
1.40%, 03/31/05 8,000,000 89,079
-----------------------------------------------------------------------------
600,558
-----------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
UNITED KINGDOM - 1.04%
British Airport Authority PLC (Airlines), Conv.
Bonds, 5.75%, 03/29/06 GBP 500,000 $ 1,043,143
--------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Convertible
Bonds & Notes (Cost $2,003,675) 2,249,008
--------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED GOVERNMENT
BONDS & NOTES - 11.23%(f)
AUSTRALIAN DOLLARS - 1.07%
New South Wales Treasury Corp., Gtd. Notes, 8.00%,
03/01/08 AUD 1,500,000 1,076,929
--------------------------------------------------------------------------------
BRITISH POUND STERLING - 3.84%
Federal National Mortgage Association, Sr. Unsec.
Notes, 6.875%, 06/07/02 GBP 450,000 756,857
--------------------------------------------------------------------------------
Ontario Province, Deb., 11.125%, 02/14/01 500,000 902,997
--------------------------------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 400,000 684,868
--------------------------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 400,000 675,570
--------------------------------------------------------------------------------
Bonds, 7.50%, 12/07/06 450,000 828,219
--------------------------------------------------------------------------------
3,848,511
--------------------------------------------------------------------------------
CANADIAN DOLLARS - 1.04%
Municipal Finance Authority of British Columbia,
Bonds, 7.75%, 12/01/05 CAD 500,000 384,521
--------------------------------------------------------------------------------
Ontario Province,
Sr. Unsec. Unsub. Global Bonds,
8.00%, 03/11/03 750,000 562,564
--------------------------------------------------------------------------------
Quebec (Province of), Deb.,
9.375%, 01/16/23 100,000 97,196
--------------------------------------------------------------------------------
1,044,281
--------------------------------------------------------------------------------
GERMAN DEUTSCHE MARKS - 0.64%
Bundesrepublic Deutschland, Bonds, 6.875%, 05/12/05 DEM 1,000,000 626,262
--------------------------------------------------------------------------------
NEW ZEALAND DOLLARS - 2.07%
Federal National Mortgage Association, Notes, 7.25%,
06/20/02 NZD 1,250,000 644,909
--------------------------------------------------------------------------------
New Zealand Government,
Bonds, 8.00%, 02/15/01 750,000 399,132
--------------------------------------------------------------------------------
Bonds, 10.00%, 03/15/02 1,800,000 1,029,608
--------------------------------------------------------------------------------
2,073,649
--------------------------------------------------------------------------------
SWEDISH KRONAS - 2.57%
Swedish Government,
Bonds, 10.25%, 05/05/03 SEK 6,000,000 933,714
--------------------------------------------------------------------------------
Bonds, 6.00%, 02/09/05 6,000,000 803,731
--------------------------------------------------------------------------------
Bonds, 6.50%, 10/25/06 6,000,000 833,821
--------------------------------------------------------------------------------
2,571,266
--------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Government Bonds
& Notes (Cost $11,862,728) 11,240,898
--------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-35
MARKET
SHARES VALUE
DOMESTIC COMMON STOCK - 0.02%
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.02%
Nextel Communications, Inc. - Class A(g)(Cost $12,000) 743 $ 18,482
-------------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 1.77%
BANKS (REGIONAL) - 0.48%
Westpac Banking Corp. STRYPES Trust - $3.135 Conv. Pfd. 16,000 483,000
-------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.29%
Conseco Inc. - $4.278 Conv. PRIDES 8,000 1,286,000
-------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks (Cost
$990,600) 1,769,000
-------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 0.44%
FRANCE - 0.44%
Societe Generale (Banks - Major Regional)
(Cost $272,296) 2,150 447,109
-------------------------------------------------------------------------------
WARRANTS - 0.05%
ELECTRICAL EQUIPMENT - 0.01%
Electronic Retailing Systems International,
expiring 02/01/04(h) 590 5,900
-------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.00%
MVE Inc., expiring 02/15/02(h) 190 3,802
-------------------------------------------------------------------------------
METAL FABRICATORS - 0.00%
Gulf States Steel Inc., expiring 04/15/03(h) 230 575
-------------------------------------------------------------------------------
PERSONAL CARE - 0.00%
IHF Capital Inc., Series I, expiring 11/14/99 (Acquired
11/04/94 - 12/07/94; Cost $0)(b)(h) 150 750
-------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.02%
Clearnet Communications Inc. (Canada),
expiring 09/15/05(h) 891 8,687
-------------------------------------------------------------------------------
Orion Network Systems, Inc., expiring 01/15/07(h) 580 9,280
-------------------------------------------------------------------------------
17,967
-------------------------------------------------------------------------------
TELEPHONE - 0.02%
ESAT Holdings Ltd., expiring 02/01/07
(Acquired 06/16/97; Cost $0)(b)(h) 470 18,800
-------------------------------------------------------------------------------
Knology Holdings, Inc., expiring 10/15/07
(Acquired 03/12/98; Cost $0)(b)(h) 1,000 5,250
-------------------------------------------------------------------------------
24,050
-------------------------------------------------------------------------------
Total Warrants (Cost $7,590) 53,044
-------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 2.40%
U.S. TREASURY NOTES & BONDS - 2.40%
5.75%, 04/30/03 1,000,000 1,009,890
-------------------------------------------------------------------------------
6.125%, 11/15/27 1,300,000 1,393,847
-------------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $2,376,500) 2,403,737
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
REPURCHASE AGREEMENT - 0.03%(i)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98(j)
(Cost $31,723) $ 31,723 $ 31,723
----------------------------------------------------------------------
TOTAL INVESTMENTS - 99.22% 99,357,842
----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.78% 782,498
----------------------------------------------------------------------
NET ASSETS - 100.00% $100,140,340
======================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Principal amount is in U.S. Dollars, except as indicated by note (f).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 06/30/98 was $12,060,592
which represents 12.04% of the Fund's net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(d) Discounted bond at purchase. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(e) Issued as a unit. This unit includes one Sr. Note plus one warrant to
purchase 6.667 shares of common stock.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(g) Non-income producing security.
(h) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(i) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Abbreviations:
AUD - Australian Dollar Pfd. - Preferred
CAD - Canadian Dollar PRIDES - Preferred Redeemable Increased
Conv. - Convertible Dividend Equity Security
Deb. - Debentures Sec. - Secured
DEM - German Deutsche Mark SEK - Swedish Krona
Disc. - Discounted Sr. - Senior
GBP - British Pound Sterling STRYPES - Structured Yield Product
Gtd. - Guaranteed Exchangeable for Stock
JPY - Japanese Yen Sub. - Subordinated
NZD - New Zealand Dollar Unsec. - Unsecured
Unsub. - Unsubordinated
|
See Notes To Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
FS-36
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, at market value (cost $96,690,415) $ 99,357,842 ---------------------------------------------------------------------- Foreign currencies, at value (cost $773,991) 812,710 ---------------------------------------------------------------------- Cash 74,743 ---------------------------------------------------------------------- Receivables for: Investment sold 15,435 ---------------------------------------------------------------------- Forward currency contracts 125,852 ---------------------------------------------------------------------- Capital stock sold 136,021 ---------------------------------------------------------------------- Dividends and interest 1,679,458 ---------------------------------------------------------------------- Investment for deferred compensation plan 18,129 ---------------------------------------------------------------------- Other assets 85 ---------------------------------------------------------------------- Total assets 102,220,275 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 1,874,405 ---------------------------------------------------------------------- Capital stock reacquired 112,858 ---------------------------------------------------------------------- Deferred compensation plan 18,129 ---------------------------------------------------------------------- Accrued advisory fees 49,496 ---------------------------------------------------------------------- Accrued administrative services fees 3,809 ---------------------------------------------------------------------- Accrued directors' fees 2,500 ---------------------------------------------------------------------- Accrued operating expenses 18,738 ---------------------------------------------------------------------- Total liabilities 2,079,935 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $100,140,340 ====================================================================== CAPITAL STOCK, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 8,512,046 ---------------------------------------------------------------------- Net asset value, offering and redemption price per share $ 11.76 ====================================================================== |
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Interest $3,686,393
-------------------------------------------------------------------------------
Dividends 39,724
-------------------------------------------------------------------------------
Total investment income 3,726,117
-------------------------------------------------------------------------------
EXPENSES:
Advisory fees 287,120
-------------------------------------------------------------------------------
Administrative services fees 22,341
-------------------------------------------------------------------------------
Custodian fees 19,427
-------------------------------------------------------------------------------
Directors' fees and expenses 4,472
-------------------------------------------------------------------------------
Organizational costs 965
-------------------------------------------------------------------------------
Other 29,929
-------------------------------------------------------------------------------
Total expenses 364,254
-------------------------------------------------------------------------------
Net investment income 3,361,863
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (101,760)
-------------------------------------------------------------------------------
Foreign currencies (79,463)
-------------------------------------------------------------------------------
Forward currency contracts 700,860
-------------------------------------------------------------------------------
519,637
-------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 349,078
-------------------------------------------------------------------------------
Foreign currencies 47,245
-------------------------------------------------------------------------------
Forward currency contracts (383,347)
-------------------------------------------------------------------------------
12,976
-------------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and forward
currency contracts 532,613
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,894,476
===============================================================================
|
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
FS-37
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
-----------------------
OPERATIONS:
Net investment income $ 3,361,863 $ 5,150,458
-----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and forward currency contracts 519,637 1,075,468
-----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies and forward
currency contracts 12,976 695,704
-----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,894,476 6,921,630
-----------------------------------------------------------------------------
Distributions to shareholders from net investment
income -- (77,788)
-----------------------------------------------------------------------------
Net increase from capital stock transactions 6,927,212 18,851,039
-----------------------------------------------------------------------------
Net increase in net assets 10,821,688 25,694,881
-----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 89,318,652 63,623,771
-----------------------------------------------------------------------------
End of period $100,140,340 $89,318,652
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 87,582,458 $80,655,246
-----------------------------------------------------------------------------
Undistributed net investment income 7,556,940 4,195,077
-----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and forward
currency contracts 2,173,440 1,653,803
-----------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and forward currency contracts 2,827,502 2,814,526
-----------------------------------------------------------------------------
$100,140,340 $89,318,652
=============================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Diversified Income Fund (the "Fund"). The Fund's investment
objective is to seek to achieve a high level of current income. The Fund will
seek to achieve its objective by investing primarily in a diversified
portfolio of foreign and U.S. government and corporate debt securities,
including lower rated high yield debt securities (commonly known as "junk
bonds"). These high yield bonds may involve special risks in addition to the
risks associated with investment in higher rated debt securities. High yield
bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than higher grade bonds. Also, the secondary
market in which high yield bonds are traded may be less liquid than the market
for higher grade bonds. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations--Debt obligations are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service 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, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which
prices are not provided by the pricing service and which are listed or
traded on an exchange are valued at the last sales price on the exchange
where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on
that day unless the Board of Directors, or persons designated by the Board
of Directors, determines that the over-the-counter quotations more closely
reflect the current market value of the security. Securities traded in the
over-the-counter market, except (i) securities priced by the pricing
service, (ii) securities for which representative exchange prices are
available, and (iii) securities reported in the NASDAQ National Market
System, are valued at the mean between representative last bid and asked
prices obtained from
AIM V.I. DIVERSIFIED INCOME FUND
FS-38
an electronic quotation reporting system, if such prices are available, or
from established market makers. Each security reported in the NASDAQ National
Market System is valued at the last sales price on the valuation date or
absent a last sales price, at the mean of the closing bid and asked prices.
Securities for which market quotations are either not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Fund's officers in accordance with methods which
are specifically authorized by the Board of Directors. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities as well
as corporate bonds and U.S. Government securities is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. Foreign Currency Translation - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for
the amount of a purchase or sale of a security denominated in a foreign
currency in order to "lock-in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
Outstanding forward currency contracts at June 30, 1998 were as follows:
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- ---------- ----------- ----------- --------------
07/13/98 JPY 5,000,000 $ 38,941 $ 36,283 $ 2,658
07/27/98 GBP 550,000 911,570 917,499 (5,929)
07/28/98 DEM 3,350,000 1,879,910 1,861,009 18,901
07/29/98 SEK 19,000,000 2,470,741 2,385,307 85,434
07/31/98 GBP 1,375,000 2,282,500 2,293,233 (10,733)
08/04/98 AUD 1,730,000 1,128,133 1,074,970 53,163
08/06/98 JPY 29,500,000 224,335 214,856 9,479
08/17/98 NZD 2,900,000 1,537,000 1,504,213 32,787
08/28/98 GBP 1,800,000 2,925,450 2,997,305 (71,855)
08/31/98 DEM 2,500,000 1,422,718 1,391,604 31,114
09/08/98 JPY 37,500,000 275,128 274,425 703
09/21/98 NZD 1,400,000 717,640 724,547 (6,907)
09/22/98 AUD 870,000 527,916 540,879 (12,963)
----------- ----------- --------
$16,341,982 $16,216,130 $125,852
=========== =========== ========
|
D. Securities Transactions, Investment Income and Distributions -Securities transactions are accounted for on a trade date basis. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income and distributions to shareholders are recorded on the ex-dividend date. It is the policy of the Fund not to amortize premiums on bonds for financial reporting purposes. Realized gains or losses from securities transactions are recorded on the identified cost basis. E. Federal Income Taxes - For federal income tax purposes, each portfolio in the Company is taxed as a separate entity. It is the Fund's policy to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and capital gains to its shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I
M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.60% of
the first $250 million of the Fund's average daily net assets, plus 0.55% of
such Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $22,341 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,375 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
AIM V.I. DIVERSIFIED INCOME FUND
FS-39
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June 30,
1998 was $32,563,391 and $19,933,646, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $ 4,985,116 -------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (2,317,689) -------------------------------------------------------------------------- Net unrealized appreciation of investment securities $ 2,667,427 ========================================================================== |
Investments have the same cost for tax and financial statement purposes.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
JUNE 30, DECEMBER 31,
1998 1997
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ------------
Sold 1,442,204 $16,754,171 2,860,755 $ 30,505,544
----------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 6,908 77,788
----------------------------------------------------------------------------
Reacquired (844,594) (9,826,959) (1,114,698) (11,732,293)
----------------------------------------------------------------------------
597,610 $ 6,927,212 1,752,965 $ 18,851,039
============================================================================
|
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995 and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
JUNE 30, ------------------------- -----------------
1998 1997 1996 1995 1995 1994
-------- ------- ------- ------- ------- -------
Net asset value,
beginning of period $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46 $ 10.00
------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.36 0.73 0.73 0.69 0.76 0.54
------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.11 0.24 0.28 0.94 (1.42) 0.29
------------------------------------------------------------------------------------------
Total from investment
operations 0.47 0.97 1.01 1.63 (0.66) 0.83
------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.01) (0.68) (0.75) (0.68) (0.35)
------------------------------------------------------------------------------------------
Distributions from net
realized capital
gains -- -- -- -- -- (0.02)
------------------------------------------------------------------------------------------
Total distributions -- (0.01) (0.68) (0.75) (0.68) (0.37)
------------------------------------------------------------------------------------------
Net asset value, end of
period $ 11.76 $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46
==========================================================================================
Total return(a) 4.16% 9.39% 10.19% 18.11% (6.35)% 8.33%
==========================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $100,140 $89,319 $63,624 $44,630 $25,271 $14,530
==========================================================================================
Ratio of expenses to
average net assets(b) 0.76%(c) 0.80% 0.86% 0.88%(d) 0.91% 1.05%(d)
==========================================================================================
Ratio of net investment
income to average net
assets(e) 7.03%(c) 6.90% 7.09% 7.65%(d) 8.07% 6.78%(d)
==========================================================================================
Portfolio turnover rate 21% 52% 76% 72% 100% 57%
==========================================================================================
|
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.03% and 1.69% (annualized) for January 31, 1995 and 1994, respectively.
(c) Ratios are annualized and based on average net assets of $96,499,677.
(d) Annualized.
(e) After fee waivers and/or expense reimbursement. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 7.95% and 6.14% (annualized) for January 31, 1995 and
1994, respectively.
AIM V.I. DIVERSIFIED INCOME FUND
FS-40
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS - 45.92%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.61%
Univision Communications Inc.(a) 4,200 $ 156,450
==================================================================
COMMUNICATIONS EQUIPMENT - 3.63%
ADC Telecommunications, Inc.(a) 4,800 175,351
------------------------------------------------------------------
Lucent Technologies, Inc. 4,200 349,387
------------------------------------------------------------------
NEXTLINK Communications, Inc.-Class A(a) 1,100 41,663
------------------------------------------------------------------
Qwest Communications International Inc.(a) 6,400 223,200
------------------------------------------------------------------
Tellabs, Inc.(a) 1,600 114,600
------------------------------------------------------------------
US LEC Corp. - Class A(a) 1,300 27,137
------------------------------------------------------------------
931,338
------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.03%
Evolving Systems, Inc.(a) 300 3,319
------------------------------------------------------------------
Mobius Management Systems, Inc.(a) 300 4,500
------------------------------------------------------------------
7,819
------------------------------------------------------------------
ELECTRIC COMPANIES - 14.07%
Allegheny Energy, Inc. 7,300 219,912
------------------------------------------------------------------
Boston Edison Co. 3,400 141,100
------------------------------------------------------------------
Carolina Power & Light Co. 4,400 190,850
------------------------------------------------------------------
Cinergy Corp. 5,100 178,500
------------------------------------------------------------------
DQE, Inc. 7,000 252,000
------------------------------------------------------------------
Edison International 5,100 150,769
------------------------------------------------------------------
Energy East Corp. 6,000 249,750
------------------------------------------------------------------
FPL Group, Inc. 5,600 352,800
------------------------------------------------------------------
IPALCO Enterprises, Inc. 2,000 88,875
------------------------------------------------------------------
New Century Energies, Inc. 4,500 204,469
------------------------------------------------------------------
NIPSCO Industries, Inc. 11,600 324,800
------------------------------------------------------------------
Pinnacle West Capital Corp. 11,000 495,000
------------------------------------------------------------------
Public Service Company of New Mexico 4,700 106,631
------------------------------------------------------------------
Sierra Pacific Resources 3,700 134,356
------------------------------------------------------------------
Southern Co. 7,600 210,425
------------------------------------------------------------------
Teco Energy, Inc. 7,100 190,369
------------------------------------------------------------------
Texas Utilities Co. 2,840 118,215
------------------------------------------------------------------
3,608,821
------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.12%
ONIX Systems, Inc.(a) 2,100 27,037
------------------------------------------------------------------
RELTEC Corp.(a) 100 4,501
------------------------------------------------------------------
31,538
------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.23%
Quanta Services, Inc.(a) 4,000 58,750
------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.03%
Charles River Associates Inc.(a) 300 7,500
------------------------------------------------------------------
|
MARKET
SHARES VALUE
MANUFACTURING (SPECIALIZED) - 0.67%
Superior TeleCom Inc. 4,125 $ 171,703
----------------------------------------------------------------------
NATURAL GAS - 5.61%
Coastal Corp. (The) 1,400 97,737
----------------------------------------------------------------------
Columbia Energy Group 2,700 150,187
----------------------------------------------------------------------
Energen Corp. 2,800 56,350
----------------------------------------------------------------------
KN Energy, Inc. 4,600 249,262
----------------------------------------------------------------------
Public Service Company of North Carolina, Inc. 3,200 69,600
----------------------------------------------------------------------
Sonat, Inc. 5,400 208,575
----------------------------------------------------------------------
Williams Companies, Inc. (The) 18,000 607,500
----------------------------------------------------------------------
1,439,211
----------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.12%
AES Corp.(a) 2,400 126,151
----------------------------------------------------------------------
CalEnergy Co., Inc.(a) 5,400 162,338
----------------------------------------------------------------------
288,489
----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 3.59%
Alexandria Real Estate Equities, Inc. 3,400 101,787
----------------------------------------------------------------------
Anthracite Mortgage Capital Inc. 2,000 27,750
----------------------------------------------------------------------
Boston Properties, Inc. 4,300 148,350
----------------------------------------------------------------------
CCA Prison Realty Trust 3,000 91,875
----------------------------------------------------------------------
Corporate Office Properties Trust, Inc. 3,500 31,062
----------------------------------------------------------------------
Correctional Properties Trust(a) 800 16,200
----------------------------------------------------------------------
Crescent Real Estate Equities, Co. 2,300 77,338
----------------------------------------------------------------------
Entertainment Properties Trust 700 12,775
----------------------------------------------------------------------
Golf Trust of America, Inc. 1,300 44,688
----------------------------------------------------------------------
Mack-Cali Realty Corp. 2,000 68,750
----------------------------------------------------------------------
Meditrust Corp. 2,500 69,844
----------------------------------------------------------------------
Patriot American Hospitality, Inc. 6,599 157,963
----------------------------------------------------------------------
Starwood Hotels & Resorts 1,500 72,469
----------------------------------------------------------------------
920,851
----------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.20%
Metzler Group, Inc.(a) 1,400 51,275
----------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.22%
Hyperion Telecommunications, Inc.(a) 3,600 56,475
----------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 3.71%
IXC Communications, Inc.(a) 3,300 160,050
----------------------------------------------------------------------
Pacific Gateway Exchange, Inc.(a) 3,200 128,200
----------------------------------------------------------------------
WinStar Communications, Inc.(a) 6,100 261,919
----------------------------------------------------------------------
WorldCom, Inc.(a) 8,287 401,401
----------------------------------------------------------------------
951,570
----------------------------------------------------------------------
|
AIM V.I. GLOBAL UTILITIES FUND
FS-41
MARKET
SHARES VALUE
TELEPHONE - 12.08%
Advanced Communications Group, Inc.(a) 1,800 $ 12,488
-----------------------------------------------------------------------------
Ameritech Corp. 10,200 457,725
-----------------------------------------------------------------------------
Bell Atlantic Corp. 3,600 164,250
-----------------------------------------------------------------------------
BellSouth Corp. 6,900 463,163
-----------------------------------------------------------------------------
Century Telephone Enterprises 6,800 311,950
-----------------------------------------------------------------------------
Cincinnati Bell, Inc. 13,300 380,712
-----------------------------------------------------------------------------
Electric Lightwave, Inc. - Class A(a) 6,300 69,694
-----------------------------------------------------------------------------
GTE Corp. 3,200 178,000
-----------------------------------------------------------------------------
Intermedia Communications Inc.(a) 2,400 100,650
-----------------------------------------------------------------------------
McLeodUSA Inc. - Class A(a) 3,100 120,512
-----------------------------------------------------------------------------
SBC Communications, Inc. 13,200 528,000
-----------------------------------------------------------------------------
SCC Communications Corp.(a) 3,500 42,875
-----------------------------------------------------------------------------
Teleport Communications Group Inc. - Class A(a) 2,800 151,900
-----------------------------------------------------------------------------
US West, Inc. 2,500 117,500
-----------------------------------------------------------------------------
3,099,419
-----------------------------------------------------------------------------
Total Domestic Common Stocks (Cost $8,094,110) 11,781,209
-----------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 5.50%
COMMUNICATIONS EQUIPMENT - 0.58%
NEXTLINK Communications, Inc. - $3.25 Conv. Pfd.
(Acquired 03/26/98; Cost $145,000)(b) 2,900 148,245
-----------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.08%
Salomon Smith Barney Holdings - $3.48 Conv. Pfd. DECS 400 22,375
-----------------------------------------------------------------------------
NATURAL GAS - 3.04%
El Paso Energy Cap Trust, Inc. - $2.375 Conv. Pfd. 12,600 667,800
-----------------------------------------------------------------------------
MCN Corp. - $2.013 Conv. PRIDES 4,800 113,700
-----------------------------------------------------------------------------
781,500
-----------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.39%
AES Trust II - $2.69 Conv. Pfd. 4,000 233,280
-----------------------------------------------------------------------------
AES Trust II - $2.75 Conv. Pfd. 2,100 122,472
-----------------------------------------------------------------------------
355,752
-----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.41%
Winstar Communications - $3.50 Conv. Pfd.(b) (Acquired
03/12/98; Cost $95,000) 1,900 104,025
-----------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks
(Cost $1,387,867) 1,411,897
-----------------------------------------------------------------------------
DOMESTIC NON-CONVERTIBLE PREFERRED
STOCKS - 0.25%
ENTERTAINMENT - 0.25%
Time Warner Inc. - Series M, $102.50 PIK Pfd. 58 64,888
-----------------------------------------------------------------------------
Total Domestic Non-Convertible Preferred Stocks (Cost
$52,105) 64,888
-----------------------------------------------------------------------------
|
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 24.05%
ARGENTINA - 0.36%
Central Costanera S.A. - Class B (Electric Companies) 20,700 $ 60,039
-------------------------------------------------------------------------------
Telefonica de Argentina S.A. - ADR (Telephone) 1,000 32,437
-------------------------------------------------------------------------------
92,476
-------------------------------------------------------------------------------
AUSTRALIA - 0.14%
Telstra Corp. Ltd. (Telephone) 14,380 36,973
-------------------------------------------------------------------------------
AUSTRIA - 0.45%
Oesterreichische Elektrizitaetswirtschafts A.G. - Class
A (Electric Companies) 970 116,247
-------------------------------------------------------------------------------
BELGIUM - 0.44%
Electrabel S.A. (Electric Companies) 400 113,471
-------------------------------------------------------------------------------
BRAZIL - 1.18%
Centrais Eletricas de Santa Catarina S.A. (Electric
Companies) 40,000 30,435
-------------------------------------------------------------------------------
Companhia Paranaense de Energia (Electric Companies) 3,100 28,675
-------------------------------------------------------------------------------
Eletricidade de Sao Paulo S.A. (Electric Companies) 270 20,310
-------------------------------------------------------------------------------
Empresa Bandeirante de Energia S.A. (Electric
Companies)(a) 270 4,272
-------------------------------------------------------------------------------
Empresa Metropolitana de Aguas e Energia S.A. (Electric
Companies)(a) 270 210
-------------------------------------------------------------------------------
Empresa Paulista de Transmissao de Energia Eletrica S.A.
(Electric Companies)(a) 270 955
-------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A. - ADR (Telephone) 2,000 218,375
-------------------------------------------------------------------------------
303,232
-------------------------------------------------------------------------------
CANADA - 1.51%
Laidlaw One, Inc. - $1.22 Conv. Pfd. (Waste Management) 2,500 91,250
-------------------------------------------------------------------------------
MetroNet Communications Corp. - Class B (Communications
Equipment)(a) 1,800 50,850
-------------------------------------------------------------------------------
TELUS Corp. (Telecommunications - Cellular & Wireless) 4,300 111,223
-------------------------------------------------------------------------------
Westcoast Energy Inc. (Natural Gas) 5,500 122,719
-------------------------------------------------------------------------------
Westshore Terminals Income Fund (Services - Facilities &
Environmental) 2,200 10,468
-------------------------------------------------------------------------------
386,510
-------------------------------------------------------------------------------
CHILE - 0.81%
Cia. de Telecomunicaciones de Chile S.A. - ADR
(Telephone) 6,300 127,969
-------------------------------------------------------------------------------
Enersis S.A. - ADR (Electric Companies) 3,300 80,644
-------------------------------------------------------------------------------
208,613
-------------------------------------------------------------------------------
DENMARK - 0.29%
Tele Danmark A.S. - ADR (Telephone) 1,600 75,400
-------------------------------------------------------------------------------
FINLAND - 0.57%
Nokia Oyj A.B. - Class A - ADR (Communications
Equipment) 2,000 145,125
-------------------------------------------------------------------------------
|
AIM V.I. GLOBAL UTILITIES FUND
FS-42
MARKET
SHARES VALUE
FRANCE - 0.88%
Alstom (Engineering & Construction)(a) 2,600 $ 85,598
-------------------------------------------------------------------------------
France Telecom S.A. - ADR (Communications Equipment) 2,000 139,125
-------------------------------------------------------------------------------
224,723
-------------------------------------------------------------------------------
GERMANY - 1.57%
RWE A.G. (Electric Companies) 2,425 143,620
-------------------------------------------------------------------------------
VEBA A.G. (Manufacturing - Diversified) 1,310 88,156
-------------------------------------------------------------------------------
Viag A.G. (Manufacturing - Diversified) 250 172,185
-------------------------------------------------------------------------------
403,961
-------------------------------------------------------------------------------
HUNGARY - 0.36%
Magyar Tavkozlesi ADR (Telecommunications - Long
Distance) 3,100 91,256
-------------------------------------------------------------------------------
ISRAEL - 0.20%
Gilat Communications Ltd. (Telecommunications -
Cellular/Wireless)(a) 5,800 50,025
-------------------------------------------------------------------------------
ITALY - 3.00%
Societa Nordelettrica S.p.A. (Electric Companies) 49,000 134,114
-------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications -
Cellular/Wireless) 38,025 232,120
-------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 55,277 404,042
-------------------------------------------------------------------------------
770,276
-------------------------------------------------------------------------------
JAPAN - 0.50%
Nippon Telegraph & Telephone Corp.
(Telecommunications - Long Distance) 90 74,957
-------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. - ADR
(Telecommunications - Long Distance) 1,300 54,600
-------------------------------------------------------------------------------
129,557
-------------------------------------------------------------------------------
NETHERLANDS - 0.58%
KPN N.V. (Telecommunications - Long Distance) 284 10,938
-------------------------------------------------------------------------------
Royal PTT Nederland N.V. - ADR (Services - Commercial &
Consumer) 2,033 129,350
-------------------------------------------------------------------------------
TNT Post Group N.V. (Air Freight)(a) 284 7,264
-------------------------------------------------------------------------------
147,552
-------------------------------------------------------------------------------
NEW ZEALAND - 1.03%
Sky Network Television Ltd. (Broadcasting - Television,
Radio & Cable)(a) 1,700 20,400
-------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd. - Interim ADR
(Telephone) 2,300 38,669
-------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd. - ADR (Telephone) 6,300 206,325
-------------------------------------------------------------------------------
265,394
-------------------------------------------------------------------------------
PERU - 0.25%
Luz Del Sur S.A. (Power Producers - Independent) 1,700 18,912
-------------------------------------------------------------------------------
Telefonica del Peru S.A. - ADR (Telecommunications -
Long Distance) 2,200 44,963
-------------------------------------------------------------------------------
63,875
-------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
PORTUGAL - 1.77%
Electricidade de Portugal, S.A. - ADR (Electric
Companies) 3,700 $ 170,431
-----------------------------------------------------------------------------
Portugal Telecom S.A. - ADR (Telephone) 4,700 248,806
-----------------------------------------------------------------------------
Telecel - Comunicacaoes Pessoais, S.A.
(Telecommunications - Cellular/Wireless) 200 35,500
-----------------------------------------------------------------------------
454,737
-----------------------------------------------------------------------------
SPAIN - 2.22%
Autopistas Concesionaria Espanola S.A. (Services -
Commercial & Consumer) 3,900 60,401
-----------------------------------------------------------------------------
Autopistas Concesionaria Espanola S.A. - Rts., expiring
07/10/98 (Services - Commercial & Consumer)(a) 3,900 3,020
-----------------------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 15,700 254,927
-----------------------------------------------------------------------------
Telefonica de Espana - ADR (Telephone) 1,800 250,312
-----------------------------------------------------------------------------
568,660
-----------------------------------------------------------------------------
SWEDEN - 0.85%
Telefonaktiebolaget LM Ericsson - ADR (Communications
Equipment) 7,600 217,550
-----------------------------------------------------------------------------
UNITED KINGDOM - 5.09%
Hyder PLC (Water Utilities) 4,280 67,144
-----------------------------------------------------------------------------
National Grid Group PLC (Electric Companies) 10,313 69,609
-----------------------------------------------------------------------------
PowerGen PLC (Electric Companies) 30,695 424,616
-----------------------------------------------------------------------------
PowerGen PLC - ADR (Electric Companies) 1,100 62,012
-----------------------------------------------------------------------------
Scottish Power PLC (Electric Companies) 15,950 139,900
-----------------------------------------------------------------------------
Southern Electric PLC (Electric Companies) 9,706 87,890
-----------------------------------------------------------------------------
United Utilities PLC (Water Utilities) 14,979 218,097
-----------------------------------------------------------------------------
Wessex Water PLC (Water Utilities) 11,792 90,230
-----------------------------------------------------------------------------
Yorkshire Water PLC (Water Utilities) 19,580 146,551
-----------------------------------------------------------------------------
1,306,049
-----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$4,464,562) 6,171,662
-----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DOMESTIC NON-CONVERTIBLE BONDS & NOTES - 5.68%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.42%
Comcast Corp., Sr. Sub. Deb., 9.50%,
01/15/08 $ 100,000 106,500
-----------------------------------------------------------------------------
CONSUMER FINANCE - 0.32%
GMAC, Notes, 9.00%, 10/15/02 75,000 83,219
-----------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.74%
El Paso Electric Co., Series D Sec. First Mortgage
Bonds, 8.90%, 02/01/06 75,000 84,595
-----------------------------------------------------------------------------
Western Resources Inc., Sr. Notes, 7.125%, 08/01/09 100,000 104,590
-----------------------------------------------------------------------------
189,185
-----------------------------------------------------------------------------
|
AIM V.I. GLOBAL UTILITIES FUND
FS-43
PRINCIPAL MARKET
AMOUNT VALUE
ENTERTAINMENT - 1.10%
Time Warner, Inc.,
Deb., 9.125%, 01/15/13 $ 100,000 $ 123,396
----------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 75,000 83,569
----------------------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 75,000 76,455
----------------------------------------------------------------------------
283,420
----------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.42%
California Energy Co., Notes, 10.25%, 01/15/04 100,000 107,750
----------------------------------------------------------------------------
NATURAL GAS - 0.49%
Ferrellgas Partners, Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 75,000 77,625
----------------------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%, 08/15/04 45,000 48,876
----------------------------------------------------------------------------
126,501
----------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.42%
Tennessee Gas Pipeline Co., Bonds, 7.00%, 03/15/27 100,000 106,771
----------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.12%
AES Corp., Sr. Sub. Notes, 10.25%, 07/15/06 75,000 81,750
----------------------------------------------------------------------------
Arizona Public Service Co., Deb., 8.00%, 12/30/15 75,000 82,900
----------------------------------------------------------------------------
Indiana Michigan Power, Sec. Lease Obligation Bonds,
9.82%, 12/07/22 93,413 123,258
----------------------------------------------------------------------------
287,908
----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.65%
AT&T Corp., Sr. Notes, 7.75%, 03/01/07 150,000 165,653
----------------------------------------------------------------------------
Total Domestic Non-Convertible Bonds & Notes (Cost
$1,357,753) 1,456,907
----------------------------------------------------------------------------
DOMESTIC CONVERTIBLE BONDS - 3.14%
COMMUNICATIONS EQUIPMENT - 0.77%
Global Telesystems Group, Conv. Sr. Sub. Notes, 8.75%,
06/30/00 80,000 197,700
----------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 1.17%
Candescent Technology Corp., Conv. Sr. Sub. Deb.,
7.00%, 05/01/03 (Acquired 04/17/98; Cost $300,000)(b) 300,000 300,000
----------------------------------------------------------------------------
CONSUMER FINANCE - 1.20%
Bell Atlantic Financial Services, Conv. Bonds, 5.75%,
04/01/03 (Acquired 02/12/98; Cost $300,000)(b) 300,000 307,314
----------------------------------------------------------------------------
Total Domestic Convertible Bonds (Cost $743,463) 805,014
----------------------------------------------------------------------------
FOREIGN NON-CONVERTIBLE BONDS & NOTES - 3.65%(c)
CANADA - 1.89%
Bell Canada (Telecommunications - Cellular/Wireless)
Deb., 10.875%, 10/11/04 CAD 50,000 42,710
----------------------------------------------------------------------------
Series EW Deb., 8.80%, 08/17/05 50,000 40,183
----------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Exploration &
Production), Deb., 11.00%, 10/31/00 100,000 76,238
----------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
CANADA - (CONTINUED)
Ontario Hydro (Electric Companies), Global Bonds,
9.00%, 06/24/02 CAD 100,000 $ 76,498
----------------------------------------------------------------------------
Telegobe Canada, Inc. (Telephone), Unsec. Deb.,
8.35%, 06/20/03 100,000 75,554
----------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas - Exploration &
Production)
Series Q Deb., 10.625%, 10/20/09 125,000 117,743
----------------------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 70,000 55,574
----------------------------------------------------------------------------
484,500
----------------------------------------------------------------------------
UNITED KINGDOM - 1.76%
National Grid Co. PLC (Electric Companies), Bonds,
4.25%, 02/17/08 GBP 240,000 452,091
----------------------------------------------------------------------------
Total Foreign Non-Convertible Bonds & Notes (Cost
$878,803) 936,591
----------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 1.24%
U.S. TREASURY BONDS - 0.64%
7.625%, 02/15/25 $ 130,000 163,696
----------------------------------------------------------------------------
U.S. TREASURY NOTES - 0.60%
6.625%, 06/30/01 150,000 154,317
----------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $292,052) 318,013
----------------------------------------------------------------------------
REPURCHASE AGREEMENT - 9.39%(d)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98
(Cost $2,409,754)(e) 2,409,754 2,409,754
----------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 98.82% 25,355,935
----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.18% 302,718
----------------------------------------------------------------------------
NET ASSETS - 100.00% $25,658,653
============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
market value of these securities at 06/30/98 was $859,584 which
represented 3.35% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreements. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint accounts with
other mutual funds, private accounts, and certain non-registered
investment companies managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 6/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 at $209,153,696.
Abbreviations:
ADR - American Depositary Receipt
CAD - Canadian Dollar
Conv. - Convertible
Deb. - Debentures DECS - Dividend Enhanced Convertible Stock GBP - British Pound Sterling Gtd. - Guaranteed Pfd. - Preferred PIK - Payment in Kind |
PRIDES - Preferred Redeemable Increased Dividend Equity Securities
Rts. - Rights
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-44
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, at market value (cost $19,680,469) $25,355,935 --------------------------------------------------------------------- Foreign currencies, at value (cost $124,133) 124,578 --------------------------------------------------------------------- Receivables for: Capital stock sold 122,513 --------------------------------------------------------------------- Investments sold 173,577 --------------------------------------------------------------------- Dividends and interest 128,266 --------------------------------------------------------------------- Investment for deferred compensation plan 14,772 --------------------------------------------------------------------- Other assets 19 --------------------------------------------------------------------- Total assets 25,919,660 --------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 219,602 --------------------------------------------------------------------- Capital stock reacquired 10 --------------------------------------------------------------------- Deferred compensation plan 14,772 --------------------------------------------------------------------- Foreign currency contracts 23 --------------------------------------------------------------------- Accrued advisory fees 13,317 --------------------------------------------------------------------- Accrued directors' fees 2,024 --------------------------------------------------------------------- Accrued administrative services fees 3,729 --------------------------------------------------------------------- Accrued operating expenses 7,530 --------------------------------------------------------------------- Total liabilities 261,007 --------------------------------------------------------------------- Net assets applicable to shares outstanding $25,658,653 ===================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 --------------------------------------------------------------------- Outstanding 1,538,611 --------------------------------------------------------------------- Net asset value, offering and redemption price per share $16.68 ===================================================================== |
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Dividends (net of $18,848 foreign withholding tax) $ 271,232
-------------------------------------------------------------------------------
Interest 174,614
-------------------------------------------------------------------------------
Total investment income 445,846
-------------------------------------------------------------------------------
EXPENSES:
Advisory fees 77,543
-------------------------------------------------------------------------------
Administrative services fees 22,318
-------------------------------------------------------------------------------
Custodian fees 11,744
-------------------------------------------------------------------------------
Directors' fees and expenses 4,356
-------------------------------------------------------------------------------
Professional fees 10,670
-------------------------------------------------------------------------------
Other 5,708
-------------------------------------------------------------------------------
Total expenses 132,339
-------------------------------------------------------------------------------
Less: Expenses paid indirectly (257)
-------------------------------------------------------------------------------
Net expenses 132,082
-------------------------------------------------------------------------------
Net investment income 313,764
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 618,994
-------------------------------------------------------------------------------
Foreign currencies 9,501
-------------------------------------------------------------------------------
Futures contracts 110,924
-------------------------------------------------------------------------------
Option contracts 920
-------------------------------------------------------------------------------
740,339
-------------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 1,051,364
-------------------------------------------------------------------------------
Foreign currencies 1,343
-------------------------------------------------------------------------------
1,052,707
-------------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, futures and
option contracts 1,793,046
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations $2,106,810
===============================================================================
|
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-45
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
----------------------
OPERATIONS:
Net investment income $ 313,764 $ 458,649
-------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 740,339 176,145
-------------------------------------------------------------------------------
Net unrealized appreciation of investment securities
and foreign currencies 1,052,707 2,779,707
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,106,810 3,414,501
-------------------------------------------------------------------------------
Distributions from net realized gains -- (6,795)
-------------------------------------------------------------------------------
Net increase from capital stock transactions 1,472,982 5,095,582
-------------------------------------------------------------------------------
Net increase in net assets 3,579,792 8,503,288
-------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 22,078,861 13,575,573
-------------------------------------------------------------------------------
End of period $25,658,653 $22,078,861
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $18,309,021 $16,836,039
-------------------------------------------------------------------------------
Undistributed net investment income 753,340 439,576
-------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 919,991 179,652
-------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and option contracts 5,676,301 4,623,594
-------------------------------------------------------------------------------
$25,658,653 $22,078,861
===============================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Global Utilities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income, and as a secondary
objective the Fund seeks to achieve capital appreciation, by investing
primarily in the common and preferred stocks of public utility companies
(either domestic or foreign). Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or, absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in
AIM V.I. GLOBAL UTILITIES FUND
FS-46
foreign securities is substantially completed each day at various times prior
to the close of the New York Stock Exchange. The values of such securities
used in computing the net asset value of the Fund's shares are determined as
of such times. Foreign currency exchange rates are also generally determined
prior to the close of the New York Stock Exchange. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the New York
Stock Exchange which will not be reflected in the computation of the Fund's
net asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
options' underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The option's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $22,318 for such
services.
AIM V.I. GLOBAL UTILITIES FUND
FS-47
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,322 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $257 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $257 during the six months ended June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June
30, 1998 was $5,517,127 and $2,816,382, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $5,938,875 ------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (263,717) ------------------------------------------------------------------------- Net unrealized appreciation of investment securities $5,675,158 ========================================================================= |
Cost of investments for tax purposes is $19,680,777.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
JUNE 30, 1998 DECEMBER 31, 1997
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- -----------
Sold 300,517 $4,838,733 505,614 $ 6,971,987
-----------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 459 6,795
-----------------------------------------------------------------------
Reacquired (208,635) (3,365,751) (140,799) (1,883,200)
-----------------------------------------------------------------------
91,882 $1,472,982 365,274 $ 5,095,582
=======================================================================
|
NOTE 7 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
OPTION CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------
Beginning of period -- $ --
---------------------------------------
Written 14 3,018
---------------------------------------
Closed (14) (3,018)
---------------------------------------
Expired -- --
---------------------------------------
End of period -- $ --
=======================================
|
AIM V.I. GLOBAL UTILITIES FUND
FS-48
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995 and
the period May 2, 1994 (date operations commenced) through January 31, 1995.
DECEMBER 31,
JUNE 30, --------------------------- JANUARY 31,
1998 1997 1996 1995 1995
-------- ------- ------- ------ -----------
Net asset value,
beginning of period $ 15.26 $ 12.55 $11.64 $9.69 $10.00
-----------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.19 0.32 0.40 0.29 0.27
-----------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 1.23 2.40 0.99 1.98 (0.33)
-----------------------------------------------------------------------------------------
Total from investment
operations 1.42 2.72 1.39 2.27 (0.06)
-----------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- (0.41) (0.31) (0.25)
-----------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.01) (0.07) (0.01) --
-----------------------------------------------------------------------------------------
Total distributions -- (0.01) (0.48) (0.32) (0.25)
-----------------------------------------------------------------------------------------
Net asset value, end of
period $ 16.68 $ 15.26 $12.55 $11.64 $ 9.69
=========================================================================================
Total return(a) 9.31% 21.63% 12.07% 23.73% (0.56)%
=========================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $25,659 $22,079 $13,576 $8,394 $2,958
=========================================================================================
Ratio of expenses to
average net assets 1.11%(b) 1.28% 1.40%(c) 1.47%(c)(d) 1.31%(d)(e)
=========================================================================================
Ratio of net investment
income to average net
assets 2.63%(b) 2.81% 3.56%(c) 3.76%(c)(d) 4.39%(d)(e)
=========================================================================================
Portfolio turnover rate 13% 28% 47% 58% 69%
=========================================================================================
Average brokerage
commission rate paid(f) $0.0383 $0.0365 $0.0477 N/A N/A
=========================================================================================
|
(a) Totals returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $24,057,019.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.55%, 3.42%, 2.44% (annualized) and 2.79%
(annualized) for 1996 and 1995, respectively.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 2.80% (annualized) and 2.90% (annualized),
respectively.
(f) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. GLOBAL UTILITIES FUND
FS-49
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
U.S. GOVERNMENT AGENCY SECURITIES - 81.62%
FEDERAL FARM CREDIT BANK - 2.98%
Medium term notes
5.96%, 07/14/03 $ 200,000 $ 201,990
-------------------------------------------------------------------------------
6.22%, 06/17/08 1,000,000 1,002,810
-------------------------------------------------------------------------------
1,204,800
-------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK BOARD - 5.89%
Debentures
8.375%, 10/25/99 150,000 155,119
-------------------------------------------------------------------------------
6.00%, 06/27/00 250,000 251,653
-------------------------------------------------------------------------------
5.97%, 12/11/00 1,000,000 1,006,610
-------------------------------------------------------------------------------
7.31%, 07/06/01 500,000 521,950
-------------------------------------------------------------------------------
8.17%, 12/16/04 400,000 451,028
-------------------------------------------------------------------------------
2,386,360
-------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC") - 14.32%
Debentures
6.13%, 08/19/99 150,000 150,797
-------------------------------------------------------------------------------
Pass through certificates
6.00%, 11/01/08 to 08/01/10 757,380 754,540
-------------------------------------------------------------------------------
6.50%, 12/01/08 to 02/01/28 2,849,389 2,855,621
-------------------------------------------------------------------------------
7.00%, 11/01/10 to 01/01/26 1,576,857 1,611,396
-------------------------------------------------------------------------------
10.50%, 08/01/19 217,082 238,449
-------------------------------------------------------------------------------
8.50%, 08/01/24 178,060 186,629
-------------------------------------------------------------------------------
5,797,432
-------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") - 32.56%
Debentures
5.261%, 06/02/99 500,000 498,995
-------------------------------------------------------------------------------
7.55%, 04/22/02 400,000 425,096
-------------------------------------------------------------------------------
8.50%, 02/01/05 500,000 520,110
-------------------------------------------------------------------------------
5.75%, 06/15/05 500,000 499,060
-------------------------------------------------------------------------------
Medium term notes
7.375%, 03/28/05 300,000 326,343
-------------------------------------------------------------------------------
Pass through certificates
7.50%, 11/01/09 to 07/01/27 3,102,282 3,194,511
-------------------------------------------------------------------------------
6.50%, 10/01/10 to 06/01/23 1,527,214 1,538,342
-------------------------------------------------------------------------------
7.00%, 07/01/11 to 01/01/28 5,315,666 5,416,211
-------------------------------------------------------------------------------
8.50%, 09/01/24 225,851 236,718
-------------------------------------------------------------------------------
STRIPS(a)
7.37%, 10/09/19 1,800,000 517,788
-------------------------------------------------------------------------------
13,173,174
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") -
21.82%
Pass through certificates
9.50%, 08/15/03 to 09/15/16 $ 76,607 $ 83,003
---------------------------------------------------------------------------
9.00%, 09/15/08 to 10/15/16 142,702 154,773
---------------------------------------------------------------------------
11.00%, 10/15/15 45,419 50,997
---------------------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 29,885 32,938
---------------------------------------------------------------------------
6.50%, 12/15/23 450,648 453,320
---------------------------------------------------------------------------
8.00%, 10/15/25 to 07/15/26 2,873,721 2,992,130
---------------------------------------------------------------------------
7.50%, 05/15/27 999,426 1,029,089
---------------------------------------------------------------------------
7.00%, 04/15/28 to 06/15/28 3,966,350 4,032,033
---------------------------------------------------------------------------
8,828,283
---------------------------------------------------------------------------
PRIVATE EXPORT FUNDING COMPANY - 0.78%
Debentures
7.30%, 01/31/02 300,000 315,513
---------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION - 1.99%
Debentures
5.27%, 02/22/99 500,000 499,785
---------------------------------------------------------------------------
5.55%, 12/15/99 150,000 149,777
---------------------------------------------------------------------------
6.50%, 08/01/02 150,000 154,370
---------------------------------------------------------------------------
803,932
---------------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY - 1.28%
Debentures
6.375%, 06/15/05 500,000 517,335
---------------------------------------------------------------------------
Total U.S. Government Agency Securities (Cost
$32,381,764) 33,026,829
---------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 13.81%
U.S. TREASURY NOTES & BONDS - 12.84%
6.125%, 12/31/01 to 11/15/27 3,000,000 3,173,740
---------------------------------------------------------------------------
6.00%, 07/31/02 300,000 305,025
---------------------------------------------------------------------------
6.625%, 05/15/07 500,000 537,375
---------------------------------------------------------------------------
7.50%, 11/15/16 500,000 600,265
---------------------------------------------------------------------------
6.875%, 08/15/25 500,000 579,200
---------------------------------------------------------------------------
5,195,605
---------------------------------------------------------------------------
U.S. TREASURY STRIPS(A) - 0.97%
6.80%, 11/15/18 1,250,000 390,525
---------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $5,276,279) 5,586,130
---------------------------------------------------------------------------
REPURCHASE AGREEMENT - 8.99%(b)
SBC Capital Markets, Inc., 5.85%,
07/01/98(c) (Cost $3,637,967) 3,637,967 3,637,967
---------------------------------------------------------------------------
TOTAL INVESTMENTS - 104.42% 42,250,926
---------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (4.42)% (1,788,382)
---------------------------------------------------------------------------
NET ASSETS - 100.00% $40,462,544
===========================================================================
|
AIM V.I. GOVERNMENT SECURITIES FUND
FS-50
NOTES TO SCHEDULE OF INVESTMENTS:
(a) STRIPS are traded on a discount basis. In such cases the interest rate
shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$1,000,162,500. Collateralized by $3,590,870,000 U.S. Government
obligations, 0%, due 08/15/00 to 11/15/24 with an aggregate market value at
06/30/98 of $1,148,593,549.
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-51
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, at market value (cost $41,296,010) $ 42,250,926 ---------------------------------------------------------------------- Receivables for: Capital stock sold 26,552 ---------------------------------------------------------------------- Interest 286,952 ---------------------------------------------------------------------- Investment for deferred compensation plan 17,807 ---------------------------------------------------------------------- Other assets 10,039 ---------------------------------------------------------------------- Total assets 42,592,276 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 2,083,264 ---------------------------------------------------------------------- Deferred compensation plan 17,807 ---------------------------------------------------------------------- Accrued advisory fees 16,362 ---------------------------------------------------------------------- Accrued directors' fees 1,866 ---------------------------------------------------------------------- Accrued administrative services fees 2,911 ---------------------------------------------------------------------- Accrued operating expenses 7,522 ---------------------------------------------------------------------- Total liabilities 2,129,732 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $ 40,462,544 ---------------------------------------------------------------------- CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 3,659,782 ---------------------------------------------------------------------- Net asset value, offering and redemption price per share $11.06 ====================================================================== |
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME: Interest $1,191,117 -------------------------------------------------------------------- EXPENSES: Advisory fees 91,681 -------------------------------------------------------------------- Administrative services fees 17,370 -------------------------------------------------------------------- Custodian fees 6,999 -------------------------------------------------------------------- Directors' fees and expenses 3,546 -------------------------------------------------------------------- Professional fees 10,622 -------------------------------------------------------------------- Organizational costs 967 -------------------------------------------------------------------- Other 2,987 -------------------------------------------------------------------- Total expenses 134,172 -------------------------------------------------------------------- Net investment income 1,056,945 -------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES: Net realized gain from investment securities 39,294 -------------------------------------------------------------------- Net unrealized appreciation of investment securities 217,784 -------------------------------------------------------------------- Net gain on investment securities 257,078 -------------------------------------------------------------------- Net increase in net assets resulting from operations $1,314,023 ==================================================================== |
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-52
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
OPERATIONS:
Net investment income $ 1,056,945 $ 1,620,458
------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 39,294 (100,162)
------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities 217,784 728,502
------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,314,023 2,248,798
------------------------------------------------------------------------------
Dividends to shareholders from net investment
income -- (15,600)
------------------------------------------------------------------------------
Net increase from capital stock transactions 5,348,725 7,040,082
------------------------------------------------------------------------------
Net increase in net assets 6,662,748 9,273,280
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 33,799,796 24,526,516
------------------------------------------------------------------------------
End of period $40,462,544 $33,799,796
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $37,333,401 $31,984,676
------------------------------------------------------------------------------
Undistributed net investment income 2,642,342 1,585,397
------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (468,115) (507,409)
------------------------------------------------------------------------------
Unrealized appreciation of investment securities 954,916 737,132
------------------------------------------------------------------------------
$40,462,544 $33,799,796
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Government Securities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the United States Government.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - Debt obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities, and instrumentalities are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate, maturity and seasoning differential.
Securities for which market prices are not provided by the pricing service
are valued at the mean between last bid and asked prices based upon quotes
furnished by independent sources. Securities for which market quotations
are either not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Distributions to shareholders are recorded on the ex-dividend date.
Realized gains or losses from securities transactions are recorded on the
identified cost basis.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-53
C. Federal Income Taxes - For federal income tax purposes, each portfolio in the Company is taxed as a separate entity. It is the Fund's policy to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and capital gains to its shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund had capital loss carryforwards (which may be carried forward to offset future taxable capital gains, if any) of $507,409, which expires, if not previously utilized, through the year 2004. The Fund cannot distribute capital gains to shareholders until the tax loss carryforwards have been utilized.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment
advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of
0.50% of the first $250 million of the Fund's average daily net assets, plus
0.45% of the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $17,370 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,328 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June
30, 1998 was $17,417,564 and $10,989,515, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $969,169 ----------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (14,253) ----------------------------------------------------------------------- Net unrealized appreciation of investment securities $954,916 ======================================================================= |
Investments have the same cost for tax and financial statement purposes.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30,
1998 and the year ended December 31, 1997 were as follows:
JUNE 30, DECEMBER 31,
1998 1997
-------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- --------- -----------
Sold 859,764 $9,332,829 1,272,288 $13,023,561
------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 1,468 15,600
------------------------------------------------------------------------
Reacquired (367,782) (3,984,104) (591,274) (5,999,079)
------------------------------------------------------------------------
491,982 $5,348,725 682,482 $ 7,040,082
========================================================================
|
AIM V.I. GOVERNMENT SECURITIES FUND
FS-54
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995 and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
JUNE DECEMBER 31, JANUARY 31,
30, ------------------------- -------------------
1998 1997 1996 1995 1995 1994
------- ------- ------- ------- ------- -------
Net asset value,
beginning of period $ 10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24 $ 10.00
-----------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.22 0.59 0.58 0.54 0.53 0.38
-----------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.17 0.22 (0.35) 0.74 (0.88) 0.10
-----------------------------------------------------------------------------------------------
Total from investment
operations 0.39 0.81 0.23 1.28 (0.35) 0.48
-----------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.01) (0.53) (0.50) (0.50) (0.24)
-----------------------------------------------------------------------------------------------
Net asset value, end of
period $ 11.06 $ 10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24
===============================================================================================
Total return(a) 3.66% 8.16% 2.29% 13.84% (3.42)% 4.78%
===============================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $40,463 $33,800 $24,527 $19,545 $12,887 $10,643
===============================================================================================
Ratio of expenses to
average net assets 0.73%(b) 0.87% 0.91% 1.19%(c) 0.95%(d) 1.00%(c)(d)
===============================================================================================
Ratio of net investment
income to average net
assets 5.76%(b) 5.85% 5.80% 5.78%(c) 5.51%(e) 4.74%(c)(e)
===============================================================================================
Portfolio turnover rate 32% 66% 32% 41% 29% 0%
===============================================================================================
|
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $36,976,251.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.10% and 1.80% (annualized) for January 1995 and 1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.35% and 3.94% (annualized) for January 1995 and
1994, respectively.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-55
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS - 82.06%
AEROSPACE/DEFENSE - 0.53%
Sundstrand Corp. 30,000 $ 1,717,500
----------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.22%
Universal Corp. 18,800 702,650
----------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.47%
Federal-Mogul Corp. 22,500 1,518,750
----------------------------------------------------------------
BANKS (MONEY CENTER) - 1.55%
BankAmerica Corp. 18,000 1,555,875
----------------------------------------------------------------
Chase Manhattan Corp. (The) 46,000 3,473,000
----------------------------------------------------------------
5,028,875
----------------------------------------------------------------
BANKS (REGIONAL) - 0.41%
AmSouth Bancorporation 6,200 243,737
----------------------------------------------------------------
North Fork Bancorporation, Inc. 45,000 1,099,687
----------------------------------------------------------------
1,343,424
----------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 1.96%
Coca-Cola Co. (The) 40,000 3,420,000
----------------------------------------------------------------
PepsiCo, Inc. 71,400 2,940,787
----------------------------------------------------------------
6,360,787
----------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.53%
CBS Corp.(a) 50,000 1,587,500
----------------------------------------------------------------
Chancellor Media Corp.(a) 22,200 1,102,368
----------------------------------------------------------------
Clear Channel Communications, Inc.(a) 7,638 833,496
----------------------------------------------------------------
Comcast Corp. - Class A 66,000 2,679,187
----------------------------------------------------------------
Jacor Communications, Inc.(a) 26,500 1,563,500
----------------------------------------------------------------
Tele-Communications, Inc. - Class A(a) 95,000 3,651,563
----------------------------------------------------------------
11,417,614
----------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 0.53%
Monsanto Co. 30,500 1,704,188
----------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.26%
Millennium Chemicals Inc. 25,000 846,875
----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.66%
CIENA Corp.(a) 19,000 1,322,875
----------------------------------------------------------------
Lucent Technologies, Inc. 31,500 2,620,406
----------------------------------------------------------------
Tellabs, Inc.(a) 20,000 1,432,500
----------------------------------------------------------------
5,375,781
----------------------------------------------------------------
COMPUTERS (HARDWARE) - 1.35%
Compaq Computer Corp. 41,500 1,177,563
----------------------------------------------------------------
Dell Computer Corp.(a) 16,500 1,531,406
----------------------------------------------------------------
International Business Machines Corp. 14,500 1,664,781
----------------------------------------------------------------
4,373,750
----------------------------------------------------------------
|
MARKET
SHARES VALUE
COMPUTERS (NETWORKING) - 0.93%
Ascend Communications, Inc.(a) 31,600 $ 1,566,175
-----------------------------------------------------------------
Cisco Systems, Inc.(a) 15,700 1,445,381
-----------------------------------------------------------------
3,011,556
-----------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.58%
EMC Corp.(a) 41,800 1,873,163
-----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 6.51%
Advanced Fibre Communications, Inc.(a) 32,000 1,282,000
-----------------------------------------------------------------
BMC Software, Inc.(a) 40,000 2,077,500
-----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 37,500 1,171,875
-----------------------------------------------------------------
Computer Associates International, Inc. 28,000 1,555,750
-----------------------------------------------------------------
Computer Sciences Corp.(a) 31,100 1,990,400
-----------------------------------------------------------------
Compuware Corp.(a) 32,000 1,636,000
-----------------------------------------------------------------
Concord EFS, Inc.(a) 46,500 1,214,813
-----------------------------------------------------------------
HBO & Co. 53,000 1,868,250
-----------------------------------------------------------------
Microsoft Corp.(a) 64,000 6,936,000
-----------------------------------------------------------------
Unisys Corp.(a) 48,000 1,356,000
-----------------------------------------------------------------
21,088,588
-----------------------------------------------------------------
CONSUMER FINANCE - 0.88%
Countrywide Credit Industries, Inc. 12,800 649,600
-----------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 3,200 115,200
-----------------------------------------------------------------
Providian Financial Corp. 26,500 2,081,906
-----------------------------------------------------------------
2,846,706
-----------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 1.25%
AmeriSource Health Corp. - Class A(a) 33,000 2,167,688
-----------------------------------------------------------------
Bergen Brunswig Corp. - Class A 3,100 143,763
-----------------------------------------------------------------
Cardinal Health, Inc. 9,200 862,500
-----------------------------------------------------------------
Sysco Corp. 34,300 878,938
-----------------------------------------------------------------
4,052,889
-----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.32%
American Power Conversion Corp.(a) 16,200 486,000
-----------------------------------------------------------------
General Electric Co. 64,000 5,824,000
-----------------------------------------------------------------
Symbol Technologies, Inc. 31,800 1,200,450
-----------------------------------------------------------------
7,510,450
-----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.44%
Waters Corp.(a) 24,000 1,414,500
-----------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.05%
Altera Corp.(a) 6,000 177,376
-----------------------------------------------------------------
ENTERTAINMENT - 0.46%
Viacom, Inc. - Class B(a) 25,600 1,491,200
-----------------------------------------------------------------
|
AIM V.I. GROWTH FUND
FS-56
MARKET
SHARES VALUE
EQUIPMENT (SEMICONDUCTOR) - 0.14%
Lam Research Corp.(a) 23,500 $ 449,438
-----------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 6.36%
Ambac Financial Group, Inc. 42,500 2,486,250
-----------------------------------------------------------------------------
American Express Co. 17,000 1,938,000
-----------------------------------------------------------------------------
Fannie Mae 55,000 3,341,250
-----------------------------------------------------------------------------
Freddie Mac 101,000 4,753,313
-----------------------------------------------------------------------------
Heller Financial, Inc.(a) 55,000 1,650,000
-----------------------------------------------------------------------------
MBIA, Inc. 20,500 1,534,938
-----------------------------------------------------------------------------
MGIC Investment Corp. 25,500 1,455,094
-----------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 17,500 1,599,063
-----------------------------------------------------------------------------
SunAmerica, Inc. 32,000 1,838,000
-----------------------------------------------------------------------------
20,595,908
-----------------------------------------------------------------------------
FOOTWEAR - 0.12%
Wolverine World Wide, Inc. 17,600 381,700
-----------------------------------------------------------------------------
HARDWARE & TOOLS - 0.26%
Black & Decker Corp. (The) 14,000 854,000
-----------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 5.02%
Abbott Laboratories 52,200 2,133,675
-----------------------------------------------------------------------------
American Home Products Corp. 79,000 4,088,250
-----------------------------------------------------------------------------
Bristol-Myers Squibb Co. 42,000 4,827,375
-----------------------------------------------------------------------------
Johnson & Johnson 20,000 1,475,000
-----------------------------------------------------------------------------
Warner-Lambert Co. 54,000 3,746,250
-----------------------------------------------------------------------------
16,270,550
-----------------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 2.16%
ICN Pharmaceuticals, Inc. 62,300 2,846,331
-----------------------------------------------------------------------------
Mylan Laboratories, Inc. 9,200 276,575
-----------------------------------------------------------------------------
R.P. Scherer Corp.(a) 20,000 1,772,500
-----------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 44,900 2,096,268
-----------------------------------------------------------------------------
6,991,674
-----------------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 3.50%
Lilly (Eli) & Co. 15,000 990,937
-----------------------------------------------------------------------------
Merck & Co., Inc. 38,400 5,136,000
-----------------------------------------------------------------------------
Pfizer Inc. 14,300 1,554,231
-----------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 21,300 982,462
-----------------------------------------------------------------------------
Schering-Plough Corp. 29,100 2,666,288
-----------------------------------------------------------------------------
11,329,918
-----------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.79%
Columbia/HCA Healthcare Corp. 16,000 466,000
-----------------------------------------------------------------------------
Quorum Health Group, Inc.(a) 55,000 1,457,500
-----------------------------------------------------------------------------
Universal Health Services, Inc. - Class B(a) 10,700 624,613
-----------------------------------------------------------------------------
2,548,113
-----------------------------------------------------------------------------
|
MARKET
SHARES VALUE
HEALTH CARE (LONG TERM CARE) - 0.77%
Health Care & Retirement Corp.(a) 29,500 $ 1,163,406
-----------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 50,000 1,334,375
-----------------------------------------------------------------------
2,497,781
-----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 4.16%
Arterial Vascular Engineering, Inc.(a) 54,300 1,941,225
-----------------------------------------------------------------------
Becton, Dickinson & Co. 56,000 4,347,000
-----------------------------------------------------------------------
Biomet, Inc. 49,500 1,636,594
-----------------------------------------------------------------------
Guidant Corp. 36,000 2,567,250
-----------------------------------------------------------------------
Medtronic, Inc. 9,700 618,375
-----------------------------------------------------------------------
Stryker Corp. 29,700 1,139,737
-----------------------------------------------------------------------
Sybron International Corp.(a) 48,400 1,222,100
-----------------------------------------------------------------------
13,472,281
-----------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.50%
Furniture Brands International, Inc.(a) 21,000 589,312
-----------------------------------------------------------------------
Maytag Corp. 21,000 1,036,875
-----------------------------------------------------------------------
1,626,187
-----------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.24%
Colgate-Palmolive Co. 17,500 1,540,000
-----------------------------------------------------------------------
Dial Corp. (The) 30,000 778,125
-----------------------------------------------------------------------
Procter & Gamble Co. (The) 18,500 1,684,656
-----------------------------------------------------------------------
4,002,781
-----------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.78%
Equitable Companies, Inc. 16,000 1,199,000
-----------------------------------------------------------------------
Nationwide Financial Services, Inc. - Class A 26,000 1,326,000
-----------------------------------------------------------------------
2,525,000
-----------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 1.79%
Ace, Ltd. 23,400 912,600
-----------------------------------------------------------------------
Allmerica Financial Corp. 16,000 1,040,000
-----------------------------------------------------------------------
American International Group, Inc. 8,600 1,255,600
-----------------------------------------------------------------------
Travelers Group, Inc. 42,502 2,576,684
-----------------------------------------------------------------------
5,784,884
-----------------------------------------------------------------------
INSURANCE (PROPERTY - CASUALTY) - 0.74%
Everest Reinsurance Holdings, Inc. 7,600 292,125
-----------------------------------------------------------------------
Fremont General Corp. 16,200 877,838
-----------------------------------------------------------------------
Mercury General Corp. 12,600 810,338
-----------------------------------------------------------------------
Old Republic International Corp. 14,500 425,031
-----------------------------------------------------------------------
2,405,332
-----------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.51%
Merrill Lynch & Co., Inc. 18,000 1,660,500
-----------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.83%
Franklin Resources, Inc. 24,700 1,333,800
-----------------------------------------------------------------------
T. Rowe Price Associates, Inc. 36,000 1,352,250
-----------------------------------------------------------------------
2,686,050
-----------------------------------------------------------------------
|
AIM V.I. GROWTH FUND
FS-57
MARKET
SHARES VALUE
LEISURE TIME (PRODUCTS) - 0.91%
Harley-Davidson, Inc. 28,900 $ 1,119,875
------------------------------------------------------------------
Mattel, Inc. 43,500 1,840,594
------------------------------------------------------------------
2,960,469
------------------------------------------------------------------
LODGING - HOTELS - 1.20%
Carnival Corp. 62,000 2,456,750
------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 18,100 1,438,950
------------------------------------------------------------------
3,895,700
------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 2.24%
AlliedSignal Inc. 19,200 852,000
------------------------------------------------------------------
Crane Co. 12,900 626,456
------------------------------------------------------------------
Thermo Electron Corp.(a) 45,000 1,538,438
------------------------------------------------------------------
Tyco International Ltd. 30,000 1,890,000
------------------------------------------------------------------
U.S. Industries, Inc. 34,800 861,300
------------------------------------------------------------------
United Technologies Corp. 16,000 1,480,000
------------------------------------------------------------------
7,248,194
------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.09%
Cooper Cameron Corp.(a) 9,600 489,600
------------------------------------------------------------------
Halliburton Co. 12,000 534,750
------------------------------------------------------------------
Western Atlas Inc.(a) 29,600 2,512,300
------------------------------------------------------------------
3,536,650
------------------------------------------------------------------
PERSONAL CARE - 1.35%
Avon Products, Inc. 25,500 1,976,250
------------------------------------------------------------------
Gillette Co. 42,000 2,380,875
------------------------------------------------------------------
4,357,125
------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.32%
AES Corp.(a) 19,700 1,035,481
------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.32%
Gannett Co., Inc. 14,600 1,037,513
------------------------------------------------------------------
RESTAURANTS - 0.60%
McDonald's Corp. 28,000 1,932,000
------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 1.40%
Home Depot, Inc. (The) 32,000 2,658,000
------------------------------------------------------------------
Lowe's Companies, Inc. 46,000 1,865,875
------------------------------------------------------------------
4,523,875
------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.88%
Circuit City Stores - Circuit City Group 35,000 1,640,625
------------------------------------------------------------------
Ingram Micro, Inc. - Class A(a) 27,000 1,194,750
------------------------------------------------------------------
2,835,375
------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.75%
Federated Department Stores, Inc.(a) 15,000 807,188
------------------------------------------------------------------
Proffitt's, Inc.(a) 40,000 1,615,000
------------------------------------------------------------------
2,422,188
------------------------------------------------------------------
|
MARKET
SHARES VALUE
RETAIL (DISCOUNTERS) - 0.40%
Family Dollar Stores, Inc. 16,400 $ 303,400
------------------------------------------------------------------
Ross Stores, Inc. 23,000 989,000
------------------------------------------------------------------
1,292,400
------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.76%
CVS Corp. 29,000 1,129,188
------------------------------------------------------------------
Rite Aid Corp. 35,200 1,322,200
------------------------------------------------------------------
2,451,388
------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.93%
Albertson's, Inc. 6,900 357,506
------------------------------------------------------------------
Kroger Co.(a) 40,500 1,736,438
------------------------------------------------------------------
Safeway, Inc.(a) 22,600 919,538
------------------------------------------------------------------
3,013,482
------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 2.74%
Costco Companies, Inc.(a) 30,000 1,891,875
------------------------------------------------------------------
Dayton Hudson Corp. 49,000 2,376,500
------------------------------------------------------------------
Fred Meyer, Inc.(a) 33,400 1,419,500
------------------------------------------------------------------
Kmart Corp.(a) 99,200 1,909,600
------------------------------------------------------------------
Wal-Mart Stores, Inc. 21,000 1,275,750
------------------------------------------------------------------
8,873,225
------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.31%
Bed Bath & Beyond, Inc.(a) 13,400 694,288
------------------------------------------------------------------
Office Depot, Inc.(a) 62,300 1,966,344
------------------------------------------------------------------
Staples, Inc.(a) 54,700 1,582,881
------------------------------------------------------------------
4,243,513
------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 1.19%
Gap, Inc. (The) 28,000 1,725,500
------------------------------------------------------------------
Intimate Brands, Inc. 35,000 964,688
------------------------------------------------------------------
TJX Companies, Inc. 48,000 1,158,000
------------------------------------------------------------------
3,848,188
------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.43%
Ahmanson (H.F.) & Co. 10,200 724,200
------------------------------------------------------------------
Washington Mutual, Inc. 15,750 684,141
------------------------------------------------------------------
1,408,341
------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.56%
Outdoor Systems, Inc.(a) 65,050 1,821,400
------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.22%
Service Corp. International 92,300 3,957,363
------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 0.53%
Keane, Inc.(a) 30,500 1,708,000
------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.04%
Equifax, Inc. 57,100 2,073,444
------------------------------------------------------------------
Fiserv, Inc.(a) 30,150 1,280,433
------------------------------------------------------------------
3,353,877
------------------------------------------------------------------
|
AIM V.I. GROWTH FUND
FS-58
MARKET
SHARES VALUE
SERVICES (EMPLOYMENT) - 0.27%
AccuStaff, Inc.(a) 28,100 $ 878,125
-----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 2.43%
AT&T Corp. 26,000 1,485,250
-----------------------------------------------------------------------------
MCI Communications Corp. 110,000 6,393,750
-----------------------------------------------------------------------------
7,879,000
-----------------------------------------------------------------------------
TEXTILES (APPAREL) - 1.00%
Jones Apparel Group, Inc.(a) 9,500 347,343
-----------------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 26,000 1,625,000
-----------------------------------------------------------------------------
Warnaco Group, Inc. (The) 30,000 1,273,125
-----------------------------------------------------------------------------
3,245,468
-----------------------------------------------------------------------------
WASTE MANAGEMENT - 0.63%
Waste Management, Inc. 58,300 2,040,500
-----------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $186,316,149) 265,737,559
-----------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED
STOCK - 0.44%
FINANCIAL (DIVERSIFIED) - 0.44%
MGIC Investment Corp. - $3.12 Conv. Pfd. 15,000 1,434,375
-----------------------------------------------------------------------------
Total Domestic Convertible Preferred Stock (Cost
$1,058,616) 1,434,375
-----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DOMESTIC CONVERTIBLE CORPORATE
NOTE - 0.47%
ELECTRICAL EQUIPMENT - 0.47%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%,
05/01/06(b) (acquired 10/31/96 - 12/06/96; cost
$1,166,399) (Cost $1,166,399) $ 923,000 1,515,012
-----------------------------------------------------------------------------
FOREIGN STOCKS & OTHER
EQUITY INTERESTS - 8.50% SHARES
CANADA - 1.40%
Bank of Montreal (Banks - Major Regional) 11,100 611,196
-----------------------------------------------------------------------------
Newcourt Credit Group, Inc. (Financial -
Diversified) 14,500 713,218
-----------------------------------------------------------------------------
Northern Telecom Ltd. - ADR (Communications
Equipment) 42,000 2,383,500
-----------------------------------------------------------------------------
Royal Bank of Canada (Banks - Major Regional) 13,700 824,207
-----------------------------------------------------------------------------
4,532,121
-----------------------------------------------------------------------------
FINLAND - 0.70%
Nokia Oyj A.B. - Class A - ADR (Communications
Equipment) 6,200 449,888
-----------------------------------------------------------------------------
Nokia Oyj A.B. - Class A (Communications Equipment) 24,800 1,832,663
-----------------------------------------------------------------------------
2,282,551
-----------------------------------------------------------------------------
FRANCE - 2.20%
Alcatel Alsthom (Communications Equipment) 8,500 1,731,078
-----------------------------------------------------------------------------
Banque Nationale de Paris (Banks - Major Regional) 26,000 2,124,906
-----------------------------------------------------------------------------
|
MARKET
SHARES VALUE
FRANCE - (CONTINUED)
Renault S.A. (Automobiles)(a) 22,500 $ 1,280,131
--------------------------------------------------------------------------------
Societe Generale (Banks - Major Regional) 9,500 1,975,597
--------------------------------------------------------------------------------
7,111,712
--------------------------------------------------------------------------------
GERMANY - 0.16%
Adidas Salomon A.G. (Footwear) 2,950 514,487
--------------------------------------------------------------------------------
IRELAND - 0.53%
Elan Corp. PLC - ADR (Health Care - Drugs - Generic &
Other)(a) 26,600 1,710,711
--------------------------------------------------------------------------------
NETHERLANDS - 0.89%
Akzo Nobel N.V. (Chemicals - Diversified) 5,450 1,212,272
--------------------------------------------------------------------------------
Philips Electronics N.V. (Household Furniture &
Appliances) 20,000 1,682,284
--------------------------------------------------------------------------------
2,894,556
--------------------------------------------------------------------------------
SWEDEN - 0.62%
Telefonaktiebolaget LM Ericsson - ADR (Communications
Equipment) 60,000 1,717,500
--------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - Class B
(Communications Equipment) 9,600 280,476
--------------------------------------------------------------------------------
1,997,976
--------------------------------------------------------------------------------
SWITZERLAND - 2.00%
Nestle S.A. (Foods) 1,500 3,214,497
--------------------------------------------------------------------------------
UBS - Union Bank of Switzerland (Banks - Major
Regional)(a) 8,750 3,258,070
--------------------------------------------------------------------------------
6,472,567
--------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$22,079,030) 27,516,681
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 8.98%(c)
Dresdner Kleinwort Benson North America LLC 5.85%,
07/01/98(d) (Cost $29,082,498) $29,082,498 29,082,498
--------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.45% 325,286,125
--------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.45)% (1,454,595)
--------------------------------------------------------------------------------
NET ASSETS - 100.00% $323,831,530
===============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
market value of this security at 06/30/98 represented 0.47% of the Fund's
net assets.
(c) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered in investment companies managed by the
investment advisor or its affiliates.
(d) Joint repurchase agreements entered into 06/30/98 with a maturing value of
$70,011,375. Collateralized by $71,382,000 U.S. Government obligations, 0%
to 6.30% due 07/02/98 to 12/03/01 with an aggregate market value at
06/30/98 of $71,404,458.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
Sub. - Subordinated
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-59
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments at market value (cost $239,702,692) $325,286,125 ---------------------------------------------------------------------- Foreign currencies, at market (cost $27,976) 27,340 ---------------------------------------------------------------------- Receivables for: Capital stock sold 188,460 ---------------------------------------------------------------------- Investments sold 2,009,498 ---------------------------------------------------------------------- Dividends and interest 206,825 ---------------------------------------------------------------------- Investment for deferred compensation plan 19,005 ---------------------------------------------------------------------- Other assets 800 ---------------------------------------------------------------------- Total assets 327,738,053 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 3,615,564 ---------------------------------------------------------------------- Capital stock reacquired 66,919 ---------------------------------------------------------------------- Deferred compensation plan 19,005 ---------------------------------------------------------------------- Accrued advisory fees 167,414 ---------------------------------------------------------------------- Accrued directors' fees 2,316 ---------------------------------------------------------------------- Accrued administrative services fees 3,188 ---------------------------------------------------------------------- Accrued operating expenses 32,117 ---------------------------------------------------------------------- Total liabilities 3,906,523 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $323,831,530 ====================================================================== CAPITAL STOCK, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 13,738,456 ====================================================================== Net asset value, offering and redemption price per share $23.57 ====================================================================== |
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Dividends (net of $43,062 foreign withholding tax) $ 1,123,590
------------------------------------------------------------------------------
Interest 770,826
------------------------------------------------------------------------------
Total investment income 1,894,416
------------------------------------------------------------------------------
EXPENSES:
Advisory fees 935,432
------------------------------------------------------------------------------
Administrative services fees 19,128
------------------------------------------------------------------------------
Custodian fees 43,808
------------------------------------------------------------------------------
Directors' fees and expenses 4,891
------------------------------------------------------------------------------
Organizational costs 965
------------------------------------------------------------------------------
Other 38,439
------------------------------------------------------------------------------
Total expenses 1,042,663
------------------------------------------------------------------------------
Net investment income 851,753
------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTIONS CONTRACTS:
Net realized gain (loss) from:
Investment securities 13,452,632
------------------------------------------------------------------------------
Foreign currencies (3,977)
------------------------------------------------------------------------------
Futures contracts 2,342,733
------------------------------------------------------------------------------
Options contracts (210,765)
------------------------------------------------------------------------------
15,580,623
------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 33,119,893
------------------------------------------------------------------------------
Foreign currencies (2,096)
------------------------------------------------------------------------------
Options contracts 413,643
------------------------------------------------------------------------------
33,531,440
------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies, futures
and options contracts 49,112,063
------------------------------------------------------------------------------
Net increase in net assets resulting from operations $49,963,816
==============================================================================
|
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-60
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
-----------------------
OPERATIONS:
Net investment income $ 851,753 $ 1,211,773
------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and options contracts 15,580,623 22,109,980
------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and
options contracts 33,531,440 28,069,985
------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 49,963,816 51,391,738
------------------------------------------------------------------------------
Dividends to shareholders from net investment
income -- (1,119,140)
------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (8,443,286)
------------------------------------------------------------------------------
Net increase from capital stock transactions 15,015,944 38,384,566
------------------------------------------------------------------------------
Net increase in net assets 64,979,760 80,213,878
------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 258,851,770 178,637,892
------------------------------------------------------------------------------
End of period $323,831,530 $258,851,770
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $198,991,625 $183,975,681
------------------------------------------------------------------------------
Undistributed net investment income 2,034,559 1,182,806
------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
options contracts 37,224,008 21,643,385
------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and options contracts 85,581,338 52,049,898
------------------------------------------------------------------------------
$323,831,530 $258,851,770
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth Fund (the "Fund"). The Fund's investment objective is
to seek growth of capital principally through investment in common stocks of
seasoned and better capitalized companies considered by AIM to have strong
earnings momentum. Currently, shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable annuity contracts
and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A.Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where the
security is principally traded, or lacking any sales on a particular day, the
security is valued at the mean between the closing bid and asked prices on
that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. If no mean is available, as is the case
in some foreign markets, the closing bid will be used absent a last sales
price. Each security reported on the NASDAQ National Market System is valued
at the last sales price on the valuation date or absent a last sales price, at
the mean of the closing bid and asked prices. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term
AIM V.I. GROWTH FUND
FS-61
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Put options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The option's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
G. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
H. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
AIM V.I. GROWTH FUND
FS-62
Pursuant to a master administrative services agreement between the Company and
AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $19,128 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,512 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the six months ended June 30, 1998 was
$173,480,910 and $149,627,037, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $86,033,439 -------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (612,503) -------------------------------------------------------------------------- Net unrealized appreciation of investment securities $85,420,936 ========================================================================== |
Cost of investments for tax purposes is $239,865,189.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998 and the year ended December 31, 1997 were as follows:
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
Sold 1,246,514 $ 27,248,118 2,757,339 $ 51,600,352
----------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 492,909 9,562,426
----------------------------------------------------------------------------
Reacquired (562,384) (12,232,174) (1,185,922) (22,778,212)
----------------------------------------------------------------------------
684,130 $ 15,015,944 2,064,326 $ 38,384,566
============================================================================
|
NOTE 6 - CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
CALL OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------
Beginning of period 1,815 $ 531,904
----------------------------------------
Written 1,944 781,037
----------------------------------------
Closed (2,073) (664,334)
----------------------------------------
Exercised (712) (324,189)
----------------------------------------
Expired (974) (324,418)
----------------------------------------
End of period -- $ --
----------------------------------------
|
NOTE 7 - PUT OPTIONS CONTRACTS PURCHASED
Transactions in put options purchased during the six months ended June 30, 1998
are summarized as follows:
PUT OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
----------------
Beginning of year 1,317 $ 350,774
--------------------------------------
Purchased 353 113,507
--------------------------------------
Closed (753) (227,113)
--------------------------------------
Expired (917) (237,168)
--------------------------------------
End of year -- $ --
======================================
|
AIM V.I. GROWTH FUND
FS-63
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
JUNE 30, ---------------------------- -----------------
1998 1997 1996 1995 1995 1994
-------- -------- -------- -------- ------- -------
Net asset value,
beginning of period $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59 $ 10.00
------------------------ -------- -------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.06 0.08 0.07 0.09 0.06 0.02
------------------------ -------- -------- -------- -------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 3.68 4.27 2.52 3.65 (0.88) 1.59
------------------------ -------- -------- -------- -------- ------- -------
Total from investment
operations 3.74 4.35 2.59 3.74 (0.82) 1.61
------------------------ -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net
investment income -- (0.09) (0.06) (0.01) (0.06) (0.02)
------------------------ -------- -------- -------- -------- ------- -------
Distributions from net
realized gains -- (0.68) (0.72) -- -- --
------------------------ -------- -------- -------- -------- ------- -------
Total distributions -- (0.77) (0.78) (0.01) (0.06) (0.02)
------------------------ -------- -------- -------- -------- ------- -------
Net asset value, end of
period $ 23.57 $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59
======================== ======== ======== ======== ======== ======= =======
Total return(a) 18.86% 26.87% 18.09% 34.89% (7.11)% 16.07%
======================== ======== ======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $323,832 $258,852 $178,638 $102,600 $45,497 $25,115
======================== ======== ======== ======== ======== ======= =======
Ratio of expenses to
average net assets 0.72%(b) 0.73% 0.78% 0.84%(c) 0.95% 0.85%(c)(d)
======================== ======== ======== ======== ======== ======= =======
Ratio of net investment
income to average net
assets 0.59%(b) 0.54% 0.79% 0.95%(c) 0.71% 0.51%(c)(d)
======================== ======== ======== ======== ======== ======= =======
Portfolio turnover rate 57% 132% 143% 125% 179% 99%
======================== ======== ======== ======== ======== ======= =======
Average brokerage
commission rate paid(e) $ 0.0611 $ 0.0618 $ 0.0629 N/A N/A N/A
======================== ======== ======== ======== ======== ======= =======
|
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of
$292,327,721.
(c) Annualized.
(d) After fee waivers and/or expense reimbursement. Ratios of
expenses and net investment income (loss) to average net assets
prior to fee waivers and/or expense reimbursements were 1.50%
(annualized) and (0.14)% (annualized), respectively.
(e) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities
for the period divided by the total number of related shares
purchased and sold, which is required to be disclosed for fiscal
years beginning September 1, 1995 and thereafter.
AIM V.I. GROWTH FUND
FS-64
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
MARKET
SHARES VALUE
COMMON STOCKS - 81.97%
AUTO PARTS & EQUIPMENT - 0.75%
Federal - Mogul Corp. 30,000 $ 2,025,000
----------------------------------------------------------------------
Lear Corp.(a) 100,000 5,131,250
----------------------------------------------------------------------
7,156,250
----------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 3.07%
Banc One Corp. 85,000 4,744,063
----------------------------------------------------------------------
Bank of Montreal (Canada) 50,000 2,753,136
----------------------------------------------------------------------
Mellon Bank Corp. 55,000 3,829,375
----------------------------------------------------------------------
Royal Bank of Canada (Canada) 41,100 2,472,622
----------------------------------------------------------------------
UBS AG - Registered (Switzerland)(a) 41,461 15,438,043
----------------------------------------------------------------------
29,237,239
----------------------------------------------------------------------
BANKS (MONEY CENTER) - 4.31%
BankAmerica Corp. 75,000 6,482,813
----------------------------------------------------------------------
Chase Manhattan Corp. (The) 340,000 25,670,000
----------------------------------------------------------------------
Citicorp 60,000 8,955,000
----------------------------------------------------------------------
41,107,813
----------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 0.52%
Coca-Cola Co. (The) 57,800 4,941,900
----------------------------------------------------------------------
BROADCASTING (RADIO, TELEVISION & CABLE) - 1.76%
CBS Corp.(a) 120,000 3,810,000
----------------------------------------------------------------------
Comcast Corp. - Class A 80,000 3,247,500
----------------------------------------------------------------------
MediaOne Group Inc.(a) 90,000 3,954,375
----------------------------------------------------------------------
Tele-Communications, Inc. - Class A(a) 150,000 5,765,625
----------------------------------------------------------------------
16,777,500
----------------------------------------------------------------------
CHEMICALS - 0.33%
Rohm & Haas Co. 30,000 3,118,125
----------------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 1.66%
Monsanto Co. 215,000 12,013,125
----------------------------------------------------------------------
PPG Industries, Inc. 55,000 3,825,938
----------------------------------------------------------------------
15,839,063
----------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.11%
Alcatel Alsthom CGE - Sponsored ADR 50,000 2,034,375
----------------------------------------------------------------------
DSC Communications Corp.(a)(b)(c) 80,000 2,400,000
----------------------------------------------------------------------
Lucent Technologies, Inc. 60,000 4,991,250
----------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR (Sweden) 275,000 7,871,875
----------------------------------------------------------------------
Tellabs, Inc.(a) 40,000 2,865,000
----------------------------------------------------------------------
20,162,500
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
COMPUTERS (HARDWARE) - 1.34%
Compaq Computer Corp. 170,000 $ 4,823,750
------------------------------------------------------------------------
Dell Computer Corp.(a) 30,000 2,784,375
------------------------------------------------------------------------
International Business Machines Corp. 45,000 5,166,563
------------------------------------------------------------------------
12,774,688
------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 1.03%
Ascend Communications, Inc.(a) 40,000 1,982,500
------------------------------------------------------------------------
Cisco Systems, Inc.(a) 85,000 7,825,313
------------------------------------------------------------------------
9,807,813
------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 2.63%
Computer Associates International, Inc. 55,000 3,055,938
------------------------------------------------------------------------
Compuware Corp.(a) 60,000 3,067,500
------------------------------------------------------------------------
HBO & Co. 90,000 3,172,500
------------------------------------------------------------------------
Microsoft Corp.(a) 70,000 7,586,250
------------------------------------------------------------------------
Novell, Inc.(a) 300,000 3,825,000
------------------------------------------------------------------------
Sterling Commerce, Inc.(a) 90,000 4,365,000
------------------------------------------------------------------------
25,072,188
------------------------------------------------------------------------
CONSUMER FINANCE - 1.11%
Beneficial Corp. 17,500 2,680,781
------------------------------------------------------------------------
Household International, Inc. 105,000 5,223,750
------------------------------------------------------------------------
MBNA Corp. 80,000 2,640,000
------------------------------------------------------------------------
10,544,531
------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.78%
Bergen Brunswig Corp. - Class A 60,000 2,782,500
------------------------------------------------------------------------
Cardinal Health, Inc. 50,000 4,687,500
------------------------------------------------------------------------
7,470,000
------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.82%
Cinergy Corp. 52,500 1,837,500
------------------------------------------------------------------------
Edison International 70,000 2,069,375
------------------------------------------------------------------------
FPL Group, Inc. 30,000 1,890,000
------------------------------------------------------------------------
PG&E Corp. 65,000 2,051,562
------------------------------------------------------------------------
7,848,437
------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.98%
General Electric Co. 175,000 15,925,000
------------------------------------------------------------------------
Philips Electronics N.V. - ADR - New York Shares
(Netherlands) 35,000 2,975,000
------------------------------------------------------------------------
18,900,000
------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.88%
Amkor Technology, Inc.(a) 300,000 2,803,125
------------------------------------------------------------------------
Intel Corp. 75,000 5,559,375
------------------------------------------------------------------------
8,362,500
------------------------------------------------------------------------
|
AIM V.I. GROWTH AND INCOME FUND
FS-65
MARKET
SHARES VALUE
ENTERTAINMENT - 0.81%
Time Warner Inc. 90,000 $ 7,689,375
-----------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 5.27%
American Express Co. 65,000 7,410,000
-----------------------------------------------------------------------
Associates First Capital Corp. - Class A 45,000 3,459,375
-----------------------------------------------------------------------
Fannie Mae 175,000 10,631,250
-----------------------------------------------------------------------
Freddie Mac 295,000 13,883,438
-----------------------------------------------------------------------
MBIA, Inc. 40,000 2,995,000
-----------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 130,000 11,878,750
-----------------------------------------------------------------------
50,257,813
-----------------------------------------------------------------------
HARDWARE & TOOLS - 0.51%
Black & Decker Corp. (The) 80,000 4,880,000
-----------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 5.20%
Abbott Laboratories 90,000 3,678,750
-----------------------------------------------------------------------
American Home Products Corp. 275,000 14,231,250
-----------------------------------------------------------------------
Bristol-Myers Squibb Co. 80,000 9,195,000
-----------------------------------------------------------------------
Johnson & Johnson 60,000 4,425,000
-----------------------------------------------------------------------
Warner-Lambert Co. 260,000 18,037,500
-----------------------------------------------------------------------
49,567,500
-----------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.37%
R.P. Scherer Corp.(a) 40,000 3,545,000
-----------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 5.58%
Lilly (Eli) & Co. 95,000 6,275,938
-----------------------------------------------------------------------
Merck & Co., Inc. 80,000 10,700,000
-----------------------------------------------------------------------
Pfizer Inc. 150,000 16,303,124
-----------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 320,000 14,760,000
-----------------------------------------------------------------------
SmithKline Beecham PLC - ADR (United Kingdom) 85,000 5,142,500
-----------------------------------------------------------------------
53,181,562
-----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.70%
Columbia/HCA Healthcare Corp. 115,000 3,349,375
-----------------------------------------------------------------------
Health Management Associates, Inc. - Class A(a) 100,000 3,343,750
-----------------------------------------------------------------------
6,693,125
-----------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.28%
HEALTHSOUTH Corp.(a) 100,000 2,668,750
-----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.27%
Arterial Vascular Engineering, Inc.(a) 175,000 6,256,250
-----------------------------------------------------------------------
Becton, Dickinson & Co. 60,000 4,657,500
-----------------------------------------------------------------------
Guidant Corp. 20,000 1,426,250
-----------------------------------------------------------------------
Medtronic, Inc. 60,000 3,825,000
-----------------------------------------------------------------------
US Surgical Corp. 120,000 5,475,000
-----------------------------------------------------------------------
21,640,000
-----------------------------------------------------------------------
|
MARKET
SHARES VALUE
HEALTH CARE (SPECIALIZED SERVICES) - 0.68%
Omnicare, Inc. 170,000 $ 6,481,250
------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.18%
Colgate-Palmolive Co. 75,000 6,600,000
------------------------------------------------------------------------
Procter & Gamble Co. (The) 51,500 4,689,719
------------------------------------------------------------------------
11,289,719
------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.20%
Provident Companies, Inc. 55,000 1,897,500
------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 2.90%
Ace, Ltd. 120,000 4,680,000
------------------------------------------------------------------------
American International Group, Inc. 110,000 16,060,000
------------------------------------------------------------------------
Travelers Group, Inc. 115,000 6,971,875
------------------------------------------------------------------------
27,711,875
------------------------------------------------------------------------
INSURANCE (PROPERTY - CASUALTY) - 0.58%
Allstate Corp. (The) 60,000 5,493,750
------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.73%
Merrill Lynch & Co., Inc. 75,000 6,918,750
------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.73%
Franklin Resources, Inc. 130,000 7,020,000
------------------------------------------------------------------------
LODGING - HOTELS - 0.58%
Carnival Corp. - Class A 140,000 5,547,500
------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.08%
Hillenbrand Industries, Inc. 30,000 1,800,000
------------------------------------------------------------------------
Textron, Inc. 40,000 2,867,500
------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 90,000 5,670,000
------------------------------------------------------------------------
10,337,500
------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.16%
US Filter Corp.(a)(b)(c) 53,900 1,512,569
------------------------------------------------------------------------
NATURAL GAS - 1.44%
El Paso Natural Gas Co. 130,000 4,972,500
------------------------------------------------------------------------
Enron Corp. 100,000 5,406,250
------------------------------------------------------------------------
Williams Companies, Inc. (The) 100,000 3,375,000
------------------------------------------------------------------------
13,753,750
------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 2.26%
British Petroleum Co. PLC - ADR (United Kingdom) 50,000 4,412,500
------------------------------------------------------------------------
Elf Acquitaine S.A. (France) 30,000 2,130,000
------------------------------------------------------------------------
Exxon Corp. 125,000 8,914,063
------------------------------------------------------------------------
Royal Dutch Petroleum Co. - New York Shares
(Netherlands) 70,000 3,836,875
------------------------------------------------------------------------
Total S.A. (France) 35,000 2,288,125
------------------------------------------------------------------------
21,581,563
------------------------------------------------------------------------
|
AIM V.I. GROWTH AND INCOME FUND
FS-66
MARKET
SHARES VALUE
OIL & GAS (DRILLING & EQUIPMENT) - 2.27%
Camco International, Inc. 55,000 $ 4,283,125
--------------------------------------------------------------------
Dresser Industries, Inc. 115,000 5,067,188
--------------------------------------------------------------------
EVI Weatherford, Inc.(a) 75,000 2,784,375
--------------------------------------------------------------------
Halliburton Co. 90,000 4,010,625
--------------------------------------------------------------------
Petroleum Geo-Services ASA - ADR (Norway)(a) 70,000 2,135,000
--------------------------------------------------------------------
Schlumberger Ltd. 50,000 3,415,624
--------------------------------------------------------------------
21,695,937
--------------------------------------------------------------------
PERSONAL CARE - 0.58%
Avon Products, Inc. 12,600 976,500
--------------------------------------------------------------------
Gillette Co. 80,000 4,535,000
--------------------------------------------------------------------
5,511,500
--------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.78%
Xerox Corp. 73,000 7,418,625
--------------------------------------------------------------------
RAILROADS - 0.52%
Kansas City Southern Industries, Inc. 100,000 4,962,500
--------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 1.72%
Boston Properties, Inc. 65,000 2,242,500
--------------------------------------------------------------------
Crescent Real Estate Equities, Co. 105,000 3,530,625
--------------------------------------------------------------------
Patriot American Hospitality, Inc. 160,000 3,830,000
--------------------------------------------------------------------
Starwood Hotels & Resorts 80,000 3,865,000
--------------------------------------------------------------------
Vornado Realty Trust 75,000 2,976,562
--------------------------------------------------------------------
16,444,687
--------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.42%
Ingram Micro, Inc. - Class A(a) 90,000 3,982,500
--------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 2.17%
Federated Department Stores, Inc.(a) 130,000 6,995,625
--------------------------------------------------------------------
J.C. Penney Co., Inc. 60,000 4,338,750
--------------------------------------------------------------------
Kohl's Corp.(a) 80,000 4,150,000
--------------------------------------------------------------------
Proffitt's, Inc.(a) 130,000 5,248,750
--------------------------------------------------------------------
20,733,125
--------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.84%
CVS Corp. 100,000 3,893,750
--------------------------------------------------------------------
Walgreen Co. 100,000 4,131,250
--------------------------------------------------------------------
8,025,000
--------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 1.25%
Costco Companies, Inc.(a) 60,000 3,783,750
--------------------------------------------------------------------
Fred Meyer, Inc.(a) 71,600 3,043,000
--------------------------------------------------------------------
Wal-Mart Stores, Inc. 83,800 5,090,850
--------------------------------------------------------------------
11,917,600
--------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.39%
Washington Mutual, Inc. 85,000 3,692,188
--------------------------------------------------------------------
|
MARKET
SHARES VALUE
SERVICES (COMMERCIAL & CONSUMER) - 1.68%
Service Corp. International 293,100 $ 12,566,662
-----------------------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 130,000 3,461,250
-----------------------------------------------------------------------------
16,027,912
-----------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.41%
Ceridian Corp.(a) 85,000 4,993,750
-----------------------------------------------------------------------------
Equifax, Inc. 100,000 3,631,250
-----------------------------------------------------------------------------
Fiserv, Inc.(a) 115,000 4,883,905
-----------------------------------------------------------------------------
13,508,905
-----------------------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.25%
Corrections Corp. of America(a) 100,000 2,350,000
-----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 2.79%
MCI Communications Corp. 175,000 10,171,875
-----------------------------------------------------------------------------
WorldCom, Inc.(a) 340,000 16,468,750
-----------------------------------------------------------------------------
26,640,625
-----------------------------------------------------------------------------
TELEPHONE - 2.58%
Ameritech Corp. 110,000 4,936,250
-----------------------------------------------------------------------------
Bell Atlantic Corp. 110,000 5,018,750
-----------------------------------------------------------------------------
BellSouth Corp. 75,000 5,034,374
-----------------------------------------------------------------------------
SBC Communications, Inc. 240,000 9,600,000
-----------------------------------------------------------------------------
24,589,374
-----------------------------------------------------------------------------
TOBACCO - 3.72%
Philip Morris Companies, Inc. 900,000 35,437,500
-----------------------------------------------------------------------------
WASTE MANAGEMENT - 0.01%
Thermo Instrument Systems Inc.(a) 4,500 118,125
-----------------------------------------------------------------------------
Total Common Stocks (Cost $619,895,023) 781,845,501
-----------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 5.73%
AIR FREIGHT - 0.33%
CNF Trust I - $2.50 Series A Gtd. Conv. Pfd. 50,000 3,175,000
-----------------------------------------------------------------------------
AIRLINES - 0.47%
Continental Air Finance Trust - $4.25 Conv. Pfd. 35,000 4,453,085
-----------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.17%
Federal-Mogul Finance Trust - $3.50 Gtd. Conv. Pfd.
(Acquired 06/30/98; Cost $1,665,096)(d) 22,300 1,665,096
-----------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 0.35%
MGIC Investment Corp. - $3.12 Series A Conv. Pfd.
STRYPES 35,000 3,346,875
-----------------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.37%
Medpartners Inc. - $1.44 Conv. Pfd. TAPS 330,000 3,485,625
-----------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.10%
Conseco Inc. - $4.278 Conv. PRIDES 65,000 10,448,750
-----------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.26%
Salomon Smith Barney Holdings - $3.48 Conv. Pfd. DECS 45,000 2,517,187
-----------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.29%
AES Trust I - $2.69 Series A Gtd. Conv. Pfd. 35,000 2,730,000
-----------------------------------------------------------------------------
|
AIM V.I. GROWTH AND INCOME FUND
FS-67
MARKET
SHARES VALUE
RAILROADS - 0.39%
Union Pacific Cap Trust - $3.125 Gtd. Conv. Pfd. TIDES
(Acquired 03/27/98 - 04/02/98; Cost $4,068,346)(d) 80,000 $ 3,746,560
-------------------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.33%
TJX Cos., Inc. - $7.00 Series E Conv. PEPS 6,000 3,131,625
-------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.08%
Cendant Corp. - $3.75 Conv. PRIDES(c) 275,000 10,295,313
-------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.59%
AirTouch Communications, Inc. - $1.74 Series B Conv.
Pfd. 70,000 3,377,500
-------------------------------------------------------------------------------
Nextel Trust - $1.015 Conv. Pfd. STRYPES 100,000 2,225,000
-------------------------------------------------------------------------------
5,602,500
-------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(Cost $55,981,617) 54,597,616
-------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS - 7.82%
AIRLINES - 0.32%
Continental Airlines, Conv. Unsec. Sub. Notes, 6.75%,
04/15/06 $ 1,500,000 3,092,415
-------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.27%
Candescent Technology Corp., Conv. Sr. Sub. Deb.,
7.00%, 05/01/03 (Acquired 04/17/98; Cost
$5,000,000)(d) 5,000,000 5,000,000
-------------------------------------------------------------------------------
Comverse Technology Inc., Conv. Sub. Notes, 4.50%,
07/01/05 (Acquired 06/25/98; Cost $3,000,000)(d) 3,000,000 3,056,250
-------------------------------------------------------------------------------
EMC Corp., Conv. Sub. Notes, 3.25%, 03/15/02 3,500,000 7,196,140
-------------------------------------------------------------------------------
Global Telesystems Group, Inc., Conv. Sr. Unsec. Sub.
Notes, 8.75%, 06/30/00 (Acquired 02/05/98; Cost
$1,950,312)(b)(d) 1,500,000 3,706,875
-------------------------------------------------------------------------------
Western Digital Corp., Conv. Gtd. Sub. Deb., 6.80%,
02/18/18 (Acquired 06/12/98; Cost $2,400,000)(d)(e) 10,000,000 2,692,200
-------------------------------------------------------------------------------
21,651,465
-------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.87%
America Online, Inc., Conv. Unsec. Sub. Notes, 4.00%,
11/15/02 (Acquired 02/10/98; Cost $2,499,041)(d) 2,000,000 4,292,260
-------------------------------------------------------------------------------
Platinum Technology, Inc., Conv. Unsec. Sub. Notes,
6.25%, 12/15/02 (Acquired 12/11/97; Cost
$1,997,000)(d) 2,000,000 2,170,000
-------------------------------------------------------------------------------
Veritas Software Corp., Conv. Unsec. Sub. Notes,
5.25%, 11/01/04 1,500,000 1,822,500
-------------------------------------------------------------------------------
8,284,760
-------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.43%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%, 05/01/06 2,500,000 4,103,500
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
ELECTRONICS SEMICONDUCTORS - 0.39%
Amkor Technology, Inc., Conv. Unsec. Sub. Notes,
5.75%, 05/01/03 $ 4,000,000 $ 3,713,600
------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.66%
NCS Healthcare Inc., Conv. Sub. Notes, 5.75%,
08/15/04 (Acquired 08/07/98 - 12/08/97; Cost
$2,133,540)(d) 2,100,000 2,251,389
------------------------------------------------------------------------------
Omnicare, Inc., Conv. Sub. Deb., 5.00%, 12/01/07
(Acquired 12/04/97; Cost $3,500,000)(d) 3,500,000 4,090,625
------------------------------------------------------------------------------
6,342,014
------------------------------------------------------------------------------
HOUSEWARES - 0.24%
Sunbeam Corp., Conv. Sr. Sub. Deb., 7.64%, 03/25/18
(Acquired 06/16/98 - 06/19/98; Cost
$2,662,620)(d)(e) 10,000,000 2,275,000
------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.40%
Diamond Offshore Drilling, Inc., Conv. Unsec. Sub.
Notes, 3.75%, 02/15/07 3,250,000 3,780,465
------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.37%
Staples Inc., Conv. Unsec. Sub. Deb., 4.50%, 10/01/00
(Acquired 10/23/97 - 12/30/97; Cost $2,299,750)(d) 1,750,000 3,493,998
------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.23%
Equity Corp. International, Conv. Unsec. Sub. Deb.,
4.50%, 12/31/04 (Acquired 02/19/98 - 02/20/98; Cost
$2,001,250)(d) 2,000,000 2,194,380
------------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.23%
Affiliated Computer Services, Conv. Unsec. Sub.
Notes, 4.00%, 03/15/05 (Acquired 03/17/98; Cost
$2,006,875)(d) 2,000,000 2,218,760
------------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.36%
Career Horizons, Inc., Conv. Bonds, 7.00%, 11/01/02 1,250,000 3,451,462
------------------------------------------------------------------------------
WASTE MANAGEMENT - 1.05%
USA Waste Services, Inc.,
Conv. Unsec. Sub. Notes, 4.50%, 06/01/01 3,000,000 5,053,140
------------------------------------------------------------------------------
Conv. Sub. Notes, 4.00%, 02/01/02 2,000,000 2,491,260
------------------------------------------------------------------------------
WMX Technologies, Conv. Sub. Notes, 2.00%, 01/24/05 2,500,000 2,478,900
------------------------------------------------------------------------------
10,023,300
------------------------------------------------------------------------------
Total Convertible Corporate Bonds
(Cost $65,353,065) 74,625,119
------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 3.45%
9.125%, 05/15/99 9,000,000 9,277,110
------------------------------------------------------------------------------
11.75%, 02/15/01 10,000,000 11,505,400
------------------------------------------------------------------------------
13.125%, 05/15/01 5,000,000 5,993,650
------------------------------------------------------------------------------
13.375%, 08/15/01 5,000,000 6,106,650
------------------------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $33,651,758) 32,882,810
------------------------------------------------------------------------------
|
AIM V.I. GROWTH AND INCOME FUND
FS-68
PRINCIPAL MARKET
AMOUNT VALUE
REPURCHASE AGREEMENT(f) - 0.89%
Dean Witter Reynolds, Inc., 6.10%, 07/01/98(g)
(Cost $8,470,606) $8,470,606 $ 8,470,606
-----------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 99.86% 952,421,652
-----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.14% 1,314,888
-----------------------------------------------------------------------
NET ASSETS - 100.00% $953,736,540
=======================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 8.
(c) A portion of this security is subject to put options purchased. See Note 9.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 06/30/98 was $42,853,393
which represented 4.49% of the Fund's net assets.
(e) Zero coupon bond. Interest rate shown represents the rate of original issue
discount.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase are through
participation in joint accounts with other mutual funds, private accounts
and certain non-registered investment companies managed by the investment
advisor or its affiliates.
(g) Joint repurchase agreements entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Investment Abbreviations:
ADR - American Depositary Receipt Conv. - Convertible Deb. - Debentures DECS - Dividend Enhanced Convertible Stock Gtd. - Guaranteed PEPS - Participating Equity Preferred Shares Pfd. - Preferred PRIDES - Preferred Redeemable Increased Dividend Equity Security Sec. - Secured Sr. - Senior STRYPES - Structured Yield Product Exchangeable for Stock Sub. - Subordinated TAPS - Threshold Appreciation Priced Security TIDES - Term Income Deferrable Equity Security |
Unsec. - Unsecured
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-69
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, at market value (cost $783,352,069) $952,421,652 ---------------------------------------------------------------------- Receivables for: Investments sold 6,780,916 ---------------------------------------------------------------------- Capital stock sold 1,452,639 ---------------------------------------------------------------------- Dividends and interest 2,281,899 ---------------------------------------------------------------------- Options purchased 227,316 ---------------------------------------------------------------------- Investment for deferred compensation plan 16,205 ---------------------------------------------------------------------- Other assets 29,208 ---------------------------------------------------------------------- Total assets 963,209,835 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 8,660,394 ---------------------------------------------------------------------- Capital stock reacquired 104,490 ---------------------------------------------------------------------- Options written 224,882 ---------------------------------------------------------------------- Deferred compensation plan 16,205 ---------------------------------------------------------------------- Accrued advisory fees 456,148 ---------------------------------------------------------------------- Accrued administrative services fees 4,505 ---------------------------------------------------------------------- Accrued directors' fees 2,000 ---------------------------------------------------------------------- Accrued operating expenses 4,671 ---------------------------------------------------------------------- Total liabilities 9,473,295 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $953,736,540 ====================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 44,185,153 ====================================================================== Net asset value, offering and redemption price per share $ 21.59 ====================================================================== |
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Dividends (net of $102,911 foreign withholding tax) $ 5,275,424
------------------------------------------------------------------------------
Interest 3,400,181
------------------------------------------------------------------------------
Total investment income 8,675,605
------------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,435,599
------------------------------------------------------------------------------
Administrative services fees 27,639
------------------------------------------------------------------------------
Custodian fees 23,293
------------------------------------------------------------------------------
Directors' fees and expenses 5,991
------------------------------------------------------------------------------
Interest expense (Note 4) 58,555
------------------------------------------------------------------------------
Other 12,221
------------------------------------------------------------------------------
Total expenses 2,563,298
------------------------------------------------------------------------------
Less: Expenses paid indirectly (5,485)
------------------------------------------------------------------------------
Net expenses 2,557,813
------------------------------------------------------------------------------
Net investment income 6,117,792
------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 18,975,844
------------------------------------------------------------------------------
Foreign currencies 56,797
------------------------------------------------------------------------------
Futures contracts (321,187)
------------------------------------------------------------------------------
Option contracts (1,237,650)
------------------------------------------------------------------------------
17,473,804
------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 81,373,820
------------------------------------------------------------------------------
Foreign currencies (5,380)
------------------------------------------------------------------------------
Futures contracts 277,200
------------------------------------------------------------------------------
Option contracts 150,870
------------------------------------------------------------------------------
81,796,510
------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies,
futures and option contracts 99,270,314
------------------------------------------------------------------------------
Net increase in net assets resulting from operations $105,388,106
==============================================================================
|
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-70
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
-----------------------
OPERATIONS:
Net investment income $ 6,117,792 $ 4,767,618
--------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and option contracts 17,473,804 9,736,106
--------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 81,796,510 66,989,418
--------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 105,388,106 81,493,142
--------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (326,695)
--------------------------------------------------------------------------------
Distributions from net realized gains -- (490,042)
--------------------------------------------------------------------------------
Net increase from capital stock transactions 209,235,889 349,104,509
--------------------------------------------------------------------------------
Net increase in net assets 314,623,995 429,780,914
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 639,112,545 209,331,631
--------------------------------------------------------------------------------
End of period $953,736,540 $639,112,545
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $746,862,076 $537,626,187
--------------------------------------------------------------------------------
Undistributed net investment income 10,968,636 4,850,844
--------------------------------------------------------------------------------
Undistributed net realized gain on sales from
investment securities, foreign currencies, futures
and option contracts 26,895,677 9,421,873
--------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and option contracts 169,010,151 87,213,641
--------------------------------------------------------------------------------
$953,736,540 $639,112,545
================================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth and Income Fund (the "Fund"). The Fund's investment
objective is to seek growth of capital, with current income as a secondary
objective. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between the last bid and
asked prices based upon quotes furnished by independent sources. Securities
for which market quotations either are not readily available or are
questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors. Short-term obligations having 60 days
or less to maturity are valued at amortized cost which approximates market
value. Generally, trading in foreign securities is
AIM V.I. GROWTH AND INCOME FUND
FS-71
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written. The Fund will
not write a covered call option if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 25% of the net assets of the
Fund.
H. Put options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
options's underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The options's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $27,639 for such
services.
AIM V.I. GROWTH AND INCOME FUND
FS-72
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,818 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $5,485 under an expense
offset arrangement. The effect of the above arrangement resulted in a reduction
of the Fund's total expenses of $5,485 during the six months ended June 30,
1998.
NOTE 4 - BORROWINGS
Reverse repurchase agreements involve the sale of securities held by the Fund,
with an agreement that the Fund will repurchase such securities at an agreed-
upon price and date. Proceeds from reverse repurchase agreements are treated as
borrowings. The agreements are collateralized by the underlying securities and
are carried at the amount at which the securities will subsequently be
repurchased as specified in the agreements. The maximum amount outstanding
during the period ended June 30, 1998 was $18,886,000 while borrowings averaged
$2,074,785 per day with a weighted average interest rate of 5.61%.
NOTE 5 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June 30,
1998 was $759,707,519 and $541,546,154, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $180,248,162 --------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (11,558,458) --------------------------------------------------------------------------- Net unrealized appreciation of investment securities $169,689,704 =========================================================================== |
Cost of investments for tax purposes is $783,731,948.
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
June 30, December 31,
1998 1997
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Sold 10,738,330 $217,917,456 20,645,975 $361,699,824
------------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 44,268 816,737
------------------------------------------------------------------------------
Reacquired (421,720) (8,681,567) (745,032) (13,412,052)
------------------------------------------------------------------------------
10,316,610 $209,235,889 19,945,211 $349,104,509
==============================================================================
|
NOTE 8 - CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------
Beginning of period 4,712 $ 1,004,268
-------------------------------------------
Written 14,347 3,458,401
-------------------------------------------
Closed (14,047) (3,460,100)
-------------------------------------------
Exercised (2,550) (654,784)
-------------------------------------------
Expired (935) (124,574)
-------------------------------------------
End of period 1,527 $ 223,211
===========================================
|
Open call option contracts written at June 30, 1998 were as follows:
JUNE 30,
1998 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
----- ------------------------------------------------
DSC Communications Corp. Oct $35 800 $ 87,597 $ 77,500 $ 10,097
------------------------------------------------------------------------------------
Global Telesystems
Group, Inc. Jul 45 53 16,404 26,832 (10,428)
------------------------------------------------------------------------------------
Global Telesystems Group
Inc. Aug 50 135 66,929 63,281 3,648
------------------------------------------------------------------------------------
US Filter Corp. Aug 30 539 52,281 57,269 (4,988)
------------------------------------------------------------------------------------
1,527 $223,211 $224,882 $ (1,671)
====================================================================================
|
NOTE 9 - PUT OPTION CONTRACTS PURCHASED
Transactions in put options purchased during the six months ended June 30, 1998
are summarized as follows:
PUT OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
----------------
Beginning of period 2,187 $ 429,294
----------------------------------------
Purchased 2,389 292,659
----------------------------------------
Closed (1,937) (356,889)
----------------------------------------
Expired (300) (85,367)
----------------------------------------
End of period 2,339 $ 279,697
========================================
|
Open put option contracts purchased at June 30, 1998 were as follows:
JUNE 30,
1998 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS PAID VALUE (DEPRECIATION)
----- ------------- ------------------------------------
DSC Communications Corp. Oct $25 600 $104,300 $ 60,000 $(44,300)
--------------------------------------------------------------------------------------
DSC Communications Corp. Oct 27.50 200 50,600 33,750 (16,850)
--------------------------------------------------------------------------------------
Cendant Corp. Jul 20 500 42,193 31,250 (10,943)
--------------------------------------------------------------------------------------
Cendant Corp. Aug 20 500 40,562 70,313 29,751
--------------------------------------------------------------------------------------
United States Filter
Corp. Aug 25 539 42,042 32,003 (10,039)
--------------------------------------------------------------------------------------
2,339 $279,697 $227,316 $(52,381)
======================================================================================
|
AIM V.I. GROWTH AND INCOME FUND
FS-73
NOTE 10 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995 and
the period May 2, 1994 (date operations commenced) through January 31, 1995.
December 31,
June 30, --------------------------- January 31,
1998 1997 1996 1995 1995
-------- -------- -------- ------- -----------
Net asset value,
beginning of period $ 18.87 $ 15.03 $ 12.68 $ 9.98 $10.00
--------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.11 0.13 0.16 0.14 0.11
--------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 2.61 3.74 2.36 3.11 (0.02)
--------------------------------------------------------------------------------------
Total from investment
operations 2.72 3.87 2.52 3.25 0.09
--------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.01) (0.14) (0.14) (0.11)
--------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.02) (0.03) (0.41) --
--------------------------------------------------------------------------------------
Total distributions -- (0.03) (0.17) (0.55) (0.11)
--------------------------------------------------------------------------------------
Net asset value, end of
period $ 21.59 $ 18.87 $ 15.03 $ 12.68 $ 9.98
======================================================================================
Total return(a) 14.41% 25.72% 19.95% 32.65% 0.90%
======================================================================================
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $953,737 $639,113 $209,332 $38,567 $7,380
======================================================================================
Ratio of expenses to
average net assets 0.65%(b) 0.69% 0.78% 0.78%(c) 1.07%(c)(d)
======================================================================================
Ratio of net investment
income to average net
assets 1.55%(b) 1.15% 2.05% 1.92%(c) 1.95%(c)(d)
======================================================================================
Portfolio turnover rate 68% 135% 148% 145% 96%
======================================================================================
Average brokerage
commission rate paid(e) $ 0.0589 $ 0.0612 $ 0.0644 N/A N/A
======================================================================================
Borrowings for the
period:
Amount of debt
outstanding at end of
period (000s omitted) $ -- -- -- -- --
======================================================================================
Average amount of debt
outstanding during the
period (000s
omitted)(f) $ 2,075 -- -- -- --
======================================================================================
Average number of shares
outstanding during the
period (000s
omitted)(f) $ 39,118 -- -- -- --
======================================================================================
Average amount of debt
per share during the
period $ 0.0530 -- -- -- --
======================================================================================
|
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $797,761,022.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.72% (annualized) and 1.30% (annualized),
respectively.
(e) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
(f) Averages computed on a daily basis.
AIM V.I. GROWTH AND INCOME FUND
FS-74
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
PRINCIPAL MARKET
AMOUNT VALUE
CORPORATE BONDS & NOTES - 89.45%
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.70%
Park N View, Inc., Sr. Notes, 13.00%, 05/15/08(a)(b)
(Acquired 05/20/98; Cost $100,000) $ 100,000 $ 98,750
-------------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 2.76%
Exodus Communications Inc., Sr. Notes, 11.25%,
07/01/08(a) (Acquired 06/26/98; Cost $100,000) 100,000 100,875
-------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.70%
Metal Management, Inc., Sr. Sub. Notes, 10.00%,
05/15/08(a) (Acquired 06/10/98; $99,500) 100,000 98,750
-------------------------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER) - 2.96%
BPC Holding Corp., Series B Sr. Sec. Notes, 12.50%,
06/15/06 100,000 108,000
-------------------------------------------------------------------------------
FOODS - 5.26%
Favorite Brands International, Inc., Sr. Notes, 10.75%,
05/15/06(a) (Acquired 05/14/98; Cost $100,000) 100,000 101,250
-------------------------------------------------------------------------------
RAB Holdings Inc., Sr. Notes, 13.00%, 05/01/08(a)
(Acquired 05/05/98; Cost $90,900) 90,000 90,900
-------------------------------------------------------------------------------
192,150
-------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 5.58%
Resort At Summerlin LP, Sr. Sub. Notes, 13.00%,
12/15/07(a) (Acquired 05/04/98 - 06/15/98; Cost
$108,332) 105,958 110,644
-------------------------------------------------------------------------------
Venetian Casino/LV Sands, Sec. Gtd. Mortgage Notes,
12.25%, 11/15/04 90,000 93,375
-------------------------------------------------------------------------------
204,019
-------------------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 2.04%
Global Health Sciences, Sr. Notes, 11.00%, 05/01/08(a)
(Acquired 05/01/98; Cost $73,875) 75,000 74,625
-------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.83%
Mediq, Inc., Sr. Unsec. Sub. Notes, 11.00%, 06/01/08(a)
(Acquired 05/21/98; Cost $100,000) 100,000 103,500
-------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 2.45%
Pediatric Services of America, Sr. Unsec. Gtd. Sub.
Notes, 10.00%, 04/15/08 90,000 89,550
-------------------------------------------------------------------------------
HOMEBUILDING - 0.54%
Schuler Homes, Sr. Notes, 9.00%, 04/15/08(a) (Acquired
04/30/98; Cost $19,681) 20,000 19,700
-------------------------------------------------------------------------------
HOUSEWARES - 2.40%
Decora Industries Inc., Sr. Sec. Notes, 11.00%,
05/01/05(a) (Acquired 05/01/98 - 05/05/98; Cost $88,200) 90,000 87,750
-------------------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 2.67%
Booth Creek Ski Holdings, Sr. Notes, 12.50%, 03/15/07(a)
(Acquired 05/06/98; Cost $95,850) 90,000 97,425
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
LODGING-HOTELS - 2.79%
Stena Line A.B. (Sweden), Sr. Yankee Notes, 10.625%,
06/01/08 $ 100,000 $ 101,875
-------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 2.73%
Derby Cycle Corp., Sr. Notes, 10.00%, 05/15/08(a)
(Acquired 05/07/98; Cost $100,000) 100,000 99,750
-------------------------------------------------------------------------------
METAL FABRICATORS - 1.60%
Gulf States Steel, Inc., First Mortgage Notes, 13.50%,
04/15/03 60,000 58,500
-------------------------------------------------------------------------------
METALS (MINING) - 2.74%
Lodestar Holdings Inc., Sr. Notes, 11.50%, 05/15/05(a)
(Acquired 05/12/98; Cost $100,000) 100,000 100,000
-------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.75%
Ocean Rig Norway A.S. (Norway), Sr. Sec. Gtd. Notes,
10.25%, 06/01/08(a) (Acquired 05/10/98; Cost $67,000) 67,000 63,985
-------------------------------------------------------------------------------
PUBLISHING - 2.52%
Liberty Group Publishing Inc., Sr. Unsec. Disc. Notes,
11.625%, 02/01/09(c) 150,000 92,250
-------------------------------------------------------------------------------
RESTAURANTS - 1.44%
Planet Hollywood International Inc., Sr. Unsec. Sub.
Notes, 12.00%, 04/01/05 58,000 52,490
-------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 9.82%
Amazon.com Inc., Sr. Disc. Notes, 10.00%, 05/01/08(a)(c)
(Acquired 05/05/98; Cost $86,110) 140,000 85,750
-------------------------------------------------------------------------------
CEX Holdings Inc., Sr. Sub. Notes, 9.625%, 06/01/08(a)
(Acquired 05/20/98; Cost $100,000) 100,000 101,875
-------------------------------------------------------------------------------
Icon Health & Fitness, Series B Sr. Sub. Notes, 13.00%,
07/15/02 70,000 70,350
-------------------------------------------------------------------------------
US Office Products Co., Sr. Sub. Notes, 9.75%,
06/15/08(a) (Acquired 06/05/98; Cost $99,538) 100,000 101,125
-------------------------------------------------------------------------------
359,100
-------------------------------------------------------------------------------
SHIPPING - 5.53%
MC Shipping Inc., Sr. Notes, 11.25%, 03/01/08(a)
(Acquired 05/05/98 - 05/08/98; Cost $100,763) 100,000 100,500
-------------------------------------------------------------------------------
Pegasus Shipping Hellas Co. (Bermuda), Sr. Sec. Gtd.
Mortgage Notes, 11.875%, 11/15/04(a) (Acquired 05/05/98;
Cost $102,000) 100,000 101,750
-------------------------------------------------------------------------------
202,250
-------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.78%
Convergent Communications, Sr. Notes, 13.00%,
04/01/08(a)(d) (Acquired 05/04/98; Cost $89,775) 90,000 87,750
-------------------------------------------------------------------------------
KMC Telecom Holdings, Inc., Sr. Disc. Notes, 12.50%,
02/15/08(a)(c)(e) (Acquired 05/18/98; Cost $86,870) 146,000 86,870
-------------------------------------------------------------------------------
174,620
-------------------------------------------------------------------------------
|
AIM V.I. HIGH YIELD FUND
FS-75
PRINCIPAL MARKET
AMOUNT VALUE
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 5.26%
Dobson Communications Corp., Sr. Notes, 11.75%, 04/15/07 $ 75,000 $ 80,812
------------------------------------------------------------------------------
Spectrasite Holdings Inc., Sr. Disc. Notes, 12.00%,
07/15/08(a)(c) (Acquired 06/23/98; Cost $110,994) 200,000 111,500
------------------------------------------------------------------------------
192,312
------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 8.08%
Esprit Telecom Group PLC (United Kingdom), Sr. Notes,
10.875%, 06/15/08(a) (Acquired 06/19/98; Cost $100,000) 100,000 99,250
------------------------------------------------------------------------------
Long Distance International Inc., Sr. Notes, 12.25%,
04/15/08(a)(f) (Acquired 05/05/98; Cost $90,450) 90,000 90,450
------------------------------------------------------------------------------
Versatel Telecom BV (Netherlands), Sr. Notes, 13.25%,
05/15/08(a)(g) (Acquired 05/20/98; Cost $100,000) 100,000 105,500
------------------------------------------------------------------------------
295,200
------------------------------------------------------------------------------
TELEPHONE - 5.52%
Dobson Wireline Co., Sr. Notes, 12.25%, 06/15/08(a)
(Acquired 06/10/98; Cost $100,000) 100,000 98,500
------------------------------------------------------------------------------
US Xchange LLC, Sr. Notes, 15.00%, 07/01/08(a) (Acquired
06/22/98; Cost $100,000) 100,000 103,250
------------------------------------------------------------------------------
201,750
------------------------------------------------------------------------------
Total Corporate Bonds & Notes
(Cost $3,278,815) 3,269,176
------------------------------------------------------------------------------
SHARES
PREFERRED STOCK - 2.74%
BROADCASTING (TELEVISION, RADIO, & CABLE) - 2.74%
Benedek Communications, 11.50% PIK Pfd.(a) (Acquired
05/07/98; Cost $100,000) 100 100,000
------------------------------------------------------------------------------
RIGHTS & WARRANTS - 0.00%
METAL FABRICATORS - 0.00%
Gulf States Steel, Inc., expiring 04/15/03(h) 60 151
------------------------------------------------------------------------------
Total Rights & Warrants (Cost $166) 151
------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
REPURCHASE AGREEMENT - 7.02%(i)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98
(Cost $256,763) 256,763 256,763
------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.21% 3,626,090
------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.79% 29,032
------------------------------------------------------------------------------
NET ASSETS - 100.00% $3,655,122
==============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 06/30/98 was $2,621,974
which represented 71.73% of the Fund's net assets.
(b) Issued as a unit. This unit also includes 100 warrants to purchase 6.73833
shares of common stock per warrant.
(c) Discounted bond at purchase. Interest rate shown represents the coupon
rate at which the bond will accrue at a specified future date.
(d) Issued as a unit. This unit also includes 360 warrants to purchase 10.80
shares of common stock per warrant.
(e) Issued as a unit. This unit also includes 146 warrants to purchase 0.21785
shares of common stock per warrant.
(f) Issued as a unit. This unit also includes 90 warrants to purchase 15.0874
shares of common stock per warrant.
(g) Issued as unit. This unit also includes 100 warrants to purchase 6.667
shares of common stock per warrant.
(h) Non-income producing security.
(i) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investments advisor or its affiliates.
(j) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government agency
obligations, 0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate
market value at 06/30/98 of $209,153,696.
Abbreviations:
Disc. - Discounted
Gtd. - Guaranteed Pfd. - Preferred PIK - Payment in Kind Sec. - Secured Sr. - Senior Sub. - Subordinated |
Unsec. - Unsecured
See Notes to Financial Statements.
AIM V.I. HIGH YIELD FUND
FS-76
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments at market value (cost $3,635,744) $ 3,626,090 --------------------------------------------------------------------- Receivables for: Investments sold 85,730 --------------------------------------------------------------------- Dividends and interest 45,838 --------------------------------------------------------------------- Reimbursement from advisor 11,630 --------------------------------------------------------------------- Other assets 465 --------------------------------------------------------------------- Total assets 3,769,753 --------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 100,000 --------------------------------------------------------------------- Capital stock reacquired 26 --------------------------------------------------------------------- Accrued advisory fees 1,775 --------------------------------------------------------------------- Accrued directors' fees 1,384 --------------------------------------------------------------------- Accrued administrative services fees 7,600 --------------------------------------------------------------------- Accrued operating expenses 3,846 --------------------------------------------------------------------- Total liabilities 114,631 --------------------------------------------------------------------- Net assets applicable to shares outstanding $ 3,655,122 ===================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 --------------------------------------------------------------------- Outstanding 363,537 ===================================================================== Net asset value, offering and redemption price per share $10.05 ===================================================================== |
STATEMENT OF OPERATIONS
For the period May 1, 1998 (date operations commenced)
through June 30, 1998
(Unaudited)
INVESTMENT INCOME: Interest $51,679 ----------------------------------------------------------------------------- EXPENSES: Advisory fees 3,377 ----------------------------------------------------------------------------- Administrative services fees 7,600 ----------------------------------------------------------------------------- Custodian fees 3,403 ----------------------------------------------------------------------------- Directors' fees and expenses 1,384 ----------------------------------------------------------------------------- Professional fees 1,666 ----------------------------------------------------------------------------- Other 630 ----------------------------------------------------------------------------- Total expenses 18,060 ----------------------------------------------------------------------------- Less:Expenses paid indirectly (462) ----------------------------------------------------------------------------- Fees waived and reimbursed by advisor (11,630) ----------------------------------------------------------------------------- Net expenses 5,968 ----------------------------------------------------------------------------- Net investment income 45,711 ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES: Net realized gain (loss) from investment securities (22,354) ----------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investment securities (9,654) ----------------------------------------------------------------------------- Net gain (loss) from investment securities (32,008) ----------------------------------------------------------------------------- Net increase in net assets resulting from operations $13,703 ============================================================================= |
See Notes to Financial Statements.
AIM V.I. HIGH YIELD FUND
FS-77
STATEMENT OF CHANGES IN NET ASSETS
For the period May 1, 1998 (date operations commenced) through June 30, 1998
(Unaudited)
OPERATIONS:
Net investment income $ 45,711
---------------------------------------------------------------------
Net realized gain (loss) from investment securities (22,354)
---------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (9,654)
---------------------------------------------------------------------
Net increase in net assets resulting from operations 13,703
---------------------------------------------------------------------
Net increase from capital stock transactions 3,641,419
---------------------------------------------------------------------
Net increase in net assets 3,655,122
---------------------------------------------------------------------
NET ASSETS:
Beginning of period --
---------------------------------------------------------------------
End of period $3,655,122
=====================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,641,419
---------------------------------------------------------------------
Undistributed net investment income 45,711
---------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (22,354)
---------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (9,654)
---------------------------------------------------------------------
$3,655,122
=====================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. High Yield Fund (the "Fund"). The Fund's investment objective
is to achieve a high level of current income by investing primarily in
publicly traded non-investment grade debt securities. The Fund will also
consider the possibility of capital growth when it purchases and sells
securities. Debt securities of less than investment grade are considered "high
risk" securities (commonly referred to as junk bonds). These bonds may involve
special risks in addition to the risks associated with investment in higher
rated debt securities. High yield bonds may be more susceptible to real or
perceived adverse economic and competitive industry conditions than higher
grade bonds. Also, the secondary market in which high yield bonds are traded
may be less liquid than the market for higher grade bonds. The Fund commenced
operations on May 1, 1998. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - Debt securities (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service 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, yield, quality, coupon rate, maturity, type
of issue, individual trading characteristics and other market data.
Investment securities for which prices are not provided by the pricing
service and which are listed or traded on an exchange (except convertible
bonds) are valued at the last sales price on the exchange where principally
traded or, lacking any sales on a particular day, at the mean between the
closing bid and asked prices on that day unless the Board of Directors, or
persons designated by the Board of Directors, determines that over-the-
counter quotations more closely reflect the current market value of the
security. Securities traded in the over-the-counter market, except (i)
securities priced by the pricing service, (ii) securities for which
representative exchange prices are available, and (iii) securities reported
in the NASDAQ National Market System, are valued at the mean between
representative last bid and asked prices obtained from an electronic
quotation reporting system, if such prices are available, or from
established market makers. Each security reported in the NASDAQ National
Market System is valued at the last sales price on the valuation date or
absent a last sales price, at the mean between the closing bid and asked
prices. Securities for which market quotations either are not readily
available
AIM V.I. HIGH YIELD FUND
FS-78
or are questionable are valued at fair value as determined in good faith by
or under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors. Short-term obligations having 60 days
or less to maturity are valued at amortized cost which approximates market
value.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.625% of
the first $200 million of the Fund's average daily net assets, plus 0.55% of
the Fund's average daily net assets of the next $300 million, plus 0.50% of
the Fund's average daily net assets of the next $500 million, plus 0.45% of
the Fund's average daily net assets in excess of $1 billion. During the period
May 1, 1998 (date operations commenced) through June 30, 1998, AIM waived fees
and reimbursed expenses of $11,630.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the period May 1, 1998 (date operations commenced) through June 30,
1998, AIM was reimbursed $7,600 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $462 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $462 during the period May 1, 1998 (date
operations commenced) through June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees,
if so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the period May 1, 1998 (date operations
commenced) through June 30, 1998 was $3,803,279 and $405,863, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $25,342 ----------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (34,996) ----------------------------------------------------------------------------- Net unrealized appreciation (depreciation) of investment securities $(9,654) ============================================================================= |
Investments have the same cost for tax and financial statements.
AIM V.I. HIGH YIELD FUND
FS-79
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period May 1, 1998 (date
operations commenced) through June 30, 1998 were as follows:
JUNE 30, 1998
-------------------
SHARES AMOUNT
------- ----------
Sold 370,513 $3,711,665
--------------------------------
Reacquired (6,976) (70,246)
--------------------------------
363,537 $3,641,419
================================
|
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period May 1, 1998 (date operations commenced) through June 30,
1998.
JUNE 30,
1998
--------
Net asset value, beginning of period $10.00
------------------------------------------------------- ------
Income from investment operations:
Net investment income 0.13
------------------------------------------------------- ------
Net gains (losses) on securities (both realized and
unrealized) (0.08)
------------------------------------------------------- ------
Total from investment operations 0.05
------------------------------------------------------- ------
Net asset value, end of period $10.05
======================================================= ======
Total return(a) 0.50%
======================================================= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $3,655
======================================================= ======
Ratio of expenses to average net assets(b) 1.19%(c)(d)
======================================================= ======
Ratio of net investment income to average net assets(e) 8.46%(d)
======================================================= ======
Portfolio turnover rate 18%
======================================================= ======
|
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements was 3.34% (annualized).
(c) Includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would be
1.10% (annualized).
(d) Ratios are annualized and based on average net assets of
$3,233,456.
(e) After fee waivers and/or expense reimbursements. Ratio of net
investment income to average net assets prior to fee waivers
and/or expense reimbursement was 6.31% (annualized).
AIM V.I. HIGH YIELD FUND
FS-80
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY
INTERESTS - 94.27%
ARGENTINA - 1.46%
Banco Rio de La Plata S.A. (Banks - Major Regional) 40,000 $ 422,500
-------------------------------------------------------------------------------
Perez Companc S.A. - Class B (Oil & Gas - Refining &
Marketing) 136,442 685,039
-------------------------------------------------------------------------------
Telefonica de Argentina S.A. - ADR (Telephone) 32,900 1,067,194
-------------------------------------------------------------------------------
YPF Sociedad Anonima - ADR (Oil - International
Integrated) 50,400 1,515,150
-------------------------------------------------------------------------------
3,689,883
-------------------------------------------------------------------------------
AUSTRALIA - 1.18%
AMP Ltd. (Insurance - Life/Health)(a) 120,800 1,417,933
-------------------------------------------------------------------------------
Australia & New Zealand Banking Group Ltd. (Banks - Major
Regional) 168,700 1,167,151
-------------------------------------------------------------------------------
Telstra Corp. Ltd. (Telephone) 157,160 404,081
-------------------------------------------------------------------------------
2,989,165
-------------------------------------------------------------------------------
AUSTRIA - 0.34%
OMV A.G. (Oil & Gas - Refining & Marketing) 6,500 871,723
-------------------------------------------------------------------------------
BELGIUM - 1.69%
Barco Industries (Manufacturing - Diversified) 4,000 1,118,581
-------------------------------------------------------------------------------
Colruyt N.V. (Retail - Food Chains) 1,900 1,491,799
-------------------------------------------------------------------------------
UCB S.A. (Manufacturing - Diversified) 320 1,661,092
-------------------------------------------------------------------------------
4,271,472
-------------------------------------------------------------------------------
BRAZIL - 1.63%
Companhia Energetica de Minas Gerais (Electric Companies) 20,804 647,571
-------------------------------------------------------------------------------
Petroleo Brasileiro S.A. - Petrobras - Preferred (Oil &
Gas - Exploration & Production) 3,013 560,128
-------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A. (Telecommunications -
Cellular/Wireless) 7,177 570,908
-------------------------------------------------------------------------------
Telecomunicacoes de Sao Paulo S.A. - Rts., expiring
07/02/98 (Telecommunications - Cellular/Wireless)(a) 258 4,135
-------------------------------------------------------------------------------
Telecomunicacoes de Sao Paulo S.A. - TELESP - Preferred
(Telephone) 5,500 1,293,502
-------------------------------------------------------------------------------
Telecomunicacoes do Rio de Janeiro S.A.
(Telecommunications - Cellular/Wireless) 4,280 321,958
-------------------------------------------------------------------------------
Telerj Celular S.A. (Telecommunications -
Cellular/Wireless) 4,280 254,569
-------------------------------------------------------------------------------
Telesp Celular S.A. (Telecommunications -
Cellular/Wireless)(a) 5,500 456,530
-------------------------------------------------------------------------------
4,109,301
-------------------------------------------------------------------------------
CANADA - 5.69%
ATI Technologies, Inc. (Computers - Hardware)(a) 43,100 565,467
-------------------------------------------------------------------------------
Bank of Montreal (Banks - Major Regional) 35,000 1,927,195
-------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
CANADA - (CONTINUED)
BCE Inc. (Telecommunications - Cellular/Wireless) 28,100 $1,191,010
-------------------------------------------------------------------------------
Bombardier Inc. (Aerospace/Defense) 46,300 1,258,965
-------------------------------------------------------------------------------
Canadian National Railway Co. (Railroads) 9,000 478,125
-------------------------------------------------------------------------------
Geac Computer Corp. Ltd. (Services - Computer Systems)(a) 16,000 532,953
-------------------------------------------------------------------------------
Imasco Ltd. (Manufacturing - Diversified) 62,600 1,155,358
-------------------------------------------------------------------------------
Mitel Corp. (Communications Equipment)(a) 61,000 831,413
-------------------------------------------------------------------------------
Newcourt Credit Group, Inc. (Savings & Loan Companies)(a) 13,500 663,047
-------------------------------------------------------------------------------
Northern Telecom Ltd. - ADR (Communications Equipment) 22,217 1,260,814
-------------------------------------------------------------------------------
Royal Bank of Canada (Banks - Major Regional) 32,500 1,955,236
-------------------------------------------------------------------------------
Suncor, Inc. (Oil - International Integrated) 38,000 1,291,594
-------------------------------------------------------------------------------
Toronto-Dominion Bank (Banks - Regional) 28,100 1,270,283
-------------------------------------------------------------------------------
14,381,460
-------------------------------------------------------------------------------
CHILE - 0.21%
Cia. de Telecommunicaciones de Chile S.A. - ADR (Telephone) 25,500 517,969
-------------------------------------------------------------------------------
CROATIA - 0.23%
Pliva DD (Health Care - Drugs - Major Pharmaceutical)
(Acquired 05/13/98 - 05/20/98; Cost $604,917)(b) 36,000 585,000
-------------------------------------------------------------------------------
DENMARK - 0.94%
Novo Nordisk A/S - Class B (Health Care - Drugs - Major
Pharmaceutical) 17,200 2,373,968
-------------------------------------------------------------------------------
FINLAND - 1.29%
Nokia Oyj A.B. - Class A (Telecommunications -
Cellular/Wireless) 44,000 3,251,498
-------------------------------------------------------------------------------
FRANCE - 16.55%
Accor S.A. (Lodging - Hotels)(a) 5,500 1,539,581
-------------------------------------------------------------------------------
Alcatel Alsthom (Manufacturing - Diversified) 8,000 1,629,250
-------------------------------------------------------------------------------
Altran Technologies, S.A. (Services - Commercial & Consumer) 3,900 885,880
-------------------------------------------------------------------------------
AXA S.A. (Insurance - Multi-Line) 13,000 1,462,487
-------------------------------------------------------------------------------
Banque Nationale de Paris (Banks - Major Regional) 24,300 1,985,971
-------------------------------------------------------------------------------
Cap Gemini Sogeti S.A. (Computers - Software & Services) 20,800 3,269,088
-------------------------------------------------------------------------------
Danone (Foods) 8,000 2,206,303
-------------------------------------------------------------------------------
Elf Aquitaine S.A. (Oil - International Integrated) 9,000 1,265,613
-------------------------------------------------------------------------------
Essilor International S.A. (Manufacturing - Specialized) 4,475 1,893,056
-------------------------------------------------------------------------------
Lafarge S.A. (Engineering & Construction) 20,400 2,109,356
-------------------------------------------------------------------------------
Legrand S.A. (Housewares) 5,000 1,323,517
-------------------------------------------------------------------------------
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-81
MARKET
SHARES VALUE
FRANCE - (CONTINUED)
Pinault-Printemps-Redoute S.A. (Retail - General
Merchandise) 3,560 $ 2,980,164
-------------------------------------------------------------------------------
Promodes (Retail - Food Chains) 2,750 1,524,113
-------------------------------------------------------------------------------
PSA Peugeot Citreon (Automobiles) 7,000 1,505,501
-------------------------------------------------------------------------------
Renault S.A. (Automobiles)(a) 79,000 4,494,681
-------------------------------------------------------------------------------
Rexel S.A. (Distributors - Food & Health) 3,400 1,450,112
-------------------------------------------------------------------------------
Schneider S.A. (Housewares) 26,000 2,073,720
-------------------------------------------------------------------------------
Societe BIC S.A. (Office Equipment & Supplies) 10,250 1,253,164
-------------------------------------------------------------------------------
Societe Generale (Banks - Major Regional) 8,100 1,684,457
-------------------------------------------------------------------------------
Sodexho Alliance S.A. (Services - Commercial &
Consumer) 2,800 529,473
-------------------------------------------------------------------------------
Suez Lyonnaise des Eaux (Manufacturing - Diversified) 11,600 1,909,504
-------------------------------------------------------------------------------
Total S.A. - Class B (Oil & Gas - Refining & Marketing) 10,300 1,339,366
-------------------------------------------------------------------------------
Valeo S.A. (Auto Parts & Equipment) 15,000 1,533,625
-------------------------------------------------------------------------------
41,847,982
-------------------------------------------------------------------------------
GERMANY - 9.09%
Adidas A.G. (Footwear) 14,100 2,459,075
-------------------------------------------------------------------------------
Allianz A.G. (Insurance - Multi-Line) 4,300 1,434,288
-------------------------------------------------------------------------------
Bayerische Vereinsbank A.G. (Banks - Major Regional) 27,000 2,290,800
-------------------------------------------------------------------------------
BHF - Bank A.G. (Banks - Major Regional) 15,000 571,452
-------------------------------------------------------------------------------
Continental A.G. (Auto Parts & Equipment) 38,800 1,219,964
-------------------------------------------------------------------------------
Dresdner Bank A.G. (Banks - Major Regional) 24,000 1,297,621
-------------------------------------------------------------------------------
Henkel KGaA (Chemicals - Diversified) 24,700 2,444,934
-------------------------------------------------------------------------------
Karstadt A.G. (Retail - Department Stores) 5,000 2,433,039
-------------------------------------------------------------------------------
Linde A.G. (Machinery - Diversified) 1,600 1,100,205
-------------------------------------------------------------------------------
Mannesmann A.G. (Machinery - Diversified) 19,500 2,005,906
-------------------------------------------------------------------------------
Porsche A.G. (Automobiles) 300 865,081
-------------------------------------------------------------------------------
SAP A.G. (Computers - Software & Services) 2,650 1,609,133
-------------------------------------------------------------------------------
VEBA A.G. (Manufactuing - Diversified) 5,000 336,466
-------------------------------------------------------------------------------
Volkswagen A.G. (Automobiles) 3,000 2,899,684
-------------------------------------------------------------------------------
22,967,648
-------------------------------------------------------------------------------
HONG KONG - 1.67%
Cosco Pacific Ltd. (Financial - Diversified) 962,000 344,591
-------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. (Natural Gas) 966,187 1,097,515
-------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. - Wts., expiring
09/30/99 (Natural Gas)(a) 43,917 3,005
-------------------------------------------------------------------------------
HSBC Holdings PLC (Banks - Major Regional) 48,000 1,174,132
-------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail - Food Chains) 242,000 1,277,630
-------------------------------------------------------------------------------
Ng Fung Hong Ltd. (Foods) 460,000 317,671
-------------------------------------------------------------------------------
4,214,544
-------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
INDONESIA - 0.41%
Gulf Indonesia Resources Ltd. (Oil - International
Integrated)(a) 90,400 $ 1,039,600
-------------------------------------------------------------------------------
IRELAND - 1.24%
Allied Irish Banks PLC (Banks - Regional) 90,000 1,302,895
-------------------------------------------------------------------------------
Bank of Ireland (Banks - Major Regional) 38,500 789,874
-------------------------------------------------------------------------------
Elan Corp. PLC - ADR (Health Care - Drugs - Generic &
Other)(a) 16,000 1,029,000
-------------------------------------------------------------------------------
3,121,769
-------------------------------------------------------------------------------
ITALY - 6.00%
Assicurazioni Generali (Insurance - Multi - Line) 49,100 1,589,798
-------------------------------------------------------------------------------
Banca Commerciale Italiana (Banks - Major Regional) 209,300 1,253,503
-------------------------------------------------------------------------------
Banca di Roma (Banks - Major Regional)(a) 645,000 1,304,339
-------------------------------------------------------------------------------
Credito Italiano S.p.A. (Banks - Major Regional) 225,000 1,169,987
-------------------------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A. (Oil & Gas - Refining &
Marketing) 201,000 1,310,021
-------------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banks - Major
Regional) 81,000 1,275,987
-------------------------------------------------------------------------------
Pirelli S.p.A. (Electrical Equipment) 522,442 1,627,826
-------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications -
Cellular/Wireless) 485,000 2,960,636
-------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 365,000 2,667,936
-------------------------------------------------------------------------------
15,160,033
-------------------------------------------------------------------------------
JAPAN - 6.23%
Advantest Corp. (Electronics - Instrumentation) 20,630 1,114,570
-------------------------------------------------------------------------------
Bridgestone Corp. (Auto Parts & Equipment) 47,000 1,116,454
-------------------------------------------------------------------------------
Canon, Inc. (Office Equipment & Supplies) 40,000 912,515
-------------------------------------------------------------------------------
Fuji Photo Film Co. (Photography/Imaging) 26,000 909,473
-------------------------------------------------------------------------------
Hitachi Cable, Ltd. (Metal Fabricators) 124,000 599,884
-------------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobiles) 37,000 1,323,725
-------------------------------------------------------------------------------
Ibiden Co., Ltd. (Electronics - Component Distributors) 62,000 859,864
-------------------------------------------------------------------------------
Minebea Co. Ltd. (Electronics - Component
Distributors)(a) 79,000 790,114
-------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. (Telephone) 1,500 1,249,276
-------------------------------------------------------------------------------
Nippon Television Network Corp. (Broadcasting -
Television, Radio & Cable) 2,690 783,155
-------------------------------------------------------------------------------
NTT Data Communications Systems Co. (Computers - Software
& Services) 140 507,966
-------------------------------------------------------------------------------
Rohm Co. (Electronics - Component Distributors) 10,000 1,032,010
-------------------------------------------------------------------------------
SMC Corp. (Machinery - Diversified) 10,200 779,331
-------------------------------------------------------------------------------
Sony Corp. (Electronics - Component Distributors) 23,000 1,990,513
-------------------------------------------------------------------------------
TDK Corp. (Electrical Equipment) 24,000 1,781,576
-------------------------------------------------------------------------------
15,750,426
-------------------------------------------------------------------------------
MEXICO - 1.66%
Coca-Cola Femsa S.A. - ADR (Beverages - Non-Alcoholic) 39,800 691,525
-------------------------------------------------------------------------------
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-82
MARKET
SHARES VALUE
MEXICO - (CONTINUED)
Fomento Economico Mexicano, S.A. de C.V. - Class B
(Beverages - Alcoholic)(a) 23,820 $ 750,330
-------------------------------------------------------------------------------
Grupo Televisa S.A. - GDR (Entertainment)(a) 24,700 929,337
-------------------------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de C.V. - Class A (Paper &
Forest Products) 227,000 802,410
-------------------------------------------------------------------------------
Panamerican Beverages, Inc. - Class A (Beverages - Non-
Alcoholic) 28,100 883,394
-------------------------------------------------------------------------------
TV Azteca, S.A. de C.V. - ADR (Broadcasting - Television,
Radio & Cable) 13,400 144,888
-------------------------------------------------------------------------------
4,201,884
-------------------------------------------------------------------------------
NETHERLANDS - 5.66%
CMG PLC (Computers - Software & Services) 70,800 2,183,605
-------------------------------------------------------------------------------
Getronics N.V. (Computers - Software & Services) 42,500 2,205,539
-------------------------------------------------------------------------------
IHC Caland N.V. (Manufacturing - Specialized) 6,150 346,381
-------------------------------------------------------------------------------
Koninklijke Ahold N.V. (Retail - Food Chains) 60,000 1,927,249
-------------------------------------------------------------------------------
Koninklijke Numico N.V. (Foods) 15,000 470,007
-------------------------------------------------------------------------------
Philips Electronics N.V. (Household Furniture &
Appliances) 21,000 1,766,399
-------------------------------------------------------------------------------
Randstad Holdings N.V. (Services - Commercial & Consumer) 13,000 783,344
-------------------------------------------------------------------------------
Vedior N.V. (Business Services)(a) 20,229 572,169
-------------------------------------------------------------------------------
Vendex International N.V. (Retail - General Merchandise) 20,500 771,415
-------------------------------------------------------------------------------
VNU-Verenigde Nederlandse Uitgeversbedrijven Verenigd
Bezit (Publishing) 90,100 3,275,235
-------------------------------------------------------------------------------
14,301,343
-------------------------------------------------------------------------------
NORWAY - 0.74%
Merkantildata ASA (Services - Commercial & Consumer) 44,000 556,889
-------------------------------------------------------------------------------
Petroleum Geo-Services A.S.A. (Oil - International
Integrated)(a) 42,000 1,309,760
-------------------------------------------------------------------------------
1,866,649
-------------------------------------------------------------------------------
PHILIPPINES - 0.25%
Philippine Long Distance Telephone Co. (Telephone) 16,660 379,544
-------------------------------------------------------------------------------
Philippine Long Distance Telephone Co. - ADR (Telephone) 11,600 262,450
-------------------------------------------------------------------------------
641,994
-------------------------------------------------------------------------------
PORTUGAL - 2.67%
Banco Comercial Portugues, S.A. (Banks - Major Regional) 66,200 1,880,926
-------------------------------------------------------------------------------
Cimpor-Cimentos de Portugal S.A. (Construction - Cement &
Aggregates) 20,000 703,142
-------------------------------------------------------------------------------
Electricidade de Portugal, S.A. - ADR (Electric
Companies)(a) 13,800 635,663
-------------------------------------------------------------------------------
Portugal Telecom S.A. (Telephone) 50,000 2,651,679
-------------------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Telecommunications - Cellular/Wireless)(a) 5,000 888,407
-------------------------------------------------------------------------------
6,759,817
-------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
SPAIN - 3.27%
Banco Bilbao Vizcaya, S.A. (Banks - Major Regional) 42,900 $ 2,201,650
-------------------------------------------------------------------------------
Corp. Financiera Reunida, S.A. (Investment Management)(a) 49,400 745,752
-------------------------------------------------------------------------------
Endesa S.A. (Electric Companies) 49,200 1,076,400
-------------------------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 102,000 1,656,211
-------------------------------------------------------------------------------
Telefonica de Espana (Telephone) 56,000 2,589,110
-------------------------------------------------------------------------------
8,269,123
-------------------------------------------------------------------------------
SWEDEN - 1.71%
Hennes & Mauritz A.B. - Class B (Retail - Specialty -
Apparel) 21,494 1,371,843
-------------------------------------------------------------------------------
Sparbanken Sverige A.B. - Class A (Banks - Major
Regional) 52,000 1,564,890
-------------------------------------------------------------------------------
Svenska Handelsbanken - Class A (Banks - Major Regional) 14,591 676,949
-------------------------------------------------------------------------------
WM-Data A.B. (Computers - Software & Services) 20,500 712,038
-------------------------------------------------------------------------------
4,325,720
-------------------------------------------------------------------------------
SWITZERLAND - 6.30%
Clariant A.G. (Chemicals - Specialty) 3,800 2,506,239
-------------------------------------------------------------------------------
Credit Suisse Group (Banks - Major Regional) 11,400 2,540,107
-------------------------------------------------------------------------------
Holderbank Financiere Glarus A.G. - Class B
(Construction - Cement & Aggregates) 1,150 1,465,307
-------------------------------------------------------------------------------
Julius Baer Holding A.G. (Banks - Major Regional)(a) 230 720,506
-------------------------------------------------------------------------------
Nestle S.A. (Foods) 1,400 3,000,198
-------------------------------------------------------------------------------
Rieter Holdings Ltd. (Machinery - Diversified) 2,100 1,455,734
-------------------------------------------------------------------------------
UBS AG - Registered (Banks - Major Regional)(a) 7,108 2,646,521
-------------------------------------------------------------------------------
Zurich Versicherungs-Gesellschaft (Insurance - Multi-
Line) 2,500 1,597,676
-------------------------------------------------------------------------------
15,932,288
-------------------------------------------------------------------------------
TAIWAN - 0.08%
Taiwan Semiconductor Manufacturing Co. - ADR
(Electronics - Semiconductors)(a) 12,000 202,500
-------------------------------------------------------------------------------
UNITED KINGDOM - 16.08%
Airtours PLC (Services - Commercial & Consumer) 135,450 1,016,070
-------------------------------------------------------------------------------
Bodycote International PLC (Chemicals - Specialty) 40,500 717,232
-------------------------------------------------------------------------------
Boots Co., PLC (Retail - Drug Stores) 75,000 1,244,254
-------------------------------------------------------------------------------
British Aerospace PLC (Aerospace/Defense) 168,000 1,288,310
-------------------------------------------------------------------------------
British Petroleum Co. PLC (Oil & Gas - Refining &
Marketing) 40,400 589,917
-------------------------------------------------------------------------------
Cable & Wireless PLC (Telecommunications -
Cellular/Wireless) 165,000 2,006,845
-------------------------------------------------------------------------------
Compass Group PLC (Services - Commercial & Consumer) 156,000 1,795,735
-------------------------------------------------------------------------------
EMAP PLC (Publishing) 94,000 1,903,395
-------------------------------------------------------------------------------
General Electric Co. PLC (Manufacturing - Diversified) 168,100 1,450,563
-------------------------------------------------------------------------------
GKN PLC (Manufacturing - Diversified) 100,000 1,275,579
-------------------------------------------------------------------------------
Granada Group PLC (Leisure Time - Products) 43,000 791,678
-------------------------------------------------------------------------------
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-83
MARKET
SHARES VALUE
UNITED KINGDOM - (CONTINUED)
Hays PLC (Services - Commercial & Consumer) 104,000 $ 1,746,216
--------------------------------------------------------------------------------
Kingfisher PLC (Retail - Department Stores) 94,000 1,515,492
--------------------------------------------------------------------------------
Ladbroke Group PLC (Leisure Time - Products) 234,000 1,286,205
--------------------------------------------------------------------------------
Lloyds TSB Group PLC (Banks - Major Regional) 57,000 798,503
--------------------------------------------------------------------------------
Misys PLC (Services - Commercial & Consumer) 38,000 2,161,719
--------------------------------------------------------------------------------
Pearson PLC (Specialty Printing) 95,000 1,742,707
--------------------------------------------------------------------------------
Provident Financial PLC (Consumer Finance) 89,544 1,406,249
--------------------------------------------------------------------------------
Railtrack Group PLC (Shipping) 146,144 3,586,751
--------------------------------------------------------------------------------
Rentokil Initial PLC (Services - Commercial &
Consumer) 274,000 1,972,996
--------------------------------------------------------------------------------
Royal & Sun Alliance Insurance Group PLC (Insurance -
Multi-Line) 133,000 1,376,548
--------------------------------------------------------------------------------
Sage Group PLC (The) (Computers - Software & Services) 22,100 625,238
--------------------------------------------------------------------------------
SEMA Group PLC (Services - Commercial & Consumer) 68,000 800,934
--------------------------------------------------------------------------------
Smiths Industries PLC (Machinery - Diversified) 26,000 360,537
--------------------------------------------------------------------------------
Stagecoach Holdings PLC (Shipping) 16,350 348,278
--------------------------------------------------------------------------------
Thomson Travel Group PLC (Travel Services)(a) 225,900 705,759
--------------------------------------------------------------------------------
Unilever PLC (Foods) 208,000 2,217,086
--------------------------------------------------------------------------------
Vodafone Group PLC (Telecommunications -
Cellular/Wireless) 185,000 2,350,550
--------------------------------------------------------------------------------
WPP Group PLC (Services - Advertising/Marketing) 240,000 1,574,801
--------------------------------------------------------------------------------
40,656,147
--------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$165,355,369) 238,300,906
--------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
FOREIGN CONVERTIBLE BONDS - 0.57%
FRANCE - 0.57%
AXA-UAP (Insurance - Multi-Line), Conv. Sr. Deb.,
4.50%, 01/01/99(c) (Cost $854,817) FRF 3,307,500 $ 1,452,044
--------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.45%(d)
Dean Witter Reynolds Inc., 6.10%, 07/01/98(e)
(Cost $16,297,113) $16,297,113 16,297,113
--------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.29% 256,050,063
--------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.29%) (3,258,317)
--------------------------------------------------------------------------------
NET ASSETS - 100.00% $252,791,746
===============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of this security has been determined in
accordance with procedures established by the Board of Directors. The
market value at 06/30/98 represented 0.23% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(d) Collateral on repurchase aggreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
FRF - French Franc
GDR. - Global Depositary Receipt
Sr. - Senior
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-84
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, at market value (cost $182,507,299) $256,050,063 ---------------------------------------------------------------------- Foreign currencies, at value (cost $1,507,064) 1,525,070 ---------------------------------------------------------------------- Receivables for: Capital stock sold 120,749 ---------------------------------------------------------------------- Investments sold 805,936 ---------------------------------------------------------------------- Dividends and interest 619,439 ---------------------------------------------------------------------- Investment for deferred compensation plan 18,856 ---------------------------------------------------------------------- Total assets 259,140,113 ---------------------------------------------------------------------- LIABILITIES: Payables for: Capital stock reacquired 13,600 ---------------------------------------------------------------------- Investments purchased 6,121,937 ---------------------------------------------------------------------- Deferred compensation plan 18,856 ---------------------------------------------------------------------- Accrued advisory fees 153,352 ---------------------------------------------------------------------- Accrued administrative services fees 8,286 ---------------------------------------------------------------------- Accrued directors' fees 2,114 ---------------------------------------------------------------------- Accrued operating expenses 30,222 ---------------------------------------------------------------------- Total liabilities 6,348,367 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $252,791,746 ====================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 12,421,555 ====================================================================== Net asset value, offering and redemption price per share $20.35 ====================================================================== |
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Dividends (net of $311,053 foreign withholding tax) $ 2,149,303
----------------------------------------------------------------------------
Interest 445,443
----------------------------------------------------------------------------
Total investment income 2,594,746
----------------------------------------------------------------------------
EXPENSES:
Advisory fees 861,655
----------------------------------------------------------------------------
Administrative services fees 8,287
----------------------------------------------------------------------------
Custodian fees 110,060
----------------------------------------------------------------------------
Directors' fees and expenses 3,173
----------------------------------------------------------------------------
Organizational costs 964
----------------------------------------------------------------------------
Other 66,295
----------------------------------------------------------------------------
Total expenses 1,050,434
----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,513)
----------------------------------------------------------------------------
Net expenses 1,048,921
----------------------------------------------------------------------------
Net investment income 1,545,825
----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 4,245,320
----------------------------------------------------------------------------
Foreign currencies (211,491)
----------------------------------------------------------------------------
4,033,829
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 33,321,825
----------------------------------------------------------------------------
Foreign currencies (14,445)
----------------------------------------------------------------------------
33,307,380
----------------------------------------------------------------------------
Net gain from investment securities and foreign currencies 37,341,209
----------------------------------------------------------------------------
Net increase in net assets resulting from operations $38,887,034
============================================================================
|
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-85
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
-----------------------
OPERATIONS:
Net investment income $ 1,545,825 $ 1,372,766
--------------------------------------------------------------------------------
Net realized gain (loss) from investment securities
and foreign currencies 4,033,829 (743,433)
--------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and foreign currencies 33,307,380 11,878,346
--------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 38,887,034 12,507,679
--------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (955,397)
--------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (3,362,028)
--------------------------------------------------------------------------------
Net increase from capital stock transactions 2,882,127 37,094,253
--------------------------------------------------------------------------------
Net increase in net assets 41,769,161 45,284,507
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 211,022,585 165,738,078
--------------------------------------------------------------------------------
End of period $252,791,746 $211,022,585
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $173,165,191 $170,283,064
--------------------------------------------------------------------------------
Undistributed net investment income 2,680,679 1,134,854
--------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currencies 3,453,049 (580,780)
--------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currencies 73,492,827 40,185,447
--------------------------------------------------------------------------------
$252,791,746 $211,022,585
================================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to AIM V.I. International Equity Fund (the "Fund"). The Fund's investment
objective is to seek to provide long-term growth of capital by investing in a
diversified portfolio of international equity securities the issuers of which
are considered by AIM to have strong earnings momentum. Currently, shares of
the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on
quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices
are not provided by any of the above methods are valued at the mean between
last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's
AIM V.I. INTERNATIONAL EQUITY FUND
FS-86
officers in a manner specifically authorized by the Board of Directors.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the New York Stock Exchange
which will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on an accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
E. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $250 million of the Fund's average daily net assets, plus 0.70% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $8,287 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,158 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $1,513 under an expense
offset arrangement. The effect of the above arrangement resulted in a
reduction of the Fund's total expenses of $1,513 during the six months ended
June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June
30, 1998 was $75,292,854 and $73,236,498, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $78,216,450 -------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (4,673,686) -------------------------------------------------------------------------- Net unrealized appreciation of investment securities $73,542,764 ========================================================================== |
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sold 1,107,484 $ 21,680,487 2,963,552 $ 50,938,182
------------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 257,449 4,317,425
------------------------------------------------------------------------------
Reacquired (1,005,485) (18,798,360) (1,031,143) (18,161,354)
------------------------------------------------------------------------------
101,999 $ 2,882,127 2,189,858 $ 37,094,253
==============================================================================
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-87
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995 and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
JUNE 30, --------------------------- -------------------
1998 1997 1996 1995 1995 1994
-------- -------- -------- ------- ------- -------
Net asset value,
beginning of period $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49 $ 10.00
--------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.12 0.10 0.07 0.07 0.06 --
--------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 3.10 1.03 2.67 2.58 (1.49) 2.49
--------------------------------------------------------------------------------------------------
Total from investment
operations 3.22 1.13 2.74 2.65 (1.43) 2.49
--------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.08) (0.04) (0.02) (0.03) --
--------------------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.28) -- -- -- --
--------------------------------------------------------------------------------------------------
Total distributions -- (0.36) (0.04) (0.02) (0.03) --
--------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 20.35 $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49
==================================================================================================
Total return(a) 18.80% 6.94% 20.05% 24.04% (11.48)% 24.90%
==================================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $252,792 $211,023 $165,738 $82,257 $55,019 $23,533
==================================================================================================
Ratio of expenses to
average net assets 0.91%(b) 0.93% 0.96% 1.15%(c) 1.27%(d) 1.98%(c)(d)
==================================================================================================
Ratio of net investment
income to average net
assets 1.35%(b) 0.68% 0.78% 0.75%(c) 0.60%(e) (0.15)%(c)(e)
==================================================================================================
Portfolio turnover rate 34% 57% 59% 67% 64% 26%
==================================================================================================
Average brokerage
commission rate paid(f) $ 0.0228 $ 0.0173 $ 0.0209 N/A N/A N/A
==================================================================================================
|
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $231,678,745.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.28% and 3.06% (annualized), for January 1995 and 1994 respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.59% and (1.23)% (annualized), for January 1995 and
1994 respectively.
(f) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-88
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
PAR
(000) VALUE
COMMERCIAL PAPER - 53.37%(a)
ASSET-BACKED SECURITIES - COMMERCIAL LOANS/LEASES - 4.62%
Centric Capital Corp.
5.50%, 07/17/98 $ 750 $ 748,166
-----------------------------------------------------------------------------
5.50%, 08/14/98 1,000 993,278
-----------------------------------------------------------------------------
5.52%, 10/02/98 1,000 985,740
-----------------------------------------------------------------------------
2,727,184
-----------------------------------------------------------------------------
ASSET-BACKED SECURITIES - MULTI PURPOSE - 23.77%
Clipper Receivables Corp.
5.59%, 08/10/98 3,000 2,981,367
-----------------------------------------------------------------------------
Edison Asset Securitization, LLC
5.58%, 08/04/98 1,400 1,392,622
-----------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.53%, 07/16/98 2,210 2,204,908
-----------------------------------------------------------------------------
Monte Rosa Capital Corp.
5.60%, 08/14/98 3,000 2,979,466
-----------------------------------------------------------------------------
Receivables Capital Corp.
5.53%, 07/06/98 1,000 999,232
-----------------------------------------------------------------------------
5.51%, 07/07/98 468 467,570
-----------------------------------------------------------------------------
Sheffield Receivables Corp.
5.56%, 07/08/98 3,000 2,996,757
-----------------------------------------------------------------------------
14,021,922
-----------------------------------------------------------------------------
BEVERAGES - 5.05%
Diageo Capital PLC
5.50%, 07/31/98 1,000 995,416
-----------------------------------------------------------------------------
5.48%, 08/31/98 2,000 1,981,429
-----------------------------------------------------------------------------
2,976,845
-----------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 1.68%
First Data Corp.
5.52%, 08/18/98 1,000 992,640
-----------------------------------------------------------------------------
DRUGS - 5.07%
Novartis Finance Corp.
5.50%, 07/17/98 3,000 2,992,667
-----------------------------------------------------------------------------
FINANCE (BUSINESS CREDIT) - 5.06%
National Rural Utilities Cooperative Finance Corp.
5.50%, 08/07/98 3,000 2,983,042
-----------------------------------------------------------------------------
MACHINERY - 1.74%
Dover Corp.
5.59%, 08/18/98 1,034 1,026,293
-----------------------------------------------------------------------------
METAL MINING - 4.69%
RTZ America, Inc.
5.54%, 08/18/98 1,000 992,613
-----------------------------------------------------------------------------
5.46%, 09/04/98 1,000 990,142
-----------------------------------------------------------------------------
5.50%, 11/04/98 800 784,600
-----------------------------------------------------------------------------
2,767,355
-----------------------------------------------------------------------------
|
PAR
(000) VALUE
OIL & GAS (INTEGRATED) - 1.69%
Shell Martinez Refining Co.
5.60%, 07/14/98(b) $1,000 $ 1,000,000
---------------------------------------------------------------------------
Total Commercial Paper 31,487,948
---------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 17.80%(c)
Citicorp Securities, Inc.
6.75%, 01/25/99(d) 2,000 2,000,000
---------------------------------------------------------------------------
The Goldman Sachs Group, L.P.
5.6523%, 10/19/98(e) 2,500 2,500,000
---------------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.
6.80%, 08/17/98(f) 3,000 3,000,000
---------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.
6.60%, 11/23/98(g) 3,000 3,000,000
---------------------------------------------------------------------------
Total Master Note Agreements 10,500,000
---------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 4.24%
Federal National Mortgage Association
5.261%, 06/02/99(h) 2,000 2,000,000
---------------------------------------------------------------------------
Student Loan Marketing Association
5.321%, 08/20/98(h) 500 499,996
---------------------------------------------------------------------------
Total U.S. Government Agency Securities 2,499,996
---------------------------------------------------------------------------
Total Investments, excluding Repurchase Agreements 44,487,944
---------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 25.06%(i)
BZW Securities Inc.
6.10%, 07/01/98(j) 2,900 2,900,000
---------------------------------------------------------------------------
Dresdner Kleinwort Benson North America LLC
5.85%, 07/01/98(k) 1,087 1,087,171
---------------------------------------------------------------------------
Greenwich Capital Markets, Inc.
6.00%, 07/01/98(l) 2,900 2,900,000
---------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc.
6.125%(m) 5,000 5,000,000
---------------------------------------------------------------------------
UBS Securities LLC
6.25%, 07/01/98(n) 2,900 2,900,000
---------------------------------------------------------------------------
Total Repurchase Agreements 14,787,171
---------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.47% 59,275,115(o)
---------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.47)% (276,458)
---------------------------------------------------------------------------
NET ASSETS - 100.00% $58,998,657
===========================================================================
|
AIM V.I. MONEY MARKET FUND
FS-89
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases, the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(b) Trust certificates representing an interest in a trust (comprised of
eligible debt obligations) entitling the Fund to receive interest. The Fund
has the right, upon seven calendar days' notice to the trustee, to put its
certificates to the trust at par value plus accrued interest. Because trust
certificates involve a trust and a third party put feature, they involve
complexities and potential risks that may not be present where the debt
obligation is owned directly. Interest rates are redetermined periodically.
Rates shown are the rates in effect on 06/30/98.
(c) The investments in master note agreements are through participation in
joint accounts with other mutual funds, private accounts, and certain
nonregistered investment companies managed by the investment advisor or its
affiliates.
(d) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon three business days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 06/30/98.
(e) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon seven days' prior notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
06/30/98.
(f) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 2 business days' notice to the issuer. Interest
rates on master notes are redetermined periodically. Rate shown is the rate
in effect on 06/30/98.
(g) Master Note Purchase Agreement may be terminated by any party upon three
business days' prior written notice. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on 06/30/98.
(h) Interest rates are redetermined weekly. Rate shown is the rate in effect on
06/30/98.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 % of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$300,050,833. Collateralized by $301,403,000 U.S. Government obligations,
0% to 6.70% due 08/20/98 to 05/06/08 with an aggregate market value at
06/30/98 of $306,002,831.
(k) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$70,011,375. Collateralized by $71,382,000 U.S. Government obligations, 0%
to 6.30% due 07/02/98 to 12/03/01 with an aggregate market value at
06/30/98 of $71,404,458.
(l) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,333. Collateralized by $205,565,153 U.S. Government obligations,
6.00% to 12.25% due 09/01/01 to 06/01/28 with an aggregate market value at
06/30/98 of $204,004,737.
(m) Open repurchase agreement entered into 06/30/98. Collateralized by
$622,412,000 U.S. Government obligations, 0% to 9.65% due 09/18/98 to
12/15/43 with an aggregate market value at 06/30/98 of $612,000,396.
(n) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$500,086,806. Collateralized by $585,571,930 U.S. Government obligations,
0% to 11% due 06/22/00 to 02/01/28 with an aggregate market value at
06/30/98 of $510,079,125.
(o) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-90
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS:
Investments, excluding repurchase agreements, at
value (amortized cost) $ 44,487,944
----------------------------------------------------------------------
Repurchase agreements 14,787,171
----------------------------------------------------------------------
Interest receivable 81,820
----------------------------------------------------------------------
Investment for deferred compensation plan 18,306
----------------------------------------------------------------------
Other assets 290
----------------------------------------------------------------------
Total assets 59,375,531
----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 324,007
----------------------------------------------------------------------
Deferred compensation plan 18,306
----------------------------------------------------------------------
Accrued advisory fees 20,869
----------------------------------------------------------------------
Accrued administrative services fees 2,942
----------------------------------------------------------------------
Accrued directors' fees 1,983
----------------------------------------------------------------------
Accrued operating expenses 8,767
----------------------------------------------------------------------
Total liabilities 376,874
----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 58,998,657
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
----------------------------------------------------------------------
Outstanding 58,998,600
======================================================================
Net asset value, offering and redemption price per share $ 1.00
======================================================================
|
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME: Interest $1,655,675 ---------------------------------------------------------------- EXPENSES: Advisory fees 117,321 ---------------------------------------------------------------- Administrative services fees 17,652 ---------------------------------------------------------------- Custodian fees 10,845 ---------------------------------------------------------------- Directors' fees and expenses 4,367 ---------------------------------------------------------------- Legal fees 9,235 ---------------------------------------------------------------- Organizational costs 964 ---------------------------------------------------------------- Other 10,018 ---------------------------------------------------------------- Total expenses 170,402 ---------------------------------------------------------------- Net investment income 1,485,273 ---------------------------------------------------------------- Net increase in net assets resulting from operations $1,485,273 ================================================================ |
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-91
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
OPERATIONS:
Net investment income $ 1,485,273 $ 3,190,054
---------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,485,273 3,190,054
---------------------------------------------------------------------------
Dividends to shareholders from net investment
income (1,485,273) (3,190,054)
---------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions 364,036 (4,894,872)
---------------------------------------------------------------------------
Net increase (decrease) in net assets 364,036 (4,894,872)
---------------------------------------------------------------------------
NET ASSETS:
Beginning of period 58,634,621 63,529,493
---------------------------------------------------------------------------
End of period $58,998,657 $58,634,621
===========================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $58,998,600 $58,634,564
---------------------------------------------------------------------------
Undistributed net realized gain from investment
securities 57 57
---------------------------------------------------------------------------
$58,998,657 $58,634,621
===========================================================================
|
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Money Market Fund (the "Fund"). The Fund's investment
objective is to seek to provide as high a level of current income as is
consistent with the preservation of capital and liquidity. Currently, shares
of the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - The Fund's securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter, assumes a
constant amortization to maturity of any discount or premiums.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is recorded as earned from settlement date and is
recorded on the accrual basis. Distributions to shareholders are declared
and paid daily.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements. The Fund has a
capital loss carryforward (which may be carried forward to offset future
taxable gains, if any) of $846 which expires, if not previously utilized,
in the year 2003. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.40% of
the first $250 million of the Fund's average daily net assets, plus 0.35% of
the Fund's average daily net assets in excess of $250 million.
AIM V.I. MONEY MARKET FUND
FS-92
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $17,652 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,349 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30,
1998 and the year ended December 31, 1997 were as follows:
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
Sold 44,191,285 $ 44,191,285 88,948,357 $ 88,948,357
---------------------- ----------- ------------ ----------- ------------
Issued as reinvestment
of distributions 1,485,273 1,485,273 3,190,054 3,190,054
---------------------- ----------- ------------ ----------- ------------
Reacquired (45,312,522) (45,312,522) (97,033,283) (97,033,283)
---------------------- ----------- ------------ ----------- ------------
364,036 $ 364,036 (4,894,872) $ (4,894,872)
=========== ============ =========== ============
|
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995 and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
JUNE 30, ------------------------- -------------------
1998 1997 1996 1995 1995 1994
-------- ------- ------- ------- ------- -------
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.03 0.05 0.05 0.05 0.04 0.02
----------------------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.04) (0.02)
----------------------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ======= ======= ======= ======= ======= =======
Total return 5.13%(a) 5.14% 4.97% 5.69%(a) 3.98% 2.27%(a)
======================= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $58,999 $58,635 $63,529 $65,506 $31,017 $13,891
======================= ======= ======= ======= ======= ======= =======
Ratio of expenses to
average net assets 0.58%(b) 0.59% 0.55% 0.53%(a) 0.63%(c) 0.95%(a)(d)
======================= ======= ======= ======= ======= ======= =======
Ratio of net investment
income to average net
assets 5.06%(b) 5.01% 4.84% 5.40%(a) 4.14%(c) 2.29%(a)(d)
======================= ======= ======= ======= ======= ======= =======
|
(a) Annualized.
(b) Ratios are annualized and based on average daily net assets of
$59,146,701.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 0.70% and 4.07%, respectively.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 1.53% (annualized) and 1.70%
(annualized), respectively.
AIM V.I. MONEY MARKET FUND
FS-93
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS - 79.61%
AEROSPACE/DEFENSE - 0.18%
Orbital Sciences Corp.(a) 48,400 $ 1,808,950
-------------------------------------------------------------------------
AIR FREIGHT - 0.29%
Airborne Freight Corp. 83,400 2,913,787
-------------------------------------------------------------------------
AIRLINES - 1.88%
AMR Corp.(a) 76,000 6,327,000
-------------------------------------------------------------------------
Continental Airlines, Inc.(a) 159,900 9,733,913
-------------------------------------------------------------------------
US Airways Group, Inc.(a) 31,900 2,528,075
-------------------------------------------------------------------------
18,588,988
-------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.10%
Lear Corp.(a) 20,000 1,026,250
-------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.29%
U.S. Bancorp 67,000 2,881,000
-------------------------------------------------------------------------
BANKS (MONEY CENTER) - 2.84%
BankAmerica Corp. 55,000 4,754,063
-------------------------------------------------------------------------
Chase Manhattan Corp. (The) 266,000 20,083,000
-------------------------------------------------------------------------
Citicorp(b) 22,000 3,283,500
-------------------------------------------------------------------------
28,120,563
-------------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 1.17%
Coca-Cola Co. (The) 135,300 11,568,150
-------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.40%
Cox Communications, Inc.-Class A(a) 251,500 12,182,031
-------------------------------------------------------------------------
MediaOne Group Inc.(a) 382,000 16,784,125
-------------------------------------------------------------------------
Tele-Communications, Inc.-Class A(a) 122,000 4,689,375
-------------------------------------------------------------------------
33,655,531
-------------------------------------------------------------------------
BUILDING MATERIALS - 0.52%
Masco Corp. 85,000 5,142,500
-------------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.17%
Cytec Industries Inc.(a) 38,800 1,716,900
-------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.73%
Comverse Technology, Inc.(a) 139,000 7,210,625
-------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 2.43%
Dell Computer Corp.(a) 39,000 3,619,687
-------------------------------------------------------------------------
International Business Machines Corp.(b) 64,000 7,348,000
-------------------------------------------------------------------------
Sun Microsystems, Inc.(a) 300,900 13,070,344
-------------------------------------------------------------------------
24,038,031
-------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 3.28%
American Management Systems, Inc.(a) 41,000 1,227,437
-------------------------------------------------------------------------
BMC Software, Inc.(a) 95,000 4,934,063
-------------------------------------------------------------------------
|
MARKET
SHARES VALUE
COMPUTERS (SOFTWARE & SERVICES) - (CONTINUED)
Cadence Design Systems, Inc.(a) 14,600 $ 456,250
---------------------------------------------------------------------
Computer Sciences Corp.(a) 77,000 4,928,000
---------------------------------------------------------------------
J.D. Edwards & Co.(a) 46,100 1,979,419
---------------------------------------------------------------------
Microsoft Corp.(a)(b) 37,700 4,085,738
---------------------------------------------------------------------
Network Associates, Inc.(a) 1 57
---------------------------------------------------------------------
Sterling Commerce, Inc.(a) 86,300 4,185,550
---------------------------------------------------------------------
Unisys Corp.(a) 378,500 10,692,625
---------------------------------------------------------------------
32,489,139
---------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.27%
American Greetings Corp.-Class A 53,000 2,699,687
---------------------------------------------------------------------
CONSUMER FINANCE - 2.09%
Household International, Inc. 95,000 4,726,250
---------------------------------------------------------------------
MBNA Corp. 119,000 3,927,000
---------------------------------------------------------------------
Providian Financial Corp. 152,500 11,980,781
---------------------------------------------------------------------
20,634,031
---------------------------------------------------------------------
ELECTRIC COMPANIES - 0.13%
Wisconsin Energy Corp. 43,600 1,324,350
---------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.76%
General Electric Co. 191,000 17,381,000
---------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.13%
Waters Corp.(a) 21,900 1,290,731
---------------------------------------------------------------------
ENTERTAINMENT - 3.46%
Time Warner Inc. 355,000 30,330,313
---------------------------------------------------------------------
Viacom, Inc.-Class B(a) 67,000 3,902,750
---------------------------------------------------------------------
34,233,063
---------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 6.94%
Ambac Financial Group, Inc. 90,000 5,265,000
---------------------------------------------------------------------
American General Corp. 27,000 1,922,062
---------------------------------------------------------------------
Associates First Capital Corp.-Class A 83,011 6,381,471
---------------------------------------------------------------------
Fannie Mae 283,000 17,192,250
---------------------------------------------------------------------
Freddie Mac 408,000 19,201,500
---------------------------------------------------------------------
MBIA, Inc. 63,000 4,717,125
---------------------------------------------------------------------
MGIC Investment Corp. 28,900 1,649,106
---------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 116,000 10,599,500
---------------------------------------------------------------------
PMI Group, Inc. (The) 23,500 1,724,313
---------------------------------------------------------------------
68,652,327
---------------------------------------------------------------------
FOODS - 0.46%
Interstate Bakeries Corp. 22,100 733,439
---------------------------------------------------------------------
Quaker Oats Co. (The) 69,900 3,840,131
---------------------------------------------------------------------
4,573,570
---------------------------------------------------------------------
|
AIM V.I. VALUE FUND
FS-94
MARKET
SHARES VALUE
HARDWARE & TOOLS - 0.55%
Black & Decker Corp. (The) 90,000 $ 5,490,000
-------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 1.22%
Bristol-Myers Squibb Co. 56,000 6,436,500
-------------------------------------------------------------------------
Warner-Lambert Co. 81,000 5,619,375
-------------------------------------------------------------------------
12,055,875
-------------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 0.93%
ICN Pharmaceuticals, Inc. 136,290 6,226,748
-------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 64,200 2,997,338
-------------------------------------------------------------------------
9,224,086
-------------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 4.28%
Merck & Co., Inc. 137,000 18,323,750
-------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 520,000 23,985,000
-------------------------------------------------------------------------
42,308,750
-------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.34%
Quorum Health Group, Inc.(a) 126,050 3,340,325
-------------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.15%
Health Care and Retirement Corp.(a) 38,400 1,514,400
-------------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.23%
PhyCor, Inc.(a) 139,500 2,310,466
-------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.79%
Allegiance Corp. 26,500 1,358,125
-------------------------------------------------------------------------
Guidant Corp. 315,100 22,470,569
-------------------------------------------------------------------------
Sybron International Corp.(a) 149,600 3,777,400
-------------------------------------------------------------------------
27,606,094
-------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.19%
Omnicare, Inc. 50,000 1,906,250
-------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.81%
Colgate-Palmolive Co. 91,000 8,008,000
-------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.61%
Conseco, Inc. 50,000 2,337,500
-------------------------------------------------------------------------
Provident Companies, Inc. 106,000 3,657,000
-------------------------------------------------------------------------
5,994,500
-------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 4.65%
Ace, Ltd. 194,300 7,577,700
-------------------------------------------------------------------------
American International Group, Inc. 181,200 26,455,200
-------------------------------------------------------------------------
Hartford Financial Services Group Inc. (The) 63,000 7,205,625
-------------------------------------------------------------------------
Travelers Group, Inc. 78,000 4,728,750
-------------------------------------------------------------------------
45,967,275
-------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 3.88%
Allstate Corp. (The) 233,500 21,379,844
-------------------------------------------------------------------------
EXEL Ltd. 122,000 9,493,125
-------------------------------------------------------------------------
Progressive Corp. 53,000 7,473,000
-------------------------------------------------------------------------
38,345,969
-------------------------------------------------------------------------
|
MARKET
SHARES VALUE
INVESTMENT BANKING/BROKERAGE - 0.85%
Edwards (A.G.), Inc. 57,800 $ 2,467,338
----------------------------------------------------------------
Merrill Lynch & Co., Inc. 64,200 5,922,450
----------------------------------------------------------------
8,389,788
----------------------------------------------------------------
LODGING-HOTELS - 2.30%
Carnival Corp. 310,000 12,283,750
----------------------------------------------------------------
Marriott International, Inc.-Class A 102,500 3,318,438
----------------------------------------------------------------
Royal Caribbean Cruises Ltd. 90,000 7,155,000
----------------------------------------------------------------
22,757,188
----------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.00%
Hillenbrand Industries, Inc. 22,000 1,320,000
----------------------------------------------------------------
Tyco International Ltd. 136,000 8,568,000
----------------------------------------------------------------
9,888,000
----------------------------------------------------------------
NATURAL GAS - 1.52%
El Paso Natural Gas Co. 156,000 5,967,000
----------------------------------------------------------------
Enron Corp. 77,300 4,179,031
----------------------------------------------------------------
Williams Companies, Inc. (The) 143,600 4,846,500
----------------------------------------------------------------
14,992,531
----------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.28%
Halliburton Co.(b) 62,000 2,762,875
----------------------------------------------------------------
OIL & GAS (REFINING & MARKETING) - 0.27%
Tosco Corp. 92,080 2,704,850
----------------------------------------------------------------
PERSONAL CARE - 0.25%
Avon Products, Inc. 31,700 2,456,750
----------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.75%
Xerox Corp. 73,000 7,418,625
----------------------------------------------------------------
PUBLISHING - 0.10%
Meredith Corp. 22,000 1,032,625
----------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 1.06%
Gannett Co., Inc. 49,000 3,482,063
----------------------------------------------------------------
New York Times Co.-Class A (The) 39,000 3,090,750
----------------------------------------------------------------
Washington Post Co.-Class B (The) 6,800 3,916,800
----------------------------------------------------------------
10,489,613
----------------------------------------------------------------
RAILROADS - 0.67%
Burlington Northern Santa Fe Corp. 20,500 2,012,844
----------------------------------------------------------------
Kansas City Southern Industries, Inc. 93,700 4,649,862
----------------------------------------------------------------
6,662,706
----------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.09%
Mack-Cali Realty Corp. 26,500 910,937
----------------------------------------------------------------
RESTAURANTS - 0.20%
Cracker Barrel Old Country Store, Inc. 41,800 1,327,150
----------------------------------------------------------------
Papa John's International, Inc.(a) 15,800 623,112
----------------------------------------------------------------
1,950,262
----------------------------------------------------------------
|
AIM V.I. VALUE FUND
FS-95
MARKET
SHARES VALUE
RETAIL (BUILDING SUPPLIES) - 0.53%
Home Depot, Inc. (The) 31,200 $ 2,591,550
-----------------------------------------------------------------------
Lowe's Companies, Inc. 66,100 2,681,181
-----------------------------------------------------------------------
5,272,731
-----------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.57%
Federated Department Stores, Inc.(a) 104,000 5,596,500
-----------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.09%
Kroger Co.(a) 156,600 6,714,225
-----------------------------------------------------------------------
Safeway, Inc.(a) 99,800 4,060,613
-----------------------------------------------------------------------
10,774,838
-----------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 3.13%
Costco Companies, Inc.(a) 89,000 5,612,563
-----------------------------------------------------------------------
Dayton Hudson Corp. 435,800 21,136,300
-----------------------------------------------------------------------
Fred Meyer, Inc.(a) 99,000 4,207,500
-----------------------------------------------------------------------
30,956,363
-----------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.24%
Gap, Inc. (The) 38,000 2,341,750
-----------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.14%
Charter One Financial, Inc. 39,900 1,344,131
-----------------------------------------------------------------------
SERVICES (ADVERTISTING/MARKETING) - 0.77%
Omnicom Group, Inc. 152,000 7,581,000
-----------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.04%
Galileo International, Inc. 54,000 2,433,375
-----------------------------------------------------------------------
Service Corp. International 48,100 2,062,288
-----------------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 216,000 5,751,000
-----------------------------------------------------------------------
10,246,663
-----------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.13%
National Data Corp. 29,000 1,268,750
-----------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.16%
AccuStaff, Inc.(a) 51,000 1,593,750
-----------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.89%
AirTouch Communications, Inc.(a) 70,000 4,090,625
-----------------------------------------------------------------------
Nextel Communications, Inc.-Class A(a) 188,800 4,696,400
-----------------------------------------------------------------------
8,787,025
-----------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 4.05%
MCI Communications Corp. 222,000 12,903,750
-----------------------------------------------------------------------
WorldCom, Inc.(a) 561,219 27,184,045
-----------------------------------------------------------------------
40,087,795
-----------------------------------------------------------------------
TELEPHONE - 1.42%
BellSouth Corp. 71,000 4,765,875
-----------------------------------------------------------------------
Century Telephone Enterprises, Inc. 13,800 633,075
-----------------------------------------------------------------------
SBC Communications, Inc. 120,000 4,800,000
-----------------------------------------------------------------------
US West, Inc. 80,784 3,796,856
-----------------------------------------------------------------------
13,995,806
-----------------------------------------------------------------------
|
MARKET
SHARES VALUE
TOBACCO - 0.92%
Philip Morris Companies, Inc. 231,200 $ 9,103,500
------------------------------------------------------------------------------
WASTE MANAGEMENT - 2.04%
USA Waste Services, Inc.(a) 217,000 10,714,375
------------------------------------------------------------------------------
Waste Management, Inc. 271,200 9,492,000
------------------------------------------------------------------------------
20,206,375
------------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $628,557,518) 787,594,890
------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 8.57%
AUSTRALIA - 0.21%
News Corp. Ltd.-ADR (The) (Publishing-Newspapers) 68,300 2,194,137
------------------------------------------------------------------------------
CANADA - 2.25%
Royal Bank of Canada (Banks-Major Regional) 370,000 22,259,611
------------------------------------------------------------------------------
DENMARK - 0.18%
Novo Nordisk A/S (Health Care-Drugs-Generic & Other) 13,000 1,794,278
------------------------------------------------------------------------------
FINLAND - 1.31%
Nokia Oyj A.B.-Class A (Communications Equipment) 1,000 73,898
------------------------------------------------------------------------------
Nokia Oyj A.B.-Class A-ADR (Communications Equipment) 177,000 12,843,563
------------------------------------------------------------------------------
12,917,461
------------------------------------------------------------------------------
ITALY - 0.68%
Credito Italiano S.p.A. (Banks-Major Regional) 650,000 3,379,963
------------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banks-Major
Regional) 106,000 1,669,809
------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 225,000 1,644,618
------------------------------------------------------------------------------
6,694,390
------------------------------------------------------------------------------
SWEDEN - 2.61%
ForeningsSparbanken A.B.-Class A (Banks-Major
Regional) 131,000 3,942,320
------------------------------------------------------------------------------
Nordbanken Holding A.B. (Banks-Major Regional) 547,500 4,016,144
------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 47,200 1,379,009
------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-Class B
(Communications Equipment) 577,200 16,522,350
------------------------------------------------------------------------------
25,859,823
------------------------------------------------------------------------------
SWITZERLAND - 0.74%
Nestle S.A. (Foods) 3,400 7,286,195
------------------------------------------------------------------------------
UNITED KINGDOM - 0.59%
Railtrack Group PLC (Shipping) 114,000 2,797,854
------------------------------------------------------------------------------
SmithKline Beecham PLC-ADR (Health Care-Drugs-Major
Pharmaceuticals 50,000 3,025,000
------------------------------------------------------------------------------
5,822,854
------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$34,670,960) 84,828,749
------------------------------------------------------------------------------
|
AIM V.I. VALUE FUND
FS-96
PRINCIPAL MARKET
AMOUNT VALUE
U.S. TREASURY SECURITIES - 4.95%
U.S. TREASURY BILLS(c) - 4.95%
4.995%, 09/24/98 (Cost $48,974,916) $49,560,000(d) $ 48,974,916
-------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 7.16%(e)
Dresdner Kleinwort Benson North America LLC
5.85%, 07/01/98(f) 10,739,395 10,739,395
-------------------------------------------------------------------------
UBS Securities LLC
5.60%, 07/01/98(g) 60,126,054 60,126,054
-------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $70,865,449) 70,865,449
-------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.29% 992,264,004
-------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.29%) (2,906,458)
-------------------------------------------------------------------------
TOTAL NET ASSETS - 100.00% $989,357,546
=========================================================================
|
(a) Non-income producing security.
(b) A portion of this security is subject to open call options written. See
Note 8.
(c) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(d) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 7.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreeements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$70,011,375. Collateralized by $71,382,000 U.S. Government obligations, 0%
to 6.30% due 07/02/98 to 12/03/01 with an aggregate market value at
06/30/98 of $71,404,458.
(g) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,031,111. Collateralized by $290,091,354 U.S. Government obligations,
0% to 12.75% due 03/31/99 to 03/01/33 with an aggregate market value at
06/30/98 of $204,000,924.
Abbreviations:
ADR - American Depositary Receipt
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-97
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
ASSETS: Investments, excluding repurchase agreements at market value (cost $783,068,843) $ 992,264,004 ----------------------------------------------------------------------- Foreign currencies, at value (cost $503) 519 ----------------------------------------------------------------------- Receivables for: Investments sold 6,534,980 ----------------------------------------------------------------------- Capital stock sold 1,401,932 ----------------------------------------------------------------------- Dividends and interest 548,173 ----------------------------------------------------------------------- Investment for deferred compensation plan 20,861 ----------------------------------------------------------------------- Other assets 3,164 ----------------------------------------------------------------------- Total assets 1,000,773,633 ----------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 9,832,707 ----------------------------------------------------------------------- Options purchased 669,375 ----------------------------------------------------------------------- Variation margin 371,875 ----------------------------------------------------------------------- Deferred compensation 20,861 ----------------------------------------------------------------------- Accrued advisory fees 463,935 ----------------------------------------------------------------------- Accrued directors' fees 2,700 ----------------------------------------------------------------------- Accrued administrative services fees 4,578 ----------------------------------------------------------------------- Accrued operating expenses 50,056 ----------------------------------------------------------------------- Total liabilities 11,416,087 ----------------------------------------------------------------------- Net assets applicable to shares outstanding $ 989,357,546 ======================================================================= CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 ----------------------------------------------------------------------- Outstanding 40,104,344 ======================================================================= Net asset value, offering and redemption price per share $24.67 ======================================================================= |
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME:
Dividends (net of $123,950 foreign withholding tax) $ 3,531,118
------------------------------------------------------------------------------
Interest 2,401,809
------------------------------------------------------------------------------
Total investment income 5,932,927
------------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,477,805
------------------------------------------------------------------------------
Administrative services fees 27,468
------------------------------------------------------------------------------
Custodian fees 53,821
------------------------------------------------------------------------------
Directors' fees and expenses 5,924
------------------------------------------------------------------------------
Organizational costs 964
------------------------------------------------------------------------------
Other 75,736
------------------------------------------------------------------------------
Total expenses 2,641,718
------------------------------------------------------------------------------
Less: Expenses paid indirectly (218)
------------------------------------------------------------------------------
Net expenses 2,641,500
------------------------------------------------------------------------------
Net investment income 3,291,427
------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 26,277,193
------------------------------------------------------------------------------
Foreign currencies 6,508
------------------------------------------------------------------------------
Futures contracts 102,604
------------------------------------------------------------------------------
Option contracts (56,275)
------------------------------------------------------------------------------
26,330,030
------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 108,103,222
------------------------------------------------------------------------------
Futures contracts 493,500
------------------------------------------------------------------------------
Foreign currencies 8,975
------------------------------------------------------------------------------
Option contracts (476,286)
------------------------------------------------------------------------------
108,129,411
------------------------------------------------------------------------------
Net gain (loss) on investment securities, foreign currencies,
futures and option contracts 134,459,441
------------------------------------------------------------------------------
Net increase in net assets resulting from operations $137,750,868
==============================================================================
|
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-98
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
-----------------------
OPERATIONS:
Net investment income $ 3,291,427 $ 5,578,959
-----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and option contracts 26,330,030 47,871,104
-----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and
option contracts 108,129,411 51,486,076
-----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 137,750,868 104,936,139
-----------------------------------------------------------------------------
Dividends to shareholders from net investment
income -- (6,026,082)
-----------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (18,500,854)
-----------------------------------------------------------------------------
Net increase from capital stock transactions 160,765,185 240,697,144
-----------------------------------------------------------------------------
Net increase in net assets 298,516,053 321,106,347
-----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 690,841,493 369,735,146
-----------------------------------------------------------------------------
End of period $989,357,546 $690,841,493
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $697,149,191 $536,384,006
-----------------------------------------------------------------------------
Undistributed net investment income 8,871,054 5,579,627
-----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
option contracts 73,905,527 47,575,497
-----------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 209,431,774 101,302,363
-----------------------------------------------------------------------------
$989,357,546 $690,841,493
=============================================================================
|
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-99
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Value Fund (the "Fund"). The Fund's investment objective is to
achieve long-term growth of capital by investing primarily in equity
securities judged by AIM to be undervalued relative to the current or
projected earnings of the companies issuing the securities or relative to
current market values of assets owned by the companies issuing the securities
or relative to the equity market generally. Income is a secondary objective.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date, or absent a last sales price, at the mean of the closing bid and
asked prices. Debt obligations (including convertible bonds) are valued on
the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued at
the mean between last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations are either not
readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in
foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contract may not correlate with changes in the securities being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for
the amount of a purchase or sale of a security denominated in a foreign
currency in order to "lock-in" the U.S. dollar price of that security. The
Fund could be exposed to risk if
AIM V.I. VALUE FUND
FS-100
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "market-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $27,468 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,847 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $218 under an expense
offset arrangement. The effect of the above arrangement resulted in a
reduction of the Fund's total expenses of $218 during the six months ended
June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the six months ended June 30, 1998 was
$643,698,071 and $444,683,418, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of investment securities $211,880,973 --------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (4,734,237) --------------------------------------------------------------------------- Net unrealized appreciation of investment securities $207,146,736 =========================================================================== |
Cost of investments for tax purposes is $785,117,268.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30,
1998 and the year ended December 31, 1997 were as follows:
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
Sold 7,905,074 $182,607,840 12,245,239 $244,753,656
-----------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 1,188,320 24,526,936
-----------------------------------------------------------------------------
Reacquired (962,524) (21,842,655) (1,424,104) (28,583,448)
-----------------------------------------------------------------------------
6,942,550 $160,765,185 12,009,455 $240,697,144
=============================================================================
|
NOTE 7 - FUTURES CONTRACTS
On June 30, 1998, $1,931,911 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
UNREALIZED
NO. OF APPRECIATION
CONTRACTS CONTRACTS MONTH/COMMITMENT (DEPRECIATION)
------------- --------- ---------------- --------------
S&P 500 Index 175 Sep. 98/Buy $(371,875)
===========================================================================================
|
AIM V.I. VALUE FUND
FS-101
NOTE 8 - CALL OPTIONS CONTRACTS WRITTEN
Transactions in call option contracts written during the six months ended
June 30, 1998 are summarized as follows:
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-------------------
Beginning of period 2,102 $ 941,588
-------------------------------------------
Written 4,230 1,809,420
-------------------------------------------
Closed (1,628) (714,557)
-------------------------------------------
Exercised (1,772) (960,642)
-------------------------------------------
Expired (2,082) (660,913)
-------------------------------------------
End of period 850 $ 414,896
====== ===========
|
Open call option contracts written at June 30, 1998 were as follows:
JUNE 30, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1998 MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
----- ---------------------------------------------------
Citicorp Jul. 98 175 100 $ 60,948 $ 1,562 $ 59,386
Halliburton Co. Jul. 98 45 400 166,232 47,500 118,732
International Business
Machines Corp. Jul. 98 100 100 80,907 150,000 (69,093)
Microsoft Corp. Jul. 98 90 250 106,809 470,313 (363,504)
--- -------- -------- ---------
850 $414,896 $669,375 $(254,479)
=== ======== ======== =========
|
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
JUNE 30, ---------------------------- ------------------
1998 1997 1996 1995 1995 1994
-------- -------- -------- -------- -------- -------
Net asset value,
beginning of period $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17 $ 10.00
------------------------ -------- -------- -------- -------- -------- -------
Income from investment
operations:
Net investment income 0.05 0.08 0.30 0.11 0.10 0.02
------------------------ -------- -------- -------- -------- -------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 3.79 4.05 2.09 4.18 (0.35) 2.17
------------------------ -------- -------- -------- -------- -------- -------
Total from investment
operations 3.84 4.13 2.39 4.29 (0.25) 2.19
------------------------ -------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net
investment income -- (0.19) (0.10) (0.01) (0.09) (0.02)
------------------------ -------- -------- -------- -------- -------- -------
Distributions from net
realized gains -- (0.59) (0.92) -- -- --
------------------------ -------- -------- -------- -------- -------- -------
Total distributions -- (0.78) (1.02) (0.01) (0.09) (0.02)
------------------------ -------- -------- -------- -------- -------- -------
Net asset value, end of
period $ 24.67 $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17
======================== ======== ======== ======== ======== ======== =======
Total return(a) 18.43% 23.69% 15.02% 36.25% (2.03)% 21.94%
======================== ======== ======== ======== ======== ======== =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $989,358 $690,841 $369,735 $257,212 $109,257 $38,255
======================== ======== ======== ======== ======== ======== =======
Ratio of expenses to
average net assets 0.66%(b) 0.70% 0.73% 0.75%(c) 0.82% 1.00%(c)(d)
======================== ======== ======== ======== ======== ======== =======
Ratio of net investment
income to average net
assets 0.82%(b) 1.05% 2.00% 1.11%(c) 1.17% 0.51%(c)(d)
======================== ======== ======== ======== ======== ======== =======
Portfolio turnover rate 61% 127% 129% 145% 143% 87%
======================== ======== ======== ======== ======== ======== =======
Average brokerage
commission rate paid(e) $ 0.0539 $ 0.0487 $ 0.0429 N/A N/A N/A
======================== ======== ======== ======== ======== ======== =======
|
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $811,946,530.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.35% (annualized) and 0.16% (annualized),
respectively.
(e) The average commission rate paid is the total brokerage commissions paid
on applicable purchases and sales of securities for the period divided by
the total number of related shares purchased and sold, which is required
to be disclosed for fiscal years beginning September 1, 1995 and
thereafter.
AIM V.I. VALUE FUND
FS-102
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. Capital Appreciation Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Capital Appreciation Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993 (commencement of operations), through January 31, 1994 in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-103
SCHEDULE OF INVESTMENTS
December 31, 1997
MARKET
SHARES VALUE
COMMON STOCKS - 94.71%
AEROSPACE/DEFENSE - 0.34%
BE Aerospace, Inc.(a) 27,500 $ 735,625
---------------------------------------------------------------------
Precision Castparts Corp. 17,000 1,025,313
---------------------------------------------------------------------
1,760,938
---------------------------------------------------------------------
AIR FREIGHT - 0.35%
AirNet Systems, Inc.(a) 20,000 430,000
---------------------------------------------------------------------
CNF Transportation Inc. 36,700 1,408,363
---------------------------------------------------------------------
1,838,363
---------------------------------------------------------------------
AIRLINES - 0.12%
Southwest Airlines Co. 24,900 613,163
---------------------------------------------------------------------
BANKS (REGIONAL) - 0.64%
AmSouth Bancorporation 25,000 1,357,812
---------------------------------------------------------------------
North Fork Bancorporation, Inc. 18,100 607,479
---------------------------------------------------------------------
TCF Financial Corp. 40,000 1,357,500
---------------------------------------------------------------------
3,322,791
---------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 0.08%
Coca-Cola Enterprises Inc. 11,800 419,637
---------------------------------------------------------------------
BIOTECHNOLOGY - 0.07%
Curative Technologies, Inc.(a) 12,600 382,725
---------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 1.22%
CanWest Global Communications Corp. (Canada) 77,700 1,398,600
---------------------------------------------------------------------
Chancellor Media Corp.(a) 3,636 271,337
---------------------------------------------------------------------
Clear Channel Communications, Inc.(a) 27,600 2,192,475
---------------------------------------------------------------------
Heftel Broadcasting Corp.(a) 22,100 1,033,175
---------------------------------------------------------------------
Jacor Communications, Inc.(a) 27,500 1,460,937
---------------------------------------------------------------------
6,356,524
---------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.01%
ADC Telecommunications, Inc.(a) 116,700 4,872,225
---------------------------------------------------------------------
Brightpoint, Inc.(a) 67,200 932,400
---------------------------------------------------------------------
DSC Communications Corp.(a) 107,300 2,575,200
---------------------------------------------------------------------
ECI Telecommunications Ltd. (Israel) 35,000 892,500
---------------------------------------------------------------------
PairGain Technologies, Inc.(a) 63,100 1,222,562
---------------------------------------------------------------------
REMEC, Inc.(a) 7,500 168,750
---------------------------------------------------------------------
Scientific-Atlanta, Inc. 49,000 820,750
---------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Sweden) 21,420 799,234
---------------------------------------------------------------------
Tellabs, Inc.(a) 64,800 3,426,300
---------------------------------------------------------------------
15,709,921
---------------------------------------------------------------------
|
MARKET
SHARES VALUE
COMPUTERS (HARDWARE) - 2.55%
Citrix Systems, Inc.(a) 10,000 $ 760,000
-----------------------------------------------------------------
Comdisco, Inc. 68,500 2,290,468
-----------------------------------------------------------------
Compaq Computer Corp. 41,500 2,342,156
-----------------------------------------------------------------
Concord EFS, Inc.(a) 118,200 2,940,225
-----------------------------------------------------------------
Dell Computer Corp.(a) 34,000 2,856,000
-----------------------------------------------------------------
IDX Systems Corp.(a) 19,600 725,200
-----------------------------------------------------------------
Micron Electronics, Inc.(a) 29,800 271,925
-----------------------------------------------------------------
Sun Microsystems, Inc.(a) 28,300 1,128,463
-----------------------------------------------------------------
13,314,437
-----------------------------------------------------------------
COMPUTERS (NETWORKING) - 1.34%
Bay Networks, Inc.(a) 120,800 3,087,950
-----------------------------------------------------------------
Cisco Systems, Inc.(a) 34,950 1,948,463
-----------------------------------------------------------------
Newbridge Networks Corp. (Canada)(a) 56,000 1,953,000
-----------------------------------------------------------------
6,989,413
-----------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.11%
Adaptec, Inc.(a) 77,700 2,884,612
-----------------------------------------------------------------
EMC Corp.(a) 129,200 3,544,925
-----------------------------------------------------------------
Iomega Corp.(a) 114,000 1,417,875
-----------------------------------------------------------------
Lexmark International Group, Inc.(a) 19,200 729,600
-----------------------------------------------------------------
MicroTouch Systems, Inc.(a) 5,400 85,050
-----------------------------------------------------------------
SMART Modular Technologies, Inc.(a) 15,000 345,000
-----------------------------------------------------------------
Storage Technology Corp.(a) 32,600 2,019,164
-----------------------------------------------------------------
11,026,226
-----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 8.42%
America Online, Inc.(a) 7,700 686,744
-----------------------------------------------------------------
Applied Voice Technology, Inc.(a) 10,000 282,500
-----------------------------------------------------------------
Aspect Development, Inc.(a) 12,500 650,000
-----------------------------------------------------------------
Autodesk, Inc. 38,500 1,424,500
-----------------------------------------------------------------
Avant! Corp.(a) 28,600 479,050
-----------------------------------------------------------------
BMC Software, Inc.(a) 66,700 4,377,188
-----------------------------------------------------------------
Broderbund Software, Inc.(a) 35,000 896,875
-----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 135,900 3,329,550
-----------------------------------------------------------------
CBT Group PLC-ADR (Ireland)(a) 900 73,913
-----------------------------------------------------------------
Computer Associates International, Inc. 56,250 2,974,219
-----------------------------------------------------------------
Compuware Corp.(a) 156,600 5,011,200
-----------------------------------------------------------------
Electronic Arts, Inc.(a) 45,000 1,701,563
-----------------------------------------------------------------
Electronics for Imaging, Inc.(a) 4,600 76,475
-----------------------------------------------------------------
HBO & Co. 94,688 4,545,024
-----------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-104
MARKET
SHARES VALUE
COMPUTERS (SOFTWARE & SERVICES) - (CONTINUED)
Microsoft Corp.(a) 18,300 $ 2,365,275
-----------------------------------------------------------------------
Network Associates, Inc.(a) 7,900 417,713
-----------------------------------------------------------------------
Oracle Corp.(a) 30,662 684,146
-----------------------------------------------------------------------
Parametric Technology Co.(a) 59,800 2,833,025
-----------------------------------------------------------------------
Platinum Technology, Inc.(a) 66,800 1,887,100
-----------------------------------------------------------------------
Security Dynamics Technologies, Inc.(a) 34,400 1,229,800
-----------------------------------------------------------------------
Sterling Commerce, Inc.(a) 75,055 2,884,927
-----------------------------------------------------------------------
Sterling Software, Inc.(a) 16,800 688,800
-----------------------------------------------------------------------
Symantec Corp.(a) 38,000 833,625
-----------------------------------------------------------------------
Synopsys, Inc.(a) 69,000 2,466,750
-----------------------------------------------------------------------
Tecnomatix Technologies Ltd. (Israel)(a) 18,600 627,750
-----------------------------------------------------------------------
Wind River Systems(a) 15,000 595,313
-----------------------------------------------------------------------
44,023,025
-----------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.29%
Action Performance Companies, Inc.(a) 16,000 606,000
-----------------------------------------------------------------------
Blyth Industries, Inc.(a) 30,400 910,100
-----------------------------------------------------------------------
1,516,100
-----------------------------------------------------------------------
CONSUMER FINANCE - 3.35%
Aames Financial Corp. 30,150 390,066
-----------------------------------------------------------------------
Capital One Financial Corp. 39,100 2,118,731
-----------------------------------------------------------------------
ContiFinancial Corp.(a) 15,000 377,813
-----------------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 48,000 1,842,000
-----------------------------------------------------------------------
Household International, Inc. 39,600 5,051,475
-----------------------------------------------------------------------
IMC Mortgage Co.(a) 62,000 736,250
-----------------------------------------------------------------------
MBNA Corp. 103,988 2,840,159
-----------------------------------------------------------------------
Money Store, Inc. (The) 40,000 840,000
-----------------------------------------------------------------------
Providian Financial Corp. 20,000 903,750
-----------------------------------------------------------------------
SLM Holding Corp. 17,500 2,434,688
-----------------------------------------------------------------------
17,534,932
-----------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.94%
Cardinal Health, Inc. 43,025 3,232,253
-----------------------------------------------------------------------
McKesson Corp. 15,600 1,687,725
-----------------------------------------------------------------------
4,919,978
-----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.84%
American Power Conversion Corp.(a) 49,800 1,176,525
-----------------------------------------------------------------------
Avid Technology, Inc.(a) 18,700 500,225
-----------------------------------------------------------------------
AVX Corp. 39,300 724,594
-----------------------------------------------------------------------
Berg Electronics Corp.(a) 27,200 618,800
-----------------------------------------------------------------------
Black Box Corp.(a) 19,400 686,275
-----------------------------------------------------------------------
HADCO Corp.(a) 17,500 791,875
-----------------------------------------------------------------------
Kemet Corp.(a) 39,000 755,625
-----------------------------------------------------------------------
Molex, Inc. 4,300 138,138
-----------------------------------------------------------------------
Molex, Inc.-Class A 13,133 377,552
-----------------------------------------------------------------------
Sanmina Corp.(a) 25,000 1,693,750
-----------------------------------------------------------------------
Sawtek Inc.(a) 14,900 392,988
-----------------------------------------------------------------------
SCI Systems, Inc.(a) 92,400 4,025,175
-----------------------------------------------------------------------
Solectron Corp.(a) 39,200 1,629,250
-----------------------------------------------------------------------
Symbol Technologies, Inc. 35,000 1,321,250
-----------------------------------------------------------------------
14,832,022
-----------------------------------------------------------------------
|
MARKET
SHARES VALUE
ELECTRONICS (COMPONENT DISTRIBUTORS) - 0.82%
Arrow Electronics, Inc.(a) 50,400 $ 1,634,850
------------------------------------------------------------------------
Avnet, Inc. 28,100 1,854,600
------------------------------------------------------------------------
Kent Electronics Corp.(a) 31,600 793,950
------------------------------------------------------------------------
4,283,400
------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.79%
Methode Electronics, Inc.-Class A 39,450 641,063
------------------------------------------------------------------------
Perkin-Elmer Corp. 36,200 2,572,463
------------------------------------------------------------------------
Tektronix, Inc. 23,100 916,781
------------------------------------------------------------------------
4,130,307
------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 5.72%
Altera Corp.(a) 69,000 2,285,625
------------------------------------------------------------------------
ANADIGICS, Inc.(a) 25,000 753,125
------------------------------------------------------------------------
Analog Devices, Inc.(a) 64,700 1,791,381
------------------------------------------------------------------------
ASM Lithography Holding N.V. (Netherlands)(a) 11,600 783,000
------------------------------------------------------------------------
Atmel Corp.(a) 74,400 1,381,050
------------------------------------------------------------------------
Burr-Brown Corp.(a) 27,700 889,863
------------------------------------------------------------------------
Dallas Semiconductor Corp. 38,400 1,564,800
------------------------------------------------------------------------
Intel Corp. 18,800 1,320,700
------------------------------------------------------------------------
Lattice Semiconductor Corp.(a) 32,400 1,534,950
------------------------------------------------------------------------
Linear Technology Corp. 45,100 2,598,888
------------------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 137,800 4,754,100
------------------------------------------------------------------------
Microchip Technology, Inc.(a) 107,500 3,225,000
------------------------------------------------------------------------
National Semiconductor Corp.(a) 103,000 2,671,563
------------------------------------------------------------------------
PMC-Sierra, Inc.(a) 25,000 775,000
------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.-ADR
(Taiwan)(a) 19,000 345,563
------------------------------------------------------------------------
Texas Instruments, Inc. 20,000 900,000
------------------------------------------------------------------------
Unitrode Corp.(a) 14,000 301,000
------------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 18,000 679,500
------------------------------------------------------------------------
Xilinx, Inc.(a) 38,000 1,332,375
------------------------------------------------------------------------
29,887,483
------------------------------------------------------------------------
ENTERTAINMENT - 0.20%
Regal Cinemas, Inc.(a) 37,500 1,045,313
------------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 1.41%
Applied Materials, Inc.(a) 35,700 1,075,463
------------------------------------------------------------------------
BMC Industries, Inc. 5,000 80,625
------------------------------------------------------------------------
Etec Systems, Inc.(a) 10,000 465,000
------------------------------------------------------------------------
KLA-Tencor Corp.(a) 47,600 1,838,550
------------------------------------------------------------------------
Lam Research Corp.(a) 52,700 1,541,475
------------------------------------------------------------------------
Novellus Systems, Inc.(a) 41,000 1,324,813
------------------------------------------------------------------------
Teradyne, Inc.(a) 33,000 1,056,000
------------------------------------------------------------------------
7,381,926
------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.36%
MGIC Investment Corp. 78,000 5,187,000
------------------------------------------------------------------------
Newcourt Credit Group, Inc. (Canada) 9,900 330,413
------------------------------------------------------------------------
SunAmerica, Inc. 37,500 1,603,125
------------------------------------------------------------------------
7,120,538
------------------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-105
MARKET
SHARES VALUE
FOOTWEAR - 0.26%
Adidas A.G. (Germany) 4,000 $ 526,070
----------------------------------------------------------------------
Wolverine World Wide, Inc. 37,900 857,488
----------------------------------------------------------------------
1,383,558
----------------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES - 0.20%
International Game Technology 26,700 674,175
----------------------------------------------------------------------
MGM Grand, Inc.(a) 10,000 360,625
----------------------------------------------------------------------
1,034,800
----------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 2.29%
Alpharma, Inc. 12,750 277,313
----------------------------------------------------------------------
Biovail Corporation International (Canada)(a) 10,000 390,625
----------------------------------------------------------------------
Columbia Laboratories, Inc.(a) 20,000 317,500
----------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 32,300 1,481,763
----------------------------------------------------------------------
Elan Corp. PLC-ADR (Ireland)(a) 64,200 3,286,238
----------------------------------------------------------------------
Forest Laboratories, Inc.(a) 21,200 1,045,425
----------------------------------------------------------------------
Jones Medical Industries, Inc. 47,500 1,816,875
----------------------------------------------------------------------
Mylan Laboratories, Inc. 60,300 1,262,531
----------------------------------------------------------------------
Parexel International Corp.(a) 13,300 492,100
----------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 50,000 1,621,875
----------------------------------------------------------------------
11,992,245
----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 2.92%
Health Management Associates, Inc.-Class A(a) 201,768 5,094,642
----------------------------------------------------------------------
Quorum Health Group, Inc.(a) 69,500 1,815,688
----------------------------------------------------------------------
Tenet Healthcare Corp.(a) 148,465 4,917,903
----------------------------------------------------------------------
Universal Health Services, Inc.-Class B(a) 68,400 3,445,650
----------------------------------------------------------------------
15,273,883
----------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 1.82%
Beverly Enterprises, Inc.(a) 90,000 1,170,000
----------------------------------------------------------------------
Health Care and Retirement Corp.(a) 70,000 2,817,500
----------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 199,500 5,536,125
----------------------------------------------------------------------
9,523,625
----------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 1.20%
American Oncology Resources, Inc.(a) 10,000 160,000
----------------------------------------------------------------------
Concentra Managed Care, Inc.(a) 41,500 1,400,625
----------------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 21,800 1,308,000
----------------------------------------------------------------------
HealthCare COMPARE Corp.(a) 24,100 1,232,113
----------------------------------------------------------------------
PhyCor, Inc.(a) 81,300 2,195,100
----------------------------------------------------------------------
6,295,838
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.54%
Arterial Vascular Engineering, Inc.(a) 15,200 $ 988,000
--------------------------------------------------------------
Biomet, Inc. 37,200 953,250
--------------------------------------------------------------
Dentsply International, Inc. 32,000 976,000
--------------------------------------------------------------
Guidant Corp. 21,600 1,344,600
--------------------------------------------------------------
Henry Schein, Inc.(a) 28,485 996,975
--------------------------------------------------------------
Medtronic, Inc. 33,500 1,752,469
--------------------------------------------------------------
Physician Sales & Service, Inc.(a) 33,000 709,500
--------------------------------------------------------------
Quintiles Transnational Corp.(a) 35,600 1,361,700
--------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 12,000 780,750
--------------------------------------------------------------
Stryker Corp. 14,200 528,950
--------------------------------------------------------------
Sybron International Corp.(a) 61,800 2,900,738
--------------------------------------------------------------
13,292,932
--------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 2.21%
American HomePatient, Inc.(a) 22,050 518,175
--------------------------------------------------------------
Covance, Inc.(a) 82,525 1,640,184
--------------------------------------------------------------
FPA Medical Management, Inc.(a) 56,600 1,054,175
--------------------------------------------------------------
Lincare Holdings, Inc.(a) 40,500 2,308,500
--------------------------------------------------------------
Omnicare, Inc. 143,900 4,460,900
--------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 15,000 249,375
--------------------------------------------------------------
PharMerica, Inc.(a) 40,959 424,950
--------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 31,333 861,658
--------------------------------------------------------------
Transition Systems, Inc.(a) 600 13,275
--------------------------------------------------------------
11,531,192
--------------------------------------------------------------
HOMEBUILDING - 0.29%
Clayton Homes, Inc. 65,000 1,170,000
--------------------------------------------------------------
Oakwood Homes Corp. 10,100 335,194
--------------------------------------------------------------
1,505,194
--------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.28%
Leggett & Platt, Inc. 35,000 1,465,625
--------------------------------------------------------------
HOUSEWARES - 0.05%
Central Garden and Pet Co.(a) 10,000 262,500
--------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.64%
Everest Reinsurance Holdings, Inc. 35,000 1,443,750
--------------------------------------------------------------
Executive Risk Inc. 4,400 307,175
--------------------------------------------------------------
HCC Insurance Holdings, Inc. 9,200 195,500
--------------------------------------------------------------
Mercury General Corp. 25,000 1,381,250
--------------------------------------------------------------
3,327,675
--------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.20%
Paine Webber Group Inc. 30,000 1,036,875
--------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-106
MARKET
SHARES VALUE
INVESTMENT MANAGEMENT - 0.54%
Franklin Resources, Inc. 11,500 $ 999,779
-----------------------------------------------------------------
T. Rowe Price Associates, Inc. 29,000 1,823,375
-----------------------------------------------------------------
2,823,154
-----------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 0.64%
Callaway Golf Co. 16,900 482,706
-----------------------------------------------------------------
GTECH Holdings Corp.(a) 21,300 680,269
-----------------------------------------------------------------
Harley-Davidson, Inc. 53,600 1,467,300
-----------------------------------------------------------------
North Face, Inc. (The)(a) 12,500 275,000
-----------------------------------------------------------------
Speedway Motorsports, Inc.(a) 17,900 444,144
-----------------------------------------------------------------
3,349,419
-----------------------------------------------------------------
LODGING (HOTELS) - 0.47%
Choice Hotels International, Inc.(a) 36,000 576,000
-----------------------------------------------------------------
Promus Hotel Corp.(a) 42,544 1,786,838
-----------------------------------------------------------------
Sunburst Hospitality Corp.(a) 12,000 118,500
-----------------------------------------------------------------
2,481,338
-----------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.02%
AMETEK, Inc. 9,000 243,000
-----------------------------------------------------------------
Hillenbrand Industries, Inc. 26,200 1,341,113
-----------------------------------------------------------------
Pentair, Inc. 14,500 521,094
-----------------------------------------------------------------
Thermo Electron Corp.(a) 44,300 1,971,350
-----------------------------------------------------------------
Tyco International Ltd. (Bermuda) 27,936 1,258,866
-----------------------------------------------------------------
5,335,423
-----------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.74%
Cognex Corp.(a) 42,500 1,158,125
-----------------------------------------------------------------
Diebold, Inc. 32,100 1,625,063
-----------------------------------------------------------------
US Filter Corp.(a) 36,100 1,080,740
-----------------------------------------------------------------
3,863,928
-----------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.20%
Herman Miller, Inc. 14,000 763,875
-----------------------------------------------------------------
HON INDUSTRIES, Inc. 4,900 289,100
-----------------------------------------------------------------
1,052,975
-----------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 8.60%
Baker Hughes, Inc. 38,500 1,679,563
-----------------------------------------------------------------
BJ Services Co.(a) 43,000 3,093,313
-----------------------------------------------------------------
Camco International, Inc. 41,500 2,643,031
-----------------------------------------------------------------
Cooper Cameron Corp.(a) 44,000 2,684,000
-----------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(a) 30,200 545,488
-----------------------------------------------------------------
Diamond Offshore Drilling, Inc. 37,500 1,804,688
-----------------------------------------------------------------
ENSCO International, Inc. 42,500 1,423,750
-----------------------------------------------------------------
EVI, Inc.(a) 35,600 1,842,300
-----------------------------------------------------------------
|
MARKET
SHARES VALUE
OIL & GAS (DRILLING & EQUIPMENT) - (CONTINUED)
Falcon Drilling Co., Inc.(a) 59,000 $2,068,688
----------------------------------------------------------------
Global Industries Ltd.(a) 85,000 1,445,000
----------------------------------------------------------------
Global Marine, Inc.(a) 27,000 661,500
----------------------------------------------------------------
Halliburton Co. 19,200 997,200
----------------------------------------------------------------
Input/Output, Inc.(a) 58,500 1,736,719
----------------------------------------------------------------
Lone Star Technologies, Inc.(a) 27,000 766,125
----------------------------------------------------------------
Marine Drilling Companies, Inc.(a) 64,800 1,344,600
----------------------------------------------------------------
Nabors Industries, Inc.(a) 57,400 1,804,513
----------------------------------------------------------------
National-Oilwell, Inc.(a) 36,600 1,251,263
----------------------------------------------------------------
Noble Drilling Corp.(a) 45,000 1,378,125
----------------------------------------------------------------
Petroleum Geo-Services ASA-ADR (Norway)(a) 15,000 971,250
----------------------------------------------------------------
Precision Drilling Corp. (Canada)(a) 60,000 1,462,500
----------------------------------------------------------------
Pride International, Inc.(a) 79,500 2,007,375
----------------------------------------------------------------
Rowan Companies, Inc.(a) 41,000 1,250,500
----------------------------------------------------------------
Santa Fe International Corp. 14,100 573,694
----------------------------------------------------------------
Smith International, Inc.(a) 35,300 2,166,538
----------------------------------------------------------------
Transocean Offshore Inc. 49,000 2,361,188
----------------------------------------------------------------
Varco International, Inc.(a) 116,600 2,499,613
----------------------------------------------------------------
Veritas DGC, Inc.(a) 35,800 1,414,100
----------------------------------------------------------------
Weatherford Enterra, Inc.(a) 25,000 1,093,750
----------------------------------------------------------------
44,970,374
----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 1.08%
Apache Corp. 30,000 1,051,875
----------------------------------------------------------------
Burlington Resources, Inc. 29,100 1,304,044
----------------------------------------------------------------
Ocean Energy, Inc.(a) 26,000 1,282,125
----------------------------------------------------------------
Pioneer Natural Resources Co. 13,000 376,188
----------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 80,000 900,000
----------------------------------------------------------------
Stolt Comex Seaway, S.A. (United Kingdom)(a) 15,000 750,000
----------------------------------------------------------------
5,664,232
----------------------------------------------------------------
PERSONAL CARE - 0.54%
Perrigo Co.(a) 75,000 1,003,125
----------------------------------------------------------------
Rexall Sundown, Inc.(a) 60,200 1,817,288
----------------------------------------------------------------
2,820,413
----------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.28%
Xerox Corp. 19,600 1,446,725
----------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.36%
AES Corp.(a) 40,000 1,865,000
----------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-107
MARKET
SHARES VALUE
RESTAURANTS - 1.39%
Apple South, Inc. 77,800 $ 1,021,125
-----------------------------------------------------------------
Applebee's International, Inc. 53,600 968,150
-----------------------------------------------------------------
Brinker International, Inc.(a) 36,600 585,600
-----------------------------------------------------------------
CKE Restaurants, Inc. 35,900 1,512,288
-----------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 40,000 1,335,000
-----------------------------------------------------------------
Foodmaker, Inc.(a) 10,000 150,625
-----------------------------------------------------------------
Outback Steakhouse, Inc.(a) 21,000 603,750
-----------------------------------------------------------------
Starbucks Corp.(a) 28,200 1,082,175
-----------------------------------------------------------------
7,258,713
-----------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.60%
Eagle Hardware & Garden, Inc.(a) 37,500 726,563
-----------------------------------------------------------------
Fastenal Co. 14,500 554,625
-----------------------------------------------------------------
Home Depot, Inc. 10,950 644,681
-----------------------------------------------------------------
Lowe's Companies, Inc. 25,000 1,192,188
-----------------------------------------------------------------
3,118,057
-----------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 2.09%
Best Buy Co., Inc.(a) 36,800 1,357,000
-----------------------------------------------------------------
CHS Electronics, Inc.(a) 75,000 1,284,375
-----------------------------------------------------------------
CompUSA, Inc.(a) 116,700 3,617,700
-----------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 40,700 1,185,388
-----------------------------------------------------------------
Tech Data Corp.(a) 89,900 3,494,863
-----------------------------------------------------------------
10,939,326
-----------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.67%
Kohl's Corp.(a) 18,400 1,253,500
-----------------------------------------------------------------
Nordstrom, Inc. 28,100 1,696,538
-----------------------------------------------------------------
Proffitt's, Inc.(a) 20,200 574,438
-----------------------------------------------------------------
3,524,476
-----------------------------------------------------------------
RETAIL (DISCOUNTERS) - 1.81%
Consolidated Stores Corp.(a) 95,162 4,181,180
-----------------------------------------------------------------
Dollar General Corp. 24,002 870,073
-----------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 37,650 1,557,769
-----------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 55,750 1,937,313
-----------------------------------------------------------------
Ross Stores, Inc. 24,600 894,825
-----------------------------------------------------------------
9,441,160
-----------------------------------------------------------------
RETAIL (DRUG STORES) - 0.68%
CVS Corp. 7,773 497,958
-----------------------------------------------------------------
Rite Aid Corp. 52,280 3,068,183
-----------------------------------------------------------------
3,566,141
-----------------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.92%
American Stores Co. 11,100 228,244
-----------------------------------------------------------------
Kroger Co.(a) 103,500 3,823,031
-----------------------------------------------------------------
Quality Food Centers, Inc.(a) 14,800 991,600
-----------------------------------------------------------------
Safeway, Inc.(a) 78,700 4,977,775
-----------------------------------------------------------------
10,020,650
-----------------------------------------------------------------
|
MARKET
SHARES VALUE
RETAIL (GENERAL MERCHANDISE) - 0.88%
Costco Companies, Inc.(a) 17,400 $ 776,475
-----------------------------------------------------------------
Dayton Hudson Corp. 28,800 1,944,000
-----------------------------------------------------------------
Fred Meyer, Inc.(a) 51,600 1,876,950
-----------------------------------------------------------------
4,597,425
-----------------------------------------------------------------
RETAIL (HOME SHOPPING) - 0.78%
CDW Computer Centers, Inc.(a) 58,500 3,049,313
-----------------------------------------------------------------
Micro Warehouse, Inc.(a) 72,900 1,016,044
-----------------------------------------------------------------
4,065,357
-----------------------------------------------------------------
RETAIL (SPECIALTY) - 3.95%
AutoZone, Inc.(a) 20,000 580,000
-----------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 45,500 1,751,750
-----------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 19,100 250,688
-----------------------------------------------------------------
General Nutrition Companies, Inc.(a) 39,200 1,332,800
-----------------------------------------------------------------
Hollywood Entertainment Corp.(a) 67,800 720,375
-----------------------------------------------------------------
Inacom Corp.(a) 20,600 578,088
-----------------------------------------------------------------
Michaels Stores, Inc.(a) 57,500 1,681,875
-----------------------------------------------------------------
Office Depot, Inc.(a) 84,400 2,020,325
-----------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 25,600 614,400
-----------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 30,100 731,806
-----------------------------------------------------------------
Staples, Inc.(a) 135,925 3,771,919
-----------------------------------------------------------------
Tiffany & Co. 41,100 1,482,169
-----------------------------------------------------------------
Toys "R" Us, Inc.(a) 28,400 892,825
-----------------------------------------------------------------
Viking Office Products, Inc.(a) 117,300 2,558,606
-----------------------------------------------------------------
Williams-Sonoma, Inc.(a) 39,600 1,658,250
-----------------------------------------------------------------
20,625,876
-----------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.67%
Gap, Inc. 49,050 1,738,209
-----------------------------------------------------------------
The TJX Companies, Inc. 51,500 1,770,313
-----------------------------------------------------------------
3,508,522
-----------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.16%
Dime Bancorp, Inc. 27,300 825,825
-----------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.31%
Omnicom Group, Inc. 38,800 1,644,150
-----------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 2.27%
Avis Rent A Car, Inc.(a) 30,000 958,125
-----------------------------------------------------------------
Cendant Corp.(a) 42,535 1,462,136
-----------------------------------------------------------------
Cerner Corp.(a) 74,200 1,567,475
-----------------------------------------------------------------
Cintas Corp. 8,000 312,000
-----------------------------------------------------------------
Equity Corp. International(a) 13,800 319,125
-----------------------------------------------------------------
Service Corp. International 129,000 4,764,931
-----------------------------------------------------------------
Stewart Enterprises, Inc.- Class A 53,750 2,506,094
-----------------------------------------------------------------
11,889,886
-----------------------------------------------------------------
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-108
MARKET
SHARES VALUE
SERVICES (COMPUTER SYSTEMS) - 1.29%
Cambridge Technology Partners, Inc.(a) 17,800 $ 740,925
-------------------------------------------------------------------
Gartner Group, Inc.(a) 70,500 2,626,125
-------------------------------------------------------------------
Shared Medical Systems Corp. 25,600 1,689,600
-------------------------------------------------------------------
SunGard Data Systems Inc.(a) 55,200 1,711,200
-------------------------------------------------------------------
6,767,850
-------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 2.47%
Affiliated Computer Services, Inc.(a) 30,500 802,531
-------------------------------------------------------------------
The BISYS Group, Inc.(a) 12,000 399,000
-------------------------------------------------------------------
Ceridian Corp.(a) 25,700 1,177,381
-------------------------------------------------------------------
CSG Systems International, Inc.(a) 27,400 1,096,000
-------------------------------------------------------------------
DST Systems, Inc.(a) 34,800 1,485,525
-------------------------------------------------------------------
Equifax, Inc. 14,000 496,125
-------------------------------------------------------------------
Fiserv, Inc.(a) 51,900 2,549,588
-------------------------------------------------------------------
National Data Corp. 22,500 812,813
-------------------------------------------------------------------
Paychex, Inc. 67,350 3,409,594
-------------------------------------------------------------------
PMT Services, Inc.(a) 50,500 700,688
-------------------------------------------------------------------
12,929,245
-------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.13%
AccuStaff, Inc.(a) 29,300 673,900
-------------------------------------------------------------------
SPECIALTY PRINTING - 0.25%
Valassis Communications, Inc.(a) 35,000 1,295,000
-------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.32%
Nokia Oyj A.B.-Class A (Finland) 4,300 300,553
-------------------------------------------------------------------
Nokia Oyj A.B.-Class A-ADR (Finland) 19,600 1,372,000
-------------------------------------------------------------------
1,672,553
-------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.44%
Billing Information Concepts(a) 31,000 1,488,000
-------------------------------------------------------------------
CIENA Corp.(a) 39,100 2,389,988
-------------------------------------------------------------------
LCI International, Inc.(a) 118,600 3,646,950
-------------------------------------------------------------------
7,524,938
-------------------------------------------------------------------
TELEPHONE - 0.27%
Cincinnati Bell, Inc. 46,300 1,435,300
-------------------------------------------------------------------
TEXTILES (APPAREL) - 1.52%
Jones Apparel Group, Inc.(a) 44,900 1,930,700
-------------------------------------------------------------------
Liz Claiborne, Inc. 41,500 1,735,210
-------------------------------------------------------------------
Nautica Enterprises, Inc.(a) 51,600 1,199,700
-------------------------------------------------------------------
St. John Knits, Inc. 26,700 1,068,000
-------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 57,100 2,005,630
-------------------------------------------------------------------
7,939,240
-------------------------------------------------------------------
TEXTILES (SPECIALTY) - 0.39%
Unifi, Inc. 49,500 2,014,031
-------------------------------------------------------------------
TRUCKS & PARTS - 0.05%
Wabash National Corp. 10,000 284,375
-------------------------------------------------------------------
|
MARKET
SHARES VALUE
WASTE MANAGEMENT - 1.06%
Thermo Instrument Systems, Inc.(a) 42,125 $ 1,450,680
----------------------------------------------------------------
USA Waste Services, Inc.(a) 104,675 4,108,497
----------------------------------------------------------------
5,559,177
----------------------------------------------------------------
Total Common Stocks 495,129,258
----------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 0.07%
FINANCIAL (DIVERSIFIED) - 0.07%
MGIC Investment Corp.-$3.12 Conv. Pfd. 3,500 388,500
----------------------------------------------------------------
RIGHTS - 0.07%
FINANCIAL (DIVERSIFIED) - 0.07%
Newcourt Credit Group, Inc. (Canada) 11,400 374,775
----------------------------------------------------------------
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS - 0.14%
COMPUTERS (PERIPHERALS) - 0.14%
EMC Corp., Conv. Sub. Notes, 3.25%,
03/15/02 $ 550,000 742,363
----------------------------------------------------------------
REPURCHASE AGREEMENTS - 3.67%(b)
Goldman Sachs & Co., 6.53%,
01/02/98(c) 509,896 509,896
----------------------------------------------------------------
Smith Barney, Inc., 6.75%,
01/02/98(d) 18,650,989 18,650,989
----------------------------------------------------------------
Total Repurchase Agreements 19,160,885
----------------------------------------------------------------
TOTAL INVESTMENTS - 98.66% 515,795,781
----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.34% 6,984,297
----------------------------------------------------------------
NET ASSETS - 100.00% $522,780,078
================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Government obligations,
0% to 14% due 01/08/98 to 05/15/21 with a market value at 12/31/97 of
$918,902,583.
(d) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with a market value at 12/31/97 of
$408,000,323.
Abbreviations:
ADR- American Depositary Receipt
Conv.- Convertible
Pfd.- Preferred
Sub.- Subordinated
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-109
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS: Investments, at market value (cost $404,013,691) $515,795,781 ---------------------------------------------------------------------- Receivables for: Investments sold 9,116,531 ---------------------------------------------------------------------- Capital stock sold 344,734 ---------------------------------------------------------------------- Dividends and interest 129,747 ---------------------------------------------------------------------- Investment for deferred compensation plan 19,105 ---------------------------------------------------------------------- Organizational costs, net 965 ---------------------------------------------------------------------- Other assets 970 ---------------------------------------------------------------------- Total assets 525,407,833 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 1,977,594 ---------------------------------------------------------------------- Capital stock reacquired 301,121 ---------------------------------------------------------------------- Deferred compensation plan 19,105 ---------------------------------------------------------------------- Accrued advisory fees 287,049 ---------------------------------------------------------------------- Accrued directors' fees 2,657 ---------------------------------------------------------------------- Accrued administrative service fees 3,404 ---------------------------------------------------------------------- Accrued operating expenses 36,825 ---------------------------------------------------------------------- Total liabilities 2,627,755 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $522,780,078 ====================================================================== CAPITAL SHARES, $.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 24,031,390 ====================================================================== Net asset value, offering and redemption price per share $ 21.75 ====================================================================== |
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME:
Dividends (net of $19,940 foreign withholding tax) $ 1,141,020
---------------------------------------------------------------------------
Interest 3,099,764
---------------------------------------------------------------------------
Total investment income 4,240,784
---------------------------------------------------------------------------
EXPENSES:
Advisory fees 3,083,708
---------------------------------------------------------------------------
Administrative service fees 43,588
---------------------------------------------------------------------------
Custodian fees 85,219
---------------------------------------------------------------------------
Directors' fees and expenses 10,814
---------------------------------------------------------------------------
Organizational costs 2,892
---------------------------------------------------------------------------
Other 105,711
---------------------------------------------------------------------------
Total expenses 3,331,932
---------------------------------------------------------------------------
Less: Expenses paid indirectly (5,157)
---------------------------------------------------------------------------
Net expenses 3,326,775
---------------------------------------------------------------------------
Net investment income 914,009
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 11,600,242
---------------------------------------------------------------------------
Foreign currencies (1,983)
---------------------------------------------------------------------------
Futures contracts 4,557,682
---------------------------------------------------------------------------
16,155,941
---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 36,215,593
---------------------------------------------------------------------------
Futures contracts (261,890)
---------------------------------------------------------------------------
35,953,703
---------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
futures contracts 52,109,644
---------------------------------------------------------------------------
Net increase in net assets resulting from operations $53,023,653
===========================================================================
|
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-110
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
------------ ------------
OPERATIONS:
Net investment income $ 914,009 $ 521,505
------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies and futures
contracts 16,155,941 6,958,471
------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and futures contracts 35,953,703 36,611,035
------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 53,023,653 44,091,011
------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (536,874) (546,109)
------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (6,902,664) --
------------------------------------------------------------------------------
Net increase from capital stock transactions 107,132,798 114,365,840
------------------------------------------------------------------------------
Net increase in net assets 152,716,913 157,910,742
------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 370,063,165 212,152,423
------------------------------------------------------------------------------
End of year $522,780,078 $370,063,165
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $394,408,721 $287,275,923
------------------------------------------------------------------------------
Undistributed net investment income 876,543 491,407
------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and futures
contracts 15,712,724 6,467,448
------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and futures contracts 111,782,090 75,828,387
------------------------------------------------------------------------------
$522,780,078 $370,063,165
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Capital Appreciation Fund (the "Fund"). The Fund's investment
objective is to seek capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth companies.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date, or absent a last sales price, at the mean of the closing bid and
asked prices. Debt obligations (including convertible bonds) are valued on
the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market quotations are not readily available or are questionable are valued
at fair value as determined in good faith by or under the supervision of
the Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York
Stock Exchange. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which
they are
AIM V.I. CAPITAL APPRECIATION FUND
FS-111
determined and the close of the New York Stock Exchange which will not be
reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1997,
undistributed net investment income was increased by $8,001 and
undistributed net realized gains decreased by $8,001 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contract at the
end of each day's trading. Variation margin payments are made or received
depending upon whether unrealized gains or losses are incurred. When the
contracts are closed, the Fund recognizes a realized gain or loss equal to
the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
G. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
AIM, with respect to the Fund, the Company has agreed to reimburse certain
costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $43,588 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$5,296 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolios trades to brokers who paid a portion
of the Fund's expenses related to pricing services used by the Fund which
reduced the Fund's expenses by $1,946 during the year ended December 31, 1997.
The Fund also received reductions in custodian fees of $3,211 under an expense
offset arrangement. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $5,157 during the year ended
December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended December 31, 1997 was
$405,928,809 and $281,447,431, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
Aggregate unrealized appreciation of investment securities $131,285,959 --------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (20,124,306) --------------------------------------------------------------------------- Net unrealized appreciation of investment securities $111,161,653 =========================================================================== |
Cost of investments for tax purposes is $404,634,128.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ------------
Sold 9,656,144 $202,278,514 7,080,357 $129,652,839
-----------------------------------------------------------------------------
Issued as reinvestment of
distributions 357,327 7,439,538 28,864 546,109
-----------------------------------------------------------------------------
Reacquired (5,025,910) (102,585,254) (887,800) (15,833,108)
-----------------------------------------------------------------------------
4,987,561 $107,132,798 6,221,421 $114,365,840
=============================================================================
|
AIM V.I. CAPITAL APPRECIATION FUND
FS-112
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995, and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
---------------------------------- -----------------
1997 1996 1995 1995 1994
-------- -------- -------- ------- -------
Net asset value,
beginning of period $ 19.43 $ 16.55 $ 12.05 $ 12.58 $ 10.00
----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.03 0.02 0.04 0.05 --
----------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 2.58 2.89 4.46 (0.54) 2.59
----------------------------------------------------------------------------------
Total from investment
operations 2.61 2.91 4.50 (0.49) 2.59
----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.02) (0.03) -- (0.04) (0.01)
----------------------------------------------------------------------------------
Dividends from net
realized gains (0.27) -- -- -- --
----------------------------------------------------------------------------------
Total distributions (0.29) (0.03) -- (0.04) (0.01)
----------------------------------------------------------------------------------
Net asset value, end of
period $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58
==================================================================================
Total return(a) 13.51% 17.58% 37.38% (3.91)% 25.90%
==================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000s omitted) $522,642 $370,063 $212,152 $88,177 $35,354
==================================================================================
Ratio of expenses to
average net assets 0.68%(b)(c) 0.73% 0.75%(d) 0.84% 1.06%(d)
==================================================================================
Ratio of net investment
income to average net
assets 0.18%(b) 0.18% 0.39%(d) 0.46% 0.07%(d)
==================================================================================
Portfolio turnover rate 65% 59% 37% 81% 34%
==================================================================================
Average brokerage
commission rate(e) $ 0.0577 $ 0.0592 N/A N/A N/A
==================================================================================
|
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $493,118,049.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been the
same.
(d) Annualized.
(e) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
AIM V.I. CAPITAL APPRECIATION FUND
FS-113
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. Diversified Income Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Diversified Income Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993 (commencement of operations) through January 31, 1994, in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-114
SCHEDULE OF INVESTMENTS
December 31, 1997
PRINCIPAL MARKET
AMOUNT(a) VALUE
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS &
NOTES - 65.11%
AGRICULTURAL PRODUCTS - 0.17%
Hines Horticulture, Inc., Series B Sr. Gtd. Sub.
Notes, 11.75%, 10/15/05 $ 140,000 $ 154,700
-------------------------------------------------------------------------------
AIRLINES - 3.05%
Airplanes Pass Through Trust, Sub. Bonds, 10.875%,
03/15/19 300,000 337,689
-------------------------------------------------------------------------------
America West Airlines, Pass Through Certificates,
6.86%, 07/02/04 882,000 888,632
-------------------------------------------------------------------------------
Delta Air Lines, Inc., Deb., 9.00%,
05/15/16 825,000 975,488
-------------------------------------------------------------------------------
United Air Lines, Inc., Pass Through Certificates,
9.56%, 10/19/18 425,000 522,640
-------------------------------------------------------------------------------
2,724,449
-------------------------------------------------------------------------------
AUTOMOBILES - 0.55%
General Motors Corp., Deb., 8.80%, 03/01/21 400,000 491,084
-------------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 1.02%
First Union Bancorp, Sub. Deb., 7.50%, 04/15/35 800,000 913,944
-------------------------------------------------------------------------------
BANKS (MONEY CENTER) - 1.55%
Bankers Trust New York Corp., Gtd. Notes, 7.875%,
02/25/27 600,000 618,579
-------------------------------------------------------------------------------
Deutsche Bank Financial, Gtd. Unsec. Sub. Deb., 6.70%,
12/13/06 750,000 766,283
-------------------------------------------------------------------------------
1,384,862
-------------------------------------------------------------------------------
BANKS (REGIONAL) - 1.51%
Mercantile Bank,
Sub. Notes, 6.375%, 01/15/04 300,000 299,106
-------------------------------------------------------------------------------
Unsec. Sub. Notes, 7.30%, 06/15/07 1,000,000 1,052,930
-------------------------------------------------------------------------------
1,352,036
-------------------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 1.27%
Coca-Cola Enterprises, Inc., Putable Notes, 6.72%,
06/20/20(b) 5,000,000 1,132,650
-------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 5.18%
Cablevision Systems Corp., Sr. Notes, 7.875%, 12/15/07 500,000 513,125
-------------------------------------------------------------------------------
Capstar Broadcasting Partners, Sr. Disc. Notes,
12.75%, 02/01/09(c) 490,000 355,250
-------------------------------------------------------------------------------
Comcast Cable Communications, Notes, 8.50%, 05/01/27 500,000 583,750
-------------------------------------------------------------------------------
Diamond Cable Communications PLC (United Kingdom), Sr.
Yankee Disc. Notes, 10.75%, 02/15/07(c) 1,160,000 794,600
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
BROADCASTING (TELEVISION, RADIO & CABLE) - (CONTINUED)
EchoStar DBS Corp., Sr. Sec. Gtd. Notes, 12.50%,
07/01/02 $ 430,000 $ 468,700
-------------------------------------------------------------------------------
Knology Holdings Inc., Units, 11.875%, 10/15/07
(acquired 11/14/97; cost $310,500)(c)(d)(e) 600,000 327,000
-------------------------------------------------------------------------------
Rifkin Acquisition Partners L.L.P., Sr. Sub. Notes,
11.125%, 01/15/06 100,000 111,000
-------------------------------------------------------------------------------
TCI Communications Inc., Sr. Notes, 8.00%, 08/01/05 850,000 911,081
-------------------------------------------------------------------------------
TeleWest Communications PLC (United Kingdom), Sr.
Yankee Disc. Deb., 11.00%, 10/01/07(c) 300,000 234,750
-------------------------------------------------------------------------------
United International Holdings, Inc., Sr. Sec. Disc.
Notes, 10.53%, 11/15/99(b) 400,000 330,000
-------------------------------------------------------------------------------
4,629,256
-------------------------------------------------------------------------------
CHEMICALS - 3.70%
Nova Chemicals Ltd. (Canada), Yankee Deb., 7.00%,
08/15/26 750,000 770,925
-------------------------------------------------------------------------------
Solutia Inc., Bonds, 6.72%, 10/15/37 750,000 763,148
-------------------------------------------------------------------------------
Sterling Chemicals, Inc., Sr. Unsec. Sub. Notes,
11.75%, 08/15/06 220,000 225,500
-------------------------------------------------------------------------------
Union Carbide Corp., Putable Deb., 6.79%, 06/01/25 1,500,000 1,540,800
-------------------------------------------------------------------------------
3,300,373
-------------------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.23%
Foamex International, Inc., Sr. Sub. Notes, 13.50%,
08/15/05 180,000 206,100
-------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.11%
Northern Telecom (Canada), Notes, 6.00%, 09/01/03 100,000 99,069
-------------------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.34%
Commemorative Brands, Sr. Sub. Notes, 11.00%, 01/15/07 300,000 302,250
-------------------------------------------------------------------------------
CONSUMER FINANCE - 2.10%
GMAC, Notes, 9.00%, 10/15/02 750,000 834,510
-------------------------------------------------------------------------------
Household Finance Corp., Notes, 7.125%, 09/01/05 1,000,000 1,038,960
-------------------------------------------------------------------------------
1,873,470
-------------------------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER) - 0.58%
MVE Inc., Sr. Sec. Notes, 12.50%, 02/15/02 190,000 190,475
-------------------------------------------------------------------------------
Tekni-Plex Inc., Sr. Sub. Notes, 11.25%, 04/01/07 300,000 324,750
-------------------------------------------------------------------------------
515,225
-------------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.38%
AmeriServ Food Co., Gtd. Sr. Sub. Notes, 10.125%,
07/15/07 320,000 337,600
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-115
PRINCIPAL MARKET
AMOUNT(a) VALUE
ELECTRIC COMPANIES - 0.81%
El Paso Electric Co.,
Series D Sec. First Mortgage Bonds, 8.90%, 02/01/06 $ 500,000 $ 553,575
------------------------------------------------------------------------------
Series E Sec. First Mortgage Bonds, 9.40%, 05/01/11 150,000 169,620
------------------------------------------------------------------------------
723,195
------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.44%
Electronic Retailing Systems International, Inc., Sr.
Disc. Notes, 13.25%, 02/01/04(c) 590,000 395,300
------------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.20%
Advanced Micro Devices, Inc., Sr. Sec. Notes, 11.00%,
08/01/03 170,000 182,538
------------------------------------------------------------------------------
ENTERTAINMENT - 3.13%
Ascent Entertainment Group, Sr. Discount Notes,
11.875%, 12/15/04 (acquired 12/17/97-12/18/97; cost
$339,390)(c)(d) 600,000 351,000
------------------------------------------------------------------------------
Time Warner, Inc.,
Deb., 9.125%, 01/15/13 500,000 597,270
------------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 750,000 823,665
------------------------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 500,000 506,925
------------------------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%, 06/01/05 500,000 513,855
------------------------------------------------------------------------------
2,792,715
------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 2.69%
Associates Corp. of North America, Series B Sr. Deb.,
7.95%, 02/15/10 750,000 839,175
------------------------------------------------------------------------------
Finova Capital Corp., Unsec. Notes, 7.40%, 05/06/06 750,000 790,493
------------------------------------------------------------------------------
U.S. West Capital Funding Inc., Gtd. Notes, 6.95%,
01/15/37 750,000 775,403
------------------------------------------------------------------------------
2,405,071
------------------------------------------------------------------------------
FOODS - 2.03%
ConAgra Inc., Sr. Unsec. Notes, 7.125%, 10/01/26 1,300,000 1,385,332
------------------------------------------------------------------------------
Del Monte Corp./Foods Co., Sr. Unsec. Sub. Notes,
12.25%, 04/15/07 380,000 431,300
------------------------------------------------------------------------------
1,816,632
------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.68%
Coast Hotels & Casinos Inc., Series B Sec. First
Mortgage Gtd. Notes, 13.00%, 12/15/02 180,000 204,300
------------------------------------------------------------------------------
Venetian Casino Resort LLC, Mortgage Notes, 12.25%,
11/15/04 (acquired 11/06/97; cost $400,000)(d) 400,000 402,500
------------------------------------------------------------------------------
606,800
------------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.86%
Tenet Healthcare Corp., Sr. Notes, 8.00%, 01/15/05 750,000 765,000
------------------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 1.21%
Paragon Health Network, Inc., Sr. Sub Notes, 10.50%,
11/01/07 (acquired 10/30/97; cost $416,899)(c)(d) 700,000 435,750
------------------------------------------------------------------------------
Sun Healthcare Group, Inc., Sr. Sub. Notes, 9.50%,
07/01/07 (acquired 07/01/97; cost $617,500)(d) 620,000 641,700
------------------------------------------------------------------------------
1,077,450
------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.45%
Alaris Medical Systems, Sr. Unsec. Gtd. Sub. Deb.,
9.75%, 12/01/06 $ 300,000 $ 316,500
-------------------------------------------------------------------------------
Dade International Inc., Series B Sr. Sub. Notes,
11.125%, 05/01/06 80,000 88,800
-------------------------------------------------------------------------------
405,300
-------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.36%
Dynacare Inc. (Canada), Sr. Yankee Notes, 10.75%,
01/15/06 300,000 317,250
-------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.46%
Zeta Consumer Products, Sr. Notes, 11.25%, 11/30/07
(acquired 11/20/97; cost $400,000)(d) 400,000 409,000
-------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.99%
Americo Life Inc., Sr. Sub. Notes, 9.25%, 06/01/05 75,000 77,063
-------------------------------------------------------------------------------
Torchmark Corp., Notes, 7.875%, 05/15/23 750,000 808,005
-------------------------------------------------------------------------------
885,068
-------------------------------------------------------------------------------
IRON & STEEL - 0.69%
GS Industries, Inc., Sr. Gtd. Notes, 12.00%, 09/01/04 350,000 384,563
-------------------------------------------------------------------------------
Gulf States Steel Corp., First Mortgage Notes, 13.50%,
04/15/03 230,000 233,450
-------------------------------------------------------------------------------
618,013
-------------------------------------------------------------------------------
LODGING - HOTELS - 1.95%
Booth Creek Ski Holdings, Sr. Notes, 12.50%, 03/15/07 390,000 384,150
-------------------------------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb., 7.375%, 11/15/15 750,000 770,663
-------------------------------------------------------------------------------
John Q. Hammons Hotels Inc., Sec. First Mortgage
Notes, 9.75%, 10/01/05 550,000 585,750
-------------------------------------------------------------------------------
1,740,563
-------------------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.49%
Elgin National Industries, Sr. Notes, 11.00%, 11/01/07
(acquired 11/03/97; cost $320,000)(d) 320,000 333,600
-------------------------------------------------------------------------------
Fairfield Manufacturing Co., Inc., Sr. Sub. Notes,
11.375%, 07/01/01 100,000 106,000
-------------------------------------------------------------------------------
439,600
-------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.82%
MMI Products Inc., Sr. Unsec. Sub. Notes, 11.25%,
04/15/07 380,000 416,100
-------------------------------------------------------------------------------
Simmons Co., Sr. Sub. Notes, 10.75%, 04/15/06 300,000 318,750
-------------------------------------------------------------------------------
734,850
-------------------------------------------------------------------------------
METALS MINING - 0.42%
Rio Algom Ltd. (Canada), Yankee Unsec. Deb., 7.05%,
11/01/05 370,000 377,337
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-116
PRINCIPAL MARKET
AMOUNT(a) VALUE
NATURAL GAS - 1.98%
Enron Corp.,
Notes, 6.75%, 08/01/09 $ 750,000 $ 759,052
-------------------------------------------------------------------------------
Sr. Sub. Deb., 6.75%, 07/01/05 450,000 453,577
-------------------------------------------------------------------------------
Ferrellgas Partners, Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 525,000 559,125
-------------------------------------------------------------------------------
1,771,754
-------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.35%
United Stationer Supply, Sr. Sub. Notes, 12.75%,
05/01/05 275,000 314,187
-------------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 0.98%
Gulf Canada Resources, Ltd. (Canada), Sr. Yankee
Unsec. Notes, 8.35%, 08/01/06 800,000 871,856
-------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.07%
Falcon Drilling Co., Inc., Series B Sr. Notes, 9.75%,
01/15/01 60,000 63,150
-------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 1.89%
Abraxas Petroleum Corp., Series B Sr. Notes, 11.50%,
11/01/04 125,000 137,500
-------------------------------------------------------------------------------
Centaur Mining & Exploration, Ltd., Co. (Australia),
Sr. Gtd. Notes, 11.00%, 12/01/07 (acquired 11/24/97;
cost $550,000)(d) 550,000 555,500
-------------------------------------------------------------------------------
Southwest Royalties, Inc., Sr. Gtd. Notes, 10.50%,
10/15/04 (acquired 10/08/97; cost $482,066)(d) 480,000 477,600
-------------------------------------------------------------------------------
Talisman Energy, Inc. (Canada), Yankee Deb., 7.125%,
06/01/07 500,000 516,380
-------------------------------------------------------------------------------
1,686,980
-------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.06%
Indah Kiat Fin Mauritius (Indonesia), Sr. Gtd. Unsec.
Notes, 10.00%, 07/01/07 (acquired 06/26/97; cost
$635,821)(d) 640,000 534,400
-------------------------------------------------------------------------------
Pindo Deli Pulp & Paper, Gtd. Notes, 10.75%, 10/01/07
(acquired 10/14/97-10/16/97; cost $473,250)(d) 470,000 406,550
-------------------------------------------------------------------------------
940,950
-------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.32%
Panda Global Energy Co. (China), Sr. Yankee Sec. Gtd.
Notes, 12.50%, 04/15/04 310,000 283,650
-------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 1.59%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 750,000 892,282
-------------------------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%, 10/01/26 500,000 524,135
-------------------------------------------------------------------------------
1,416,417
-------------------------------------------------------------------------------
RAILROAD - 0.77%
Norfolk Southern Corp., Putable Bonds, 7.05%, 05/01/37 650,000 689,006
-------------------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.23%
Loehmann's Holdings, Inc., Sr. Unsec. Notes, 11.875%,
05/15/03 200,000 208,500
-------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
RETAIL (FOOD CHAINS) - 0.96%
Great Atlantic & Pacific Tea Co., Inc. (Canada),
Yankee Gtd. Notes, 7.78%, 11/01/00 (acquired
10/18/95; cost $500,000)(d) $ 500,000 $ 516,452
-------------------------------------------------------------------------------
Jitney-Jungle Stores of America Inc., Sr. Gtd. Notes,
12.00%, 03/01/06 300,000 341,250
-------------------------------------------------------------------------------
857,702
-------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.56%
Big 5 Corp., Sr. Notes, 10.875%, 11/15/07 (acquired
11/07/97-11/24/97; cost $497,484)(d) 500,000 500,000
-------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.80%
CSK Auto Inc., Sr. Gtd. Sub. Deb., 11.00%, 11/01/06 100,000 110,500
-------------------------------------------------------------------------------
Icon Health & Fitness, Series B Sr. Sub. Notes,
13.00%, 07/15/02 150,000 168,375
-------------------------------------------------------------------------------
United Auto Group, Inc., Sr. Sub. Notes, 11.00%,
07/15/07 (acquired 07/22/97; cost $296,250)(d) 300,000 296,250
-------------------------------------------------------------------------------
Wilson's - The Leather Experts, Inc., Sr. Notes,
11.25%, 08/15/04 (acquired 08/14/97; cost
$140,000)(d) 140,000 138,600
-------------------------------------------------------------------------------
713,725
-------------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.24%
J. Crew Operating Corp., Sr. Sub. Notes, 10.375%,
10/15/07 (acquired 10/14/97; cost $240,000)(d) 240,000 213,600
-------------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.47%
Sovereign Bancorp, Inc., Sub. Notes, 8.00%, 03/15/03 400,000 421,488
-------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.36%
MDC Communications Corp. (Canada), Sr. Yankee Unsec.
Sub. Notes, 10.50%, 12/01/06 300,000 318,750
-------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.59%
Dialog Corp. PLC (United Kingdom), Sr. Sub. Notes,
11.00%, 11/15/07 (acquired 11/10/97; cost
$350,000)(d) 350,000 364,875
-------------------------------------------------------------------------------
Laidlaw Inc. (Canada), Yankee Deb., 6.65%, 10/01/04 550,000 553,899
-------------------------------------------------------------------------------
Pegasus Shipping Hellas, Co. (Bermuda), Gtd. Sr.
Mortgage Notes, 11.875%, 11/15/04 (acquired 11/19/97;
cost $483,000)(d) 500,000 497,500
-------------------------------------------------------------------------------
1,416,274
-------------------------------------------------------------------------------
SHIPPING - 1.15%
Hutchison Whampoa Ltd. (Cayman Islands), Series D Sr.
Yankee Gtd. Unsec. Unsub. Deb., 6.988%, 08/01/37
(acquired 10/02/97; cost $753,008)(d) 750,000 700,830
-------------------------------------------------------------------------------
Stena A.B. (Sweden), Sr. Yankee Unsec. Notes, 10.50%,
12/15/05 300,000 327,750
-------------------------------------------------------------------------------
1,028,580
-------------------------------------------------------------------------------
SOVEREIGN DEBT - 1.81%
Province of Manitoba (Canada), Yankee Bonds, 7.75%,
07/17/16 700,000 801,290
-------------------------------------------------------------------------------
Province of Quebec (Canada), Yankee Deb., 6.29%, 03/06/26 800,000 816,920
-------------------------------------------------------------------------------
1,618,210
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-117
PRINCIPAL MARKET
AMOUNT(a) VALUE
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 2.46%
Clearnet Communications Inc. (Canada), Sr. Yankee
Unsec. Disc. Notes, 14.75%, 12/15/05(c) $ 110,000 $ 88,137
--------------------------------------------------------------------------------
GST Equipment Funding, Sr. Sec. Notes, 13.25%, 05/01/07 300,000 342,750
--------------------------------------------------------------------------------
Nextel Communications, Sr. Disc. Notes, 9.75%, 10/31/07
(acquired 10/22/97-10/23/97; cost $602,450)(c)(d) 1,000,000 620,000
--------------------------------------------------------------------------------
Orion Network Systems, Inc., Units, 11.25%, 01/15/07(f) 580,000 659,750
--------------------------------------------------------------------------------
Pricellular Wireless Corp., Sr. Notes, 10.75%, 11/01/04 230,000 251,275
--------------------------------------------------------------------------------
Sygnet Wireless Inc., Sr. Unsec. Notes, 11.50%,
10/01/06 220,000 238,700
--------------------------------------------------------------------------------
2,200,612
--------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.80%
Bell Canada, Yankee Deb., 9.50%, 10/15/10 (Canada) 350,000 440,821
--------------------------------------------------------------------------------
Esprit Telecom Group PLC (United Kingdom), Sr. Yankee
Notes, 11.50%, 12/15/07 350,000 362,250
--------------------------------------------------------------------------------
MCI Communications Corp., Putable Sr. Unsec. Deb.,
7.125%, 06/15/27 650,000 680,251
--------------------------------------------------------------------------------
PhoneTel Technologies, Inc., Sr. Unsec. Gtd. Notes,
12.00%, 12/15/06 120,000 125,100
--------------------------------------------------------------------------------
1,608,422
--------------------------------------------------------------------------------
TELEPHONE - 0.62%
ESAT Holdings Ltd. (Ireland), Sr. Yankee Notes, 12.50%,
02/01/07(c) 470,000 338,400
--------------------------------------------------------------------------------
Hermes Europe Railtel BV (Netherlands), Sr. Yankee
Notes, 11.50%, 08/15/07 (acquired 08/14/97; cost
$193,238)(d) 190,000 211,850
--------------------------------------------------------------------------------
550,250
--------------------------------------------------------------------------------
TRUCKERS - 0.80%
AmeriTruck Distribution Corp., Series B Sr. Sub. Notes,
12.25%, 11/15/05 300,000 298,500
--------------------------------------------------------------------------------
Travelcenters of America Inc., Sr. Gtd. Unsec. Sub.
Deb., 10.25%, 04/01/07 400,000 422,000
--------------------------------------------------------------------------------
720,500
--------------------------------------------------------------------------------
TRUCKS & PARTS - 0.13%
Blue Bird Body Co., Series B Sr. Sub. Notes, 10.75%,
11/15/06 110,000 118,800
--------------------------------------------------------------------------------
WASTE MANAGEMENT - 1.70%
Allied Waste Industries, Inc., Sr. Disc. Notes, 11.30%,
06/01/07 (acquired 05/01/97; cost $516,924)(c)(d) 900,000 636,750
--------------------------------------------------------------------------------
WMX Technologies, Inc., Unsec. Notes, 7.10%, 08/01/26 850,000 879,725
--------------------------------------------------------------------------------
1,516,475
--------------------------------------------------------------------------------
Total U.S. Dollar Denominated Non-Convertible Bonds &
Notes 58,158,588
--------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS &
NOTES - 9.89%(g)
CANADA - 5.74%
Bank of Montreal (Banks - Money Center), Sub. Deb.,
7.92%, 07/31/12 CAD 850,000 $ 670,323
-------------------------------------------------------------------------------
Bell Mobility Cellular Inc. (Telecommunications -
Cellular/Wireless), Deb., 6.55%, 06/02/08 750,000 528,320
-------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Exploration &
Production), Deb., 11.00%, 10/31/00 450,000 352,965
-------------------------------------------------------------------------------
Clearnet Communications Inc. (Telecommunications -
Cellular/Wireless), Sr. Disc. Notes, 11.75%,
08/13/07 (acquired 07/31/97-11/04/97; cost
$630,905)(c)(d) 1,500,000 666,527
-------------------------------------------------------------------------------
Microcell Telecommunications (Telecommunications -
Cellular/Wireless), Sr. Disc. Notes, 11.125%,
10/15/07 (acquired 10/08/97; cost $424,107)(c)(d) 1,000,000 388,370
-------------------------------------------------------------------------------
NAV Canada (Services - Commercial & Consumer), Bonds,
7.40%, 06/01/27 1,000,000 798,642
-------------------------------------------------------------------------------
Telegobe Canada, Inc. (Telephone), Unsec. Deb.,
8.35%, 06/20/03 850,000 660,086
-------------------------------------------------------------------------------
Trans-Canada Pipelines (Natural Gas),
Series Q Deb., 10.625%, 10/20/09 500,000 475,953
-------------------------------------------------------------------------------
Unsec. Medium Term Notes, 8.55%, 02/01/06 280,000 226,819
-------------------------------------------------------------------------------
Westcoast Energy, Inc. (Oil & Gas - Exploration &
Production), Deb., 6.45%, 12/18/06 (acquired
12/18/96; cost $369,585)(d) 500,000 358,770
-------------------------------------------------------------------------------
5,126,775
-------------------------------------------------------------------------------
GERMANY - 2.94%
Daimler-Benz A.G. (Automobiles), Gtd. Unsub.
Eurobonds, 4.125%, 07/05/03 DEM 570,000 443,580
-------------------------------------------------------------------------------
International Bank for Reconstruction & Development
(Banks-Money Center), Unsec. Global Bonds, 7.125%,
04/12/05)(b) 725,000 446,324
-------------------------------------------------------------------------------
LKB Global (Financial-Diversified), Gtd. Notes,
6.00%, 01/25/06 3,000,000 1,728,460
-------------------------------------------------------------------------------
2,618,364
-------------------------------------------------------------------------------
NEW ZEALAND - 0.32%
International Bank for Reconstruction & Development
(Banks-Money Center), Sr. Notes, 13.31%, 08/20/07(b) NZD1,000,000 288,693
-------------------------------------------------------------------------------
UNITED KINGDOM - 0.89%
Sutton Bridge Financial Ltd. (Financial-Diversified),
Gtd. Eurobonds, 8.625%, 06/30/22 (acquired 05/29/97;
cost $733,585)(d) GBP 450,000 799,106
-------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Non-Convertible
Bonds & Notes 8,832,938
-------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES - 2.42%(g)
FRANCE - 0.32%
Societe Generale (Banks-Money Center), Conv. Deb.,
3.50%, 01/01/00 FRF1,419,000 288,352
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-118
PRINCIPAL MARKET
AMOUNT(a) VALUE
JAPAN - 1.13%
Matsushita Electric Industrial Co. Ltd.
(Electrical Equipment), Conv. Bonds, 1.30%,
03/29/02 JPY 50,000,000 $ 475,798
----------------------------------------------------------------------------
Sony Corp. (Electrical Equipment), Conv. Deb.,
1.40%, 03/31/05 8,000,000 90,986
----------------------------------------------------------------------------
Toyota Motor Corp. (Automobiles), Conv. Bonds,
1.20%, 01/28/98 30,000,000 438,845
----------------------------------------------------------------------------
1,005,629
----------------------------------------------------------------------------
UNITED KINGDOM - 0.97%
British Airport Authority PLC (Airlines), Conv.
Bonds, 5.75%, 03/29/06 GBP 500,000 866,340
----------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Convertible
Bonds & Notes 2,160,321
----------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES - 15.51%(g)
AUSTRALIA - 0.67%
Queensland Treasury Corp., Gtd. Bonds, 6.50%,
06/14/05 AUD 900,000 600,090
----------------------------------------------------------------------------
CANADA - 2.91%
Canadian Government, Bonds, 7.00%, 12/01/06 CAD 1,000,000 767,454
----------------------------------------------------------------------------
Municipal Finance Authority of British Columbia,
Unsec. Bonds, 7.75%, 12/01/05 500,000 393,356
----------------------------------------------------------------------------
Ontario Province
Sr. Unsec. Unsub. Deb, 6.875%, 09/15/00 GBP 465,000 759,821
----------------------------------------------------------------------------
Sr. Unsec. Unsub. Global Bonds, 8.00%, 03/11/03 CAD 750,000 581,521
----------------------------------------------------------------------------
Quebec (Province of), Deb., 9.375%, 01/16/23 100,000 95,116
----------------------------------------------------------------------------
2,597,268
----------------------------------------------------------------------------
GERMANY - 0.68%
Bundesrepublic Deutschland, Bonds, 6.875%,
05/12/05 DEM 1,000,000 610,962
----------------------------------------------------------------------------
ITALY - 0.35%
Republic of Italy, Conv. Eurobonds, 6.50%,
06/28/01 ITL400,000,000 312,323
----------------------------------------------------------------------------
NEW ZEALAND - 3.08%
Federal National Mortgage Association, Notes,
7.25%, 06/20/02 NZD 1,250,000 710,149
----------------------------------------------------------------------------
New Zealand Government,
Bonds, 8.00%, 02/15/01 750,000 442,479
----------------------------------------------------------------------------
Bonds, 10.00%, 03/15/02 1,800,000 1,144,973
----------------------------------------------------------------------------
Bonds, 8.00%, 04/15/04 750,000 454,128
----------------------------------------------------------------------------
2,751,729
----------------------------------------------------------------------------
SWEDEN - 2.75%
Swedish Government,
Bonds, 10.25%, 05/05/03 SEK 6,000,000 911,044
----------------------------------------------------------------------------
Bonds, 6.00%, 02/09/05 6,000,000 762,225
----------------------------------------------------------------------------
Bonds, 6.50%, 10/25/06 6,000,000 783,516
----------------------------------------------------------------------------
2,456,785
----------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT(a) VALUE
UNITED KINGDOM - 5.07%
Federal National Mortgage Association, Sr. Unsec.
Notes, 6.875%, 06/07/02 GBP 450,000 $ 741,312
-------------------------------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 400,000 679,729
-------------------------------------------------------------------------------
Bonds, 7.50% 12/07/06 450,000 795,991
-------------------------------------------------------------------------------
Gtd. Notes, 7.25%, 03/30/98 1,000,000 1,643,122
-------------------------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 400,000 664,639
-------------------------------------------------------------------------------
4,524,793
-------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 13,853,950
-------------------------------------------------------------------------------
SHARES
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 2.25%
BANKS (REGIONAL) - 0.60%
Westpac Banking Corp. STRYPES Trust - $3.135 Conv.
Pfd. 16,000 536,000
-------------------------------------------------------------------------------
ENTERTAINMENT - 0.00%
Time Warner Inc.-Series M, $102.50 PIK Conv. Pfd. 1 1,154
-------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.40%
Conseco Inc.-$4.278 Conv. PRIDES 8,000 1,248,000
-------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.25%
Citizens Utilities Co.-$2.50 Conv. Pfd. 4,700 224,425
-------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 2,009,579
-------------------------------------------------------------------------------
COMMON STOCK - 0.02%
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.02%
Nextel Communications, Inc. 743 19,318
-------------------------------------------------------------------------------
WARRANTS - 0.05%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.00%
Wireless One, Inc., expiring 10/19/00(h) 420 0
-------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.01%
Electronic Retailing Systems, expiring 01/24/98(h) 590 11,800
-------------------------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES - 0.00%
Boomtown, Inc., expiring 11/01/98 (acquired 11/03/93;
cost $0)(d)(h) 150 2
-------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.01%
MVE Inc., expiring 02/15/02(h) 190 5,700
-------------------------------------------------------------------------------
METAL FABRICATORS - 0.00%
Gulf States Steel Corp., expiring 04/15/03(h) 230 1,035
-------------------------------------------------------------------------------
PERSONAL CARE - 0.01%
IHF Capital Inc., expiring 11/14/99 (acquired
11/04/94-12/07/94; cost $150)(d)(h) 150 7,575
-------------------------------------------------------------------------------
|
AIM V.I. DIVERSIFIED INCOME FUND
FS-119
MARKET
SHARES VALUE
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.02%
Clearnet Communications Inc. (Canada), expiring
09/15/05(h) 891 $ 8,464
---------------------------------------------------------------------------
Orion Network Systems, Inc., expiring 01/15/07(h) 580 8,120
---------------------------------------------------------------------------
16,584
---------------------------------------------------------------------------
TELEPHONE - 0.00%
ESAT Holdings Ltd, expiring 02/01/07 (acquired
06/16/97; cost $0)(d)(h) 470 1,763
---------------------------------------------------------------------------
Total Warrants 44,459
---------------------------------------------------------------------------
PRINCIPAL
AMOUNT
U.S. TREASURY SECURITIES - 0.46%
Notes, 6.50%, 05/31/01 $ 400,000 409,740
---------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 0.69%
Tennessee Valley Authority, Bonds, 5.98%, 04/01/36 600,000 614,082
---------------------------------------------------------------------------
REPURCHASE AGREEMENT - 1.08%(i)
Smith Barney, Inc. 6.75%, 01/02/98(j) 966,742 966,742
---------------------------------------------------------------------------
TOTAL INVESTMENTS - 97.48% 87,069,717
---------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 2.52% 2,248,935
---------------------------------------------------------------------------
NET ASSETS - 100.00% $89,318,652
===========================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Principal amount is in U.S. Dollars, except as indicated by note (g).
(b) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount
(c) Discounted bond at purchase. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/97 was $11,793,420
which represented 13.20% of the Fund's net assets.
(e) Issued as a unit. This unit includes one Sr. Note plus one warrant to
purchase 0.003734 shares of preferred stock.
(f) Issued as a unit. This unit includes one Sr. Note plus warrants to purchase
0.8463 shares of common stock.
(g) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(h) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S.Government obligations, 0%
to 13.875%, due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Abbreviations: AUD - Australian Dollar PIK - Payment in Kind CAD - Canadian Dollar Pfd. - Preferred Conv. - Convertible PRIDES - Preferred Redeemable Increased Dividend Deb. - Debenture Equity Security |
DEM - German Deutschemark Sec. - Secured Disc. - Discounted SEK - Swedish Krona FRF - French Franc Sr. - Senior GBP - British Pound Sterling STRYPES- Structured Yield Product Exchangeable Gtd. - Guaranteed for Stock ITL - Italian Lire Sub. - Subordinated JPY - Japanese Yen Unsec. - Unsecured NZD - New Zealand Dollar Unsub. - Unsubordinated Wt. - Warrants
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
FS-120
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS: Investments, at market value (cost $84,751,367) $87,069,717 --------------------------------------------------------------------- Foreign currencies, at market value (cost $72,375) 72,202 --------------------------------------------------------------------- Receivables for: Forward currency contracts 509,198 --------------------------------------------------------------------- Capital stock sold 75,556 --------------------------------------------------------------------- Dividends and interest 1,662,634 --------------------------------------------------------------------- Investment for deferred compensation plan 16,957 --------------------------------------------------------------------- Organizational costs, net 965 --------------------------------------------------------------------- Other assets 126 --------------------------------------------------------------------- Total assets 89,407,355 --------------------------------------------------------------------- LIABILITIES: Payable for deferred compensation plan 16,957 --------------------------------------------------------------------- Accrued advisory fees 44,572 --------------------------------------------------------------------- Accrued administrative service fees 4,150 --------------------------------------------------------------------- Accrued directors' fees 2,234 --------------------------------------------------------------------- Accrued operating expenses 20,790 --------------------------------------------------------------------- Total liabilities 88,703 --------------------------------------------------------------------- Net assets applicable to shares outstanding $89,318,652 ===================================================================== CAPITAL SHARES, $.001 PAR VALUE PER SHARE: Authorized 250,000,000 --------------------------------------------------------------------- Outstanding 7,914,436 ===================================================================== Net asset value, offering and redemption price per share $ 11.29 ===================================================================== |
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME:
Interest $5,682,303
-------------------------------------------------------------------------------
Dividends 64,710
-------------------------------------------------------------------------------
Total investment income 5,747,013
-------------------------------------------------------------------------------
EXPENSES:
Advisory fees 447,539
-------------------------------------------------------------------------------
Administrative services fees 48,683
-------------------------------------------------------------------------------
Custodian fees 39,847
-------------------------------------------------------------------------------
Directors' fees and expenses 8,076
-------------------------------------------------------------------------------
Organizational costs 2,892
-------------------------------------------------------------------------------
Other 51,031
-------------------------------------------------------------------------------
Total expenses 598,068
-------------------------------------------------------------------------------
Less: Expenses paid indirectly (1,513)
-------------------------------------------------------------------------------
Net expenses 596,555
-------------------------------------------------------------------------------
Net investment income 5,150,458
-------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities 676,109
-------------------------------------------------------------------------------
Foreign currencies (439,310)
-------------------------------------------------------------------------------
Forward currency contracts 838,669
-------------------------------------------------------------------------------
1,075,468
-------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 282,391
-------------------------------------------------------------------------------
Foreign currencies (9,268)
-------------------------------------------------------------------------------
Forward currency contracts 422,581
-------------------------------------------------------------------------------
695,704
-------------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and forward
currency contracts 1,771,172
-------------------------------------------------------------------------------
Net increase in net assets resulting from operations $6,921,630
===============================================================================
|
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
FS-121
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
----------- -----------
OPERATIONS:
Net investment income $ 5,150,458 $ 3,620,192
-----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and forward currency contracts 1,075,468 967,204
-----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies and forward
currency contracts 695,704 685,218
-----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 6,921,630 5,272,614
-----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (77,788) (3,857,482)
-----------------------------------------------------------------------------
Net equalization credits -- 905,775
-----------------------------------------------------------------------------
Net increase from capital stock transactions 18,851,039 16,672,719
-----------------------------------------------------------------------------
Net increase in net assets 25,694,881 18,993,626
-----------------------------------------------------------------------------
NET ASSETS:
Beginning of year 63,623,771 44,630,145
-----------------------------------------------------------------------------
End of year $89,318,652 $63,623,771
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $80,655,246 $59,753,245
-----------------------------------------------------------------------------
Undistributed net investment income 4,195,077 1,655,895
-----------------------------------------------------------------------------
Undistributed net realized gain on investment
securities, foreign currencies and forward
currency contracts 1,653,803 95,809
-----------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and forward currency contracts 2,814,526 2,118,822
-----------------------------------------------------------------------------
$89,318,652 $63,623,771
=============================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Diversified Income Fund (the "Fund"). The Fund's investment
objective is to seek to achieve a high level of current income. The Fund will
seek to achieve its objective by investing primarily in a diversified
portfolio of foreign and U.S. government and corporate debt securities,
including lower rated high yield debt securities (commonly known as "junk
bonds"). These high yield bonds may involve special risks in addition to the
risks associated with investment in higher rated debt securities. High yield
bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than higher grade bonds. Also, the secondary
market in which high yield bonds are traded may be less liquid than the market
for higher grade bonds. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations--Debt obligations are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service 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, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which
prices are not provided by the pricing service and which are listed or
traded on an exchange are valued at the last sales price on the exchange
where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on
that day unless the Board of Directors, or persons designated by the Board
of Directors, determines that the over-the-counter quotations more closely
reflect the current market value of the security. Securities traded in the
over-the-counter market, except (i) securities priced by the pricing
service, (ii) securities for which representative exchange prices are
available, and (iii) securities reported in the NASDAQ National Market
System, are valued at the mean between representative last bid and asked
prices obtained from
AIM V.I. DIVERSIFIED INCOME FUND
FS-122
an electronic quotation reporting system, if such prices are available, or
from established market makers. Each security reported in the NASDAQ National
Market System is valued at the last sales price on the valuation date or
absent a last sales price, at the mean of the closing bid and asked prices.
Securities for which market quotations are either not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Fund's officers in accordance with methods which
are specifically authorized by the Board of Directors. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities as well
as corporate bonds and U.S. Government securities is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. Foreign Currency Translation - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for the
amount of a purchase or sale of a security denominated in a foreign currency
in order to "lock-in" the U.S. dollar price of that security. The Fund could
be exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding contracts at December 31, 1997 were as follows:
CONTRACT TO
SETTLEMENT ---------------------- UNREALIZED
DATE DELIVER RECEIVE VALUE APPRECIATION
---------- ---------- ----------- ----------- ------------
01/14/98 JPY 5,000,000 $ 41,841 $ 38,294 $ 3,547
01/28/98 DEM 3,350,000 1,894,796 1,865,325 29,471
01/29/98 SEK 19,000,000 2,554,450 2,395,003 159,447
01/30/98 GBP 1,375,000 2,296,800 2,267,448 29,352
02/06/98 JPY 31,000,000 257,903 237,433 20,470
02/18/98 NZD 3,800,000 2,367,400 2,209,406 157,994
02/20/98 DEM 2,400,000 1,402,361 1,338,028 64,333
02/27/98 GBP 1,400,000 2,339,302 2,316,645 22,657
03/05/98 JPY 93,000,000 733,207 712,328 20,879
03/19/98 NZD 1,400,000 814,800 814,585 215
03/31/98 GBP 1,000,000 1,663,250 1,662,417 833
----------- ----------- --------
$16,366,110 $15,856,912 $509,198
========
|
D. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. It is the policy of the Fund not to amortize premiums on
bonds for financial reporting purposes. Realized gains or losses from
securities transactions are recorded on the identified cost basis. On
December 31, 1997, undistributed net investment income was reduced by
$482,526 and undistributed net realized gains increased by $482,526 in order
to comply with the requirements of the American Institute of Certified
Public Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
E. Federal Income Taxes - For federal income tax purposes, each portfolio in
the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. Equalization - The Fund previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. During the year ended December 31, 1997, the Fund discontinued
equalization accounting and reclassified the cumulative equalization debits
of $2,050,962 from undistributed net investment income to paid-in capital.
This change has no effect on the net assets, the results of operations or
net asset value per share of the Fund.
G. Organizational Costs - Organizational costs of the Fund of $14,461 are being
amortized over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.60% of
the first $250 million of the Fund's average daily net assets, plus 0.55% of
such Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company and
AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $48,683 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,400 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolios trades to brokers who paid a portion of
the Fund's expenses related to pricing services used by the Fund which reduced
the Fund's expenses by $290 during the year ended December 31, 1997. The Fund
also received reductions in custodian fees of $1,223 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $1,513 during the year ended December 31, 1997.
AIM V.I. DIVERSIFIED INCOME FUND
FS-123
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $61,998,858 and $37,621,437, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1997 is as follows:
Aggregate unrealized appreciation of investment securities $4,207,440 ------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (1,889,813) ------------------------------------------------------------------------- Net unrealized appreciation of investment securities $2,317,627 ========================================================================= |
Cost of investments for tax purposes is $84,752,090.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
Sold 2,860,755 $ 30,505,544 2,366,508 $ 22,865,918
------------------------------------------------------------------------------
Issued as reinvestment of
distributions 6,908 77,788 377,444 3,857,482
------------------------------------------------------------------------------
Reacquired (1,114,698) (11,732,293) (1,044,208) (10,050,681)
------------------------------------------------------------------------------
1,752,965 $ 18,851,039 1,699,744 $ 16,672,719
==============================================================================
|
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995 and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
------------------------------- -----------------
1997 1996 1995 1995 1994
------- ------- ------- ------- -------
Net asset value,
beginning of period $ 10.33 $ 10.00 $ 9.12 $ 10.46 $ 10.00
-----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.73 0.73 0.69 0.76 0.54
-----------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.24 0.28 0.94 (1.42) 0.29
-----------------------------------------------------------------------------------
Total from investment
operations 0.97 1.01 1.63 (0.66) 0.83
-----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.01) (0.68) (0.75) (0.68) (0.35)
-----------------------------------------------------------------------------------
Distributions from net
realized capital
gains -- -- -- -- (0.02)
-----------------------------------------------------------------------------------
Total distributions (0.01) (0.68) (0.75) (0.68) (0.37)
-----------------------------------------------------------------------------------
Net asset value, end of
period $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46
===================================================================================
Total return(a) 9.39% 10.19% 18.11% (6.35)% 8.33%
===================================================================================
Ratios/supplemental data:
Net assets, end of
period (000s omitted) $89,319 $63,624 $44,630 $25,271 $14,530
===================================================================================
Ratio of expenses to
average net assets(b) 0.80%(c)(d) 0.86% 0.88%(e) 0.91% 1.05%(e)
===================================================================================
Ratio of net investment
income to average net
assets(f) 6.90%(c) 7.09% 7.65%(e) 8.07% 6.78%(e)
===================================================================================
Portfolio turnover rate 52% 76% 72% 100% 57%
===================================================================================
|
(a) Total returns for periods less than one year are not annualized.
(b) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.03% and 1.69% (annualized) for January 31, 1995 and 1994, respectively.
(c) Ratios are based on average net assets of $74,589,876.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have
remained the same.
(e) Annualized.
(f) After fee waivers and/or expense reimbursement. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 7.95% and 6.14% (annualized) for January 31, 1995 and
1994, respectively.
AIM V.I. DIVERSIFIED INCOME FUND
FS-124
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. Global Utilities Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995 and the period May 2, 1994 (commencement of operations) through January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Global Utilities Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995 and the period May 2, 1994 (commencement of operations) through January 31, 1995, in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. GLOBAL UTILITIES FUND
FS-125
SCHEDULE OF INVESTMENTS
December 31, 1997
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS - 44.14%
BROADCASTING (TELEVISION, RADIO, & CABLE) - 0.54%
Univision Communications Inc.(a) 1,700 $ 118,681
---------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.65%
ADC Telecommunications, Inc.(a) 4,800 200,400
---------------------------------------------------------------------
Excel Switching Corp(a) 400 7,150
---------------------------------------------------------------------
Lucent Technologies, Inc. 2,000 159,750
---------------------------------------------------------------------
NEXTLINK Communications, Inc.-Class A(a) 1,100 23,444
---------------------------------------------------------------------
Qwest Communications International Inc.(a) 2,200 130,900
---------------------------------------------------------------------
Tellabs, Inc.(a) 1,200 63,450
---------------------------------------------------------------------
585,094
---------------------------------------------------------------------
ELECTRIC COMPANIES - 14.74%
Allegheny Energy, Inc. 8,300 269,750
---------------------------------------------------------------------
Carolina Power & Light Co. 4,400 186,725
---------------------------------------------------------------------
CINergy Corp. 4,500 172,406
---------------------------------------------------------------------
DQE, Inc. 7,700 270,462
---------------------------------------------------------------------
Edison International 4,800 130,500
---------------------------------------------------------------------
FPL Group, Inc. 6,200 366,963
---------------------------------------------------------------------
IPALCO Enterprises, Inc. 2,000 83,875
---------------------------------------------------------------------
New Century Energies, Inc. 4,600 220,513
---------------------------------------------------------------------
New York State Electric & Gas Corp. 5,000 177,500
---------------------------------------------------------------------
NIPSCO Industries, Inc. 6,000 296,625
---------------------------------------------------------------------
Pinnacle West Capital Corp. 11,400 483,075
---------------------------------------------------------------------
Public Service Company of New Mexico 3,600 85,275
---------------------------------------------------------------------
Sierra Pacific Resources 3,300 123,750
---------------------------------------------------------------------
Southern Co. 8,200 212,175
---------------------------------------------------------------------
Teco Energy, Inc. 6,200 174,375
---------------------------------------------------------------------
3,253,969
---------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.45%
Superior TeleCom Inc.(a) 2,900 100,230
---------------------------------------------------------------------
NATURAL GAS - 7.97%
Coastal Corp. (The) 1,400 86,713
---------------------------------------------------------------------
Columbia Gas System, Inc. 2,000 157,125
---------------------------------------------------------------------
El Paso Natural Gas Co. 7,800 518,700
---------------------------------------------------------------------
Energen Corp. 1,400 55,650
---------------------------------------------------------------------
KN Energy, Inc. 2,700 145,800
---------------------------------------------------------------------
Public Service Company of North Carolina, Inc. 3,000 68,625
---------------------------------------------------------------------
Sonat, Inc. 5,100 233,325
---------------------------------------------------------------------
Williams Companies, Inc. (The) 17,400 493,725
---------------------------------------------------------------------
1,759,663
---------------------------------------------------------------------
|
MARKET
SHARES VALUE
POWER PRODUCERS (INDEPENDENT) - 1.12%
AES Corp.(a) 2,000 $ 93,250
------------------------------------------------------------------------
Calenergy, Inc.(a) 5,400 155,250
------------------------------------------------------------------------
248,500
------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 4.45%
Alexandria Real Estate Equities, Inc. 2,300 72,594
------------------------------------------------------------------------
Boston Properties, Inc. 3,100 102,493
------------------------------------------------------------------------
Cali Realty Corp. 3,100 127,100
------------------------------------------------------------------------
Captec Net Lease Realty, Inc. 2,900 49,844
------------------------------------------------------------------------
CCA Prison Realty Trust(a) 3,000 133,875
------------------------------------------------------------------------
Crescent Real Estate Equities, Co. 1,600 63,000
------------------------------------------------------------------------
Entertainment Properties Trust(a) 2,200 42,625
------------------------------------------------------------------------
Golf Trust of America, Inc. 800 23,200
------------------------------------------------------------------------
Imperial Credit Commercial Mortgage Investment Corp. 2,200 32,175
------------------------------------------------------------------------
Meditrust Corp. 1,562 57,208
------------------------------------------------------------------------
Parkway Properties, Inc. 1,100 37,744
------------------------------------------------------------------------
Patriot American Hospitality, Inc. 4,199 120,984
------------------------------------------------------------------------
Public Storage, Inc. 1,500 44,063
------------------------------------------------------------------------
Starwood Lodging Trust 1,300 75,237
------------------------------------------------------------------------
982,142
------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.28%
IXC Communications, Inc.(a) 2,600 81,575
------------------------------------------------------------------------
WinStar Communications, Inc.(a) 4,500 112,219
------------------------------------------------------------------------
WorldCom, Inc.(a) 2,968 89,782
------------------------------------------------------------------------
283,576
------------------------------------------------------------------------
TELEPHONE - 10.94%
Ameritech Corp. 5,100 410,550
------------------------------------------------------------------------
BellSouth Corp. 6,900 388,556
------------------------------------------------------------------------
Century Telephone Enterprises 5,200 259,025
------------------------------------------------------------------------
Cincinnati Bell, Inc. 18,500 573,500
------------------------------------------------------------------------
Electric Lightwave, Inc.-Class A(a) 6,300 93,712
------------------------------------------------------------------------
GTE Corp. 2,600 135,850
------------------------------------------------------------------------
McLeodUSA Inc.-Class A(a) 2,700 86,400
------------------------------------------------------------------------
SBC Communications, Inc. 4,500 329,625
------------------------------------------------------------------------
Teleport Communications Group Inc.-Class A(a) 2,500 137,188
------------------------------------------------------------------------
2,414,406
------------------------------------------------------------------------
Total Domestic Common Stocks 9,746,261
------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 2.60%
INVESTMENT BANKING/BROKERAGE - 0.11%
Salomon Inc.-$3.48 Conv. Pfd. 400 23,700
------------------------------------------------------------------------
NATURAL GAS - 0.43%
MCN Corp.-$2.013 Conv. Pfd. PRIDES 2,800 95,900
------------------------------------------------------------------------
|
AIM V.I. GLOBAL UTILITIES FUND
FS-126
MARKET
SHARES VALUE
POWER PRODUCERS (INDEPENDENT) - 1.39%
AES Trust I-$2.69 Conv. Pfd. 3,000 $ 215,250
------------------------------------------------------------------------------
AES Trust II-$2.75 Conv. Pfd. (Acquired 10/24/97;
Cost $60,000)(b) 1,200 62,550
------------------------------------------------------------------------------
Citizens Utilities Co.-$2.50 Conv. Pfd. 600 28,650
------------------------------------------------------------------------------
306,450
------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.67%
WorldCom, Inc.-$2.68 Conv. Pfd. 1,400 147,000
------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 573,050
------------------------------------------------------------------------------
DOMESTIC NON-CONVERTIBLE PREFERRED STOCKS - 0.30%
ENTERTAINMENT - 0.30%
Time Warner Inc.-Series M, $102.50 PIK Pfd. 58 65,767
------------------------------------------------------------------------------
Total Domestic Non-Convertible Preferred Stocks 65,767
------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 26.97%
ARGENTINA - 0.41%
Central Costanera S.A.-Class B (Electric Companies) 20,700 53,830
------------------------------------------------------------------------------
Telefonica de Argentina S.A.-ADR (Telephone) 1,000 37,250
------------------------------------------------------------------------------
91,080
------------------------------------------------------------------------------
AUSTRALIA - 0.14%
Telstra Corp. Ltd. (Telephone)(a) 14,380 30,366
------------------------------------------------------------------------------
AUSTRIA - 0.47%
Oesterreichische Elektrizitaetswirtschafts A.G.-Class A
(Electric Companies) 970 102,901
------------------------------------------------------------------------------
BELGIUM - 0.42%
Electrabel S.A. (Electric Companies) 400 92,521
------------------------------------------------------------------------------
BRAZIL - 1.70%
Centrais Eletricas de Santa Catarina S.A. (Electric
Companies) 40,000 49,819
------------------------------------------------------------------------------
Compania Paranaense de Energia-Copel (Electric
Companies)(a) 3,100 42,431
------------------------------------------------------------------------------
Eletricidade de Sao Paulo S.A. (Electric Companies)(a) 270 50,804
------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A.-Telebras-ADR
(Telephone) 2,000 232,875
------------------------------------------------------------------------------
375,929
------------------------------------------------------------------------------
CANADA - 1.40%
MetroNet Communications Corp.-Class B (Communications
Equipment)(a) 1,800 31,275
------------------------------------------------------------------------------
Philip Services Corp. (Waste Management)(a) 3,500 50,313
------------------------------------------------------------------------------
TELUS Corp. (Telecommunications-Cellular/Wireless) 4,300 95,385
------------------------------------------------------------------------------
Westcoast Energy Inc. (Natural Gas) 5,500 126,500
------------------------------------------------------------------------------
Westshore Terminals Inc. (Services-Facilities &
Environmental) 2,200 5,542
------------------------------------------------------------------------------
309,015
------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
CHILE - 1.29%
Cia. de Telecomunicaciones de Chile S.A.-ADR (Telephone) 6,300 $ 188,213
-------------------------------------------------------------------------------
Enersis S.A.-ADR (Electric Companies) 3,300 95,700
-------------------------------------------------------------------------------
283,913
-------------------------------------------------------------------------------
DENMARK - 0.22%
Tele Danmark A.S.-ADR (Telephone) 1,600 49,300
-------------------------------------------------------------------------------
FINLAND - 0.32%
Nokia Oyj A.B.-Class A-ADR (Communications Equipment) 1,000 70,000
-------------------------------------------------------------------------------
GERMANY - 2.20%
RWE A.G. (Electric Companies) 2,200 118,010
-------------------------------------------------------------------------------
VEBA A.G. (Manufacturing-Diversified) 3,435 233,901
-------------------------------------------------------------------------------
Viag A.G. (Manufacturing-Diversified) 250 134,658
-------------------------------------------------------------------------------
486,569
-------------------------------------------------------------------------------
FRANCE - 0.33%
France Telecom S.A.-ADR (Telecommunications-
Cellular/Wireless)(a) 2,000 72,000
-------------------------------------------------------------------------------
HONG KONG - 0.20%
China Telecom Ltd.-ADR (Telecommunications-
Cellular/Wireless)(a) 1,300 43,631
-------------------------------------------------------------------------------
HUNGARY - 0.36%
Magyar Tavkozlesi ADR (Telecommunications-Long
Distance)(a) 3,100 80,600
-------------------------------------------------------------------------------
INDONESIA - 0.11%
PT Indosat-ADR (Telephone) 1,300 25,106
-------------------------------------------------------------------------------
ISRAEL - 0.50%
ECI Telecommunications Ltd. (Communications Equipment) 2,700 68,850
-------------------------------------------------------------------------------
Gilat Communications Ltd. (Communications Equipment)(a) 5,800 42,775
-------------------------------------------------------------------------------
111,625
-------------------------------------------------------------------------------
ITALY - 2.40%
Telecom Italia Mobile S.p.A. (Telecommunications-
Cellular/Wireless) 38,025 175,444
-------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 55,277 353,598
-------------------------------------------------------------------------------
529,042
-------------------------------------------------------------------------------
JAPAN - 0.45%
Nippon Telegraph & Telephone Corp. (Telephone) 50 42,889
-------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp.-ADR (Telephone) 1,300 56,306
-------------------------------------------------------------------------------
99,195
-------------------------------------------------------------------------------
NETHERLANDS - 0.43%
Royal PTT Nederland N.V. (Telephone) 280 11,682
-------------------------------------------------------------------------------
Royal PTT Nederland N.V.-ADR (Telephone) 2,000 83,000
-------------------------------------------------------------------------------
94,682
-------------------------------------------------------------------------------
|
AIM V.I. GLOBAL UTILITIES FUND
FS-127
MARKET
SHARES VALUE
NEW ZEALAND - 1.08%
Sky Network Television Ltd. (Broadcasting-Television,
Radio & Cable)(a) 1,700 $ 25,500
----------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd.-ADR (Telephone) 5,500 213,125
----------------------------------------------------------------------------
238,625
----------------------------------------------------------------------------
PERU - 0.37%
Luz Del Sur S.A. (Power Producers-Independent)(a) 1,700 29,325
----------------------------------------------------------------------------
Telefonica del Peru S.A.-ADR (Telephone)(a) 2,200 51,288
----------------------------------------------------------------------------
80,613
----------------------------------------------------------------------------
PORTUGAL - 1.27%
Electricidade de Portugal, S.A.-ADR (Electric
Companies)(a) 1,000 38,750
----------------------------------------------------------------------------
Portugal Telecom S.A.-ADR (Telephone) 4,700 220,900
----------------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Telecommunications-Cellular/Wireless)(a) 200 21,400
----------------------------------------------------------------------------
281,050
----------------------------------------------------------------------------
SPAIN - 1.92%
Autopistas Concesionaria Espanola S.A. (Services-
Commercial & Consumer) 3,900 52,350
----------------------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 15,700 206,619
----------------------------------------------------------------------------
Telefonica de Espana-ADR (Telephone) 1,800 163,913
----------------------------------------------------------------------------
422,882
----------------------------------------------------------------------------
SWEDEN - 0.64%
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 3,800 141,788
----------------------------------------------------------------------------
UNITED KINGDOM - 7.70%
Energy Group PLC (Power Producers-Independent)(a) 2,000 89,250
----------------------------------------------------------------------------
Hyder PLC (Water Utilities) 4,210 66,930
----------------------------------------------------------------------------
National Grid Group PLC (Electric Companies) 12,134 57,593
----------------------------------------------------------------------------
National Power PLC (Electric Companies) 22,950 226,152
----------------------------------------------------------------------------
National Power PLC-ADR (Electric Companies) 900 35,662
----------------------------------------------------------------------------
PowerGen PLC (Electric Companies) 38,650 502,736
----------------------------------------------------------------------------
PowerGen PLC-ADR (Electric Companies) 1,100 58,438
----------------------------------------------------------------------------
Scottish Power PLC (Electric Companies) 15,950 140,932
----------------------------------------------------------------------------
Southern Electric PLC (Electric Companies) 9,706 80,660
----------------------------------------------------------------------------
United Utilities PLC (Water Utilities) 14,725 188,632
----------------------------------------------------------------------------
Wessex Water PLC (Water Utilities) 11,650 98,154
----------------------------------------------------------------------------
Yorkshire Water PLC (Water Utilities) 19,580 155,962
----------------------------------------------------------------------------
1,701,101
----------------------------------------------------------------------------
VENEZUELA - 0.64%
Cia. Anonima Nacional Telefonos de Venezuela
(Telecommunications-Long Distance)(a) 3,400 141,525
----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 5,955,059
----------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
DOMESTIC NON-CONVERTIBLE BONDS & NOTES - 6.55%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.48%
Comcast Corp., Sr. Sub. Deb., 9.50%, 01/15/08 $ 100,000 $ 106,875
------------------------------------------------------------------------------
CONSUMER FINANCE - 0.38%
GMAC, Notes, 9.00%, 10/15/02 75,000 83,451
------------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.84%
El Paso Electric Co., Series D Sec. 1st Mortgage Bonds,
8.90%, 02/01/06 75,000 83,036
------------------------------------------------------------------------------
Western Resources Inc., Sr. Notes, 7.125%, 08/01/09 100,000 102,984
------------------------------------------------------------------------------
186,020
------------------------------------------------------------------------------
ENTERTAINMENT - 1.26%
Time Warner, Inc.
Deb., 9.125%, 01/15/13 100,000 119,454
------------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 75,000 82,367
------------------------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 75,000 76,039
------------------------------------------------------------------------------
277,860
------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.49%
California Energy Co., Notes, 10.25%, 01/15/04 100,000 108,000
------------------------------------------------------------------------------
NATURAL GAS - 0.58%
Ferrellgas Partners, Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 75,000 79,875
------------------------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%, 08/15/04 45,000 48,915
------------------------------------------------------------------------------
128,790
------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.48%
Tennessee Gas Pipeline Co., Bonds, 7.00%, 03/15/27 100,000 105,440
------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.29%
AES Corp., Sr. Sub. Notes, 10.25%, 07/15/06 75,000 81,563
------------------------------------------------------------------------------
Arizona Public Service Co., Deb., 8.00%, 12/30/15 75,000 81,700
------------------------------------------------------------------------------
Indiana Michigan Power, Sec. Lease Obligation Bonds,
9.82%, 12/07/22 93,421 122,242
------------------------------------------------------------------------------
285,505
------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.75%
AT&T Corp., Sr. Notes, 7.75%, 03/01/07 150,000 164,414
------------------------------------------------------------------------------
Total Domestic Non-Convertible Bonds & Notes 1,446,355
------------------------------------------------------------------------------
|
AIM V.I. GLOBAL UTILITIES FUND
FS-128
PRINCIPAL MARKET
AMOUNT VALUE
FOREIGN NON-CONVERTIBLE BONDS & NOTES - 2.25%
CANADA - 2.25%(c)
Bell Canada (Telecommunications-Cellular/Wireless),
Series EW Deb., 8.80%, 08/17/05 CAD 50,000 $ 41,062
-------------------------------------------------------------------------------
Unsec. Deb., 10.875, 10/11/04 50,000 44,131
-------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas-Exploration &
Production), Deb., 11.00%, 10/31/00 100,000 78,437
-------------------------------------------------------------------------------
Ontario Hydro (Electric Companies), Global Bonds,
9.00%, 06/24/02 100,000 79,414
-------------------------------------------------------------------------------
Telegobe Canada, Inc. (Telephone), Unsec. Deb.,
8.35%, 06/20/03 100,000 77,657
-------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas-Exploration & Production),
Series Q Deb., 10.625%, 10/20/09 125,000 118,988
-------------------------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 70,000 56,705
-------------------------------------------------------------------------------
Total Foreign Non-Convertible Bonds & Notes 496,394
-------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 1.41%
U.S. TREASURY BONDS - 0.71%
7.625%, 02/15/25 $ 130,000 157,822
-------------------------------------------------------------------------------
U.S. TREASURY NOTES - 0.70%
6.625%, 06/30/01 150,000 154,260
-------------------------------------------------------------------------------
Total U.S. Treasury Securities 312,082
-------------------------------------------------------------------------------
Total Investments (excluding Repurchase Agreement) 18,594,968
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 17.27%(d)
Smith Barney, Inc., 6.75%, 01/02/98(e) 3,813,559 3,813,559
-------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 101.49% 22,408,527
-------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.49%) (329,666)
-------------------------------------------------------------------------------
NET ASSETS - 100.00% $ 22,078,861
===============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
market value of this security at 12/31/97 represented 0.28% of the Fund's
net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
Canadian dollars.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreements. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint accounts with
other mutual funds, private accounts, and certain non-registered
investment companies managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 at $408,000,323.
Abbreviations:
ADR - American Depositary Receipt
CAD - Canadian dollars
Conv. - Convertible
Deb. - Debentures
Gtd. - Guaranteed
Pfd. - Preferred
PIK - Payment in Kind
PRIDES- Preferred Redeemable Increased Dividend Equity Securities
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec.- Unsecured
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-129
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS: Investments, at market value (cost $13,970,866) $18,594,968 --------------------------------------------------------------------- Repurchase agreement (cost $3,813,559) 3,813,559 --------------------------------------------------------------------- Foreign currencies, at market value (cost $3,234) 3,246 --------------------------------------------------------------------- Receivables for: Capital stock sold 67,399 --------------------------------------------------------------------- Investments sold 39,932 --------------------------------------------------------------------- Dividends and interest 91,910 --------------------------------------------------------------------- Investment for deferred compensation plan 13,684 --------------------------------------------------------------------- Total assets 22,624,698 --------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 503,055 --------------------------------------------------------------------- Deferred compensation plan 13,684 --------------------------------------------------------------------- Accrued advisory fees 11,266 --------------------------------------------------------------------- Accrued directors' fees 1,839 --------------------------------------------------------------------- Accrued administrative services fees 3,629 --------------------------------------------------------------------- Accrued operating expenses 12,364 --------------------------------------------------------------------- Total liabilities 545,837 --------------------------------------------------------------------- Net assets applicable to shares outstanding $22,078,861 ===================================================================== CAPITAL SHARES, $.001 PAR VALUE PER SHARE: Authorized 250,000,000 --------------------------------------------------------------------- Outstanding 1,446,729 ===================================================================== Net asset value, offering and redemption price per share $15.26 ===================================================================== |
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME:
Dividends (net of $18,882 foreign withholding tax) $ 376,432
-----------------------------------------------------------------------------
Interest 290,021
-----------------------------------------------------------------------------
Total investment income 666,453
-----------------------------------------------------------------------------
EXPENSES:
Advisory fees 106,309
-----------------------------------------------------------------------------
Administrative services fees 47,128
-----------------------------------------------------------------------------
Custodian fees 17,887
-----------------------------------------------------------------------------
Directors' fees and expenses 7,826
-----------------------------------------------------------------------------
Professional fees 20,236
-----------------------------------------------------------------------------
Other 8,597
-----------------------------------------------------------------------------
Total expenses 207,983
-----------------------------------------------------------------------------
Less:Expenses paid indirectly (179)
-----------------------------------------------------------------------------
Net expenses 207,804
-----------------------------------------------------------------------------
Net investment income 458,649
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 181,733
-----------------------------------------------------------------------------
Foreign currency transactions (16,050)
-----------------------------------------------------------------------------
Futures contracts 10,462
-----------------------------------------------------------------------------
176,145
-----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 2,780,466
-----------------------------------------------------------------------------
Foreign currency transactions (759)
-----------------------------------------------------------------------------
2,779,707
-----------------------------------------------------------------------------
Net gain on investment securities, foreign currency transactions
and futures contracts 2,955,852
-----------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,414,501
=============================================================================
|
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-130
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
----------- -----------
OPERATIONS:
Net investment income $ 458,649 $ 400,253
--------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currency transactions and futures contracts 176,145 67,729
--------------------------------------------------------------------------------
Net unrealized appreciation of investment securities
and foreign currency transactions 2,779,707 880,598
--------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,414,501 1,348,580
--------------------------------------------------------------------------------
Distributions to shareholders from net investment
income -- (410,247)
--------------------------------------------------------------------------------
Distributions from net realized capital gains (6,795) (74,178)
--------------------------------------------------------------------------------
Net increase from capital stock transactions 5,095,582 4,317,451
--------------------------------------------------------------------------------
Net increase in net assets 8,503,288 5,181,606
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 13,575,573 8,393,967
--------------------------------------------------------------------------------
End of year $22,078,861 $13,575,573
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $16,836,039 $11,740,457
--------------------------------------------------------------------------------
Undistributed net investment income 439,576 (3,023)
--------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currency transactions
and futures contracts 179,652 (5,748)
--------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currency transactions 4,623,594 1,843,887
--------------------------------------------------------------------------------
$22,078,861 $13,575,573
================================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Global Utilities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income, and as a secondary
objective the Fund seeks to achieve capital appreciation, by investing
primarily in the common and preferred stocks of public utility companies
(either domestic or foreign). Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such
AIM V.I. GLOBAL UTILITIES FUND
FS-131
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis. On December 31, 1997,
undistributed net investment income was decreased and undistributed net
realized gains increased by $16,050 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $47,128 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,254 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $65 during the year ended December 31, 1997. The Fund also
received reductions in custodian fees of $114 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $179 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $7,558,487 and $3,982,219, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1997 is as follows:
Aggregate unrealized appreciation of investment securities $4,712,475 ------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (88,373) ------------------------------------------------------------------------- Net unrealized appreciation of investment securities $4,624,102 ========================================================================= |
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
Sold 505,614 $ 6,971,987 578,877 $ 6,900,184
------------------------------------------------------------------------
Issued as reinvestment of
distributions 459 6,795 39,804 484,425
------------------------------------------------------------------------
Reacquired (140,799) (1,883,200) (258,571) (3,067,158)
------------------------------------------------------------------------
365,274 $ 5,095,582 360,110 $ 4,317,451
========================================================================
|
AIM V.I. GLOBAL UTILITIES FUND
FS-132
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995 and the period May 2, 1994 (date
operations commenced) through January 31, 1995.
DECEMBER 31,
--------------------------------- JANUARY 31,
1997 1996 1995 1995
------- ------- ------ -----------
Net asset value,
beginning of period $ 12.55 $11.64 $9.69 $10.00
-----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.32 0.40 0.29 0.27
-----------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 2.40 0.99 1.98 (0.33)
-----------------------------------------------------------------------------------
Total from investment
operations 2.72 1.39 2.27 (0.06)
-----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.41) (0.31) (0.25)
-----------------------------------------------------------------------------------
Distributions from net
realized capital gains (0.01) (0.07) (0.01) --
-----------------------------------------------------------------------------------
Total distributions (0.01) (0.48) (0.32) (0.25)
-----------------------------------------------------------------------------------
Net asset value, end of
period $ 15.26 $12.55 $11.64 $ 9.69
===================================================================================
Total return(a) 21.63% 12.07% 23.73% (0.56)%
===================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $22,079 $13,576 $8,394 $2,958
===================================================================================
Ratio of expenses to
average net assets 1.28%(b)(c) 1.40%(d) 1.47%(d)(e) 1.31%(e)(f)
===================================================================================
Ratio of net investment
income to average net
assets 2.81%(b) 3.56%(d) 3.76%(d)(e) 4.39%(e)(f)
===================================================================================
Portfolio turnover rate 28% 47% 58% 69%
===================================================================================
Average brokerage
commission rate paid(g) $0.0365 $0.0477 N/A N/A
===================================================================================
|
(a) Totals returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $16,297,147.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have remained
the same.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.55%, 3.42%, 2.44% (annualized) and 2.79% (annualized)
for 1996 and 1995, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 2.80% and 2.90%, respectively.
(g) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. GLOBAL UTILITIES FUND
FS-133
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. Government Securities Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Government Securities Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994, in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. GOVERNMENT SECURITIES FUND
FS-134
SCHEDULE OF INVESTMENTS
December 31, 1997
PRINCIPAL MARKET
AMOUNT VALUE
U.S. GOVERNMENT AGENCY SECURITIES - 77.17%
FEDERAL FARM CREDIT BANK - 0.59%
Medium term notes
5.96%, 07/14/03 $ 200,000 $ 200,504
----------------------------------------------------------
FEDERAL HOME LOAN BANK BOARD - 7.06%
Debentures
8.375%, 10/25/99 150,000 156,620
----------------------------------------------------------
6.00%, 06/27/00 250,000 251,220
----------------------------------------------------------
5.97%, 12/11/00 1,000,000 1,004,790
----------------------------------------------------------
7.31%, 07/06/01 500,000 523,005
----------------------------------------------------------
8.17%, 12/16/04 400,000 449,296
----------------------------------------------------------
2,384,931
----------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC") - 14.03%
Debentures
6.13%, 08/19/99 150,000 150,825
----------------------------------------------------------
Pass through certificates
6.00%, 11/01/08 to 08/01/10 832,849 823,996
----------------------------------------------------------
6.50%, 12/01/08 to 07/01/23 1,454,590 1,456,294
----------------------------------------------------------
7.00%, 11/01/10 to 01/01/26 1,778,087 1,809,874
----------------------------------------------------------
10.50%, 08/01/19 258,784 284,338
----------------------------------------------------------
8.50%, 08/01/24 206,125 216,044
----------------------------------------------------------
4,741,371
----------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") - 41.22%
Debentures
7.55%, 04/22/02 400,000 425,244
----------------------------------------------------------
8.50%, 02/01/05 500,000 523,305
----------------------------------------------------------
Medium term notes
7.375%, 03/28/05 300,000 324,159
----------------------------------------------------------
Pass through certificates
5.504%, 06/02/99 500,000 498,795
----------------------------------------------------------
6.24%, 02/01/06 490,964 493,498
----------------------------------------------------------
6.625%, 02/01/07 664,965 687,940
----------------------------------------------------------
7.50%, 11/01/09 to 07/01/27 3,774,432 3,873,116
----------------------------------------------------------
6.50%, 10/01/10 to 06/01/23 582,304 583,737
----------------------------------------------------------
7.00%, 07/01/11 to 12/01/27 5,671,038 5,742,794
----------------------------------------------------------
8.50%, 09/01/24 294,970 309,255
----------------------------------------------------------
STRIPS(a)
7.37%, 10/09/19 1,800,000 470,124
----------------------------------------------------------
13,931,967
----------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") - 9.45%
Pass through certificates
9.50%, 08/15/03 to 09/15/16 $ 90,877 $ 98,796
----------------------------------------------------------------
9.00%, 09/15/08 to 10/15/16 175,375 190,075
----------------------------------------------------------------
11.00%, 10/15/15 45,876 51,424
----------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 43,969 48,641
----------------------------------------------------------------
6.50%, 12/15/23 463,594 462,579
----------------------------------------------------------------
8.00%, 07/15/26 1,263,321 1,312,666
----------------------------------------------------------------
7.50%, 05/15/27 1,004,475 1,030,521
----------------------------------------------------------------
3,194,702
----------------------------------------------------------------
PRIVATE EXPORT FUNDING COMPANY - 0.93%
Debentures
7.30%, 01/31/02 300,000 315,321
----------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION - 2.38%
Debentures
5.629%, 02/22/99 500,000 499,670
----------------------------------------------------------------
5.55%, 12/15/99 150,000 149,393
----------------------------------------------------------------
6.50%, 08/01/02 150,000 153,732
----------------------------------------------------------------
802,795
----------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY - 1.51%
Debentures
6.375%, 06/15/05 500,000 511,605
----------------------------------------------------------------
Total U.S. Government Agency Securities 26,083,196
----------------------------------------------------------------
U.S. TREASURY SECURITIES - 17.23%
U.S. TREASURY NOTES & BONDS - 16.17%
5.625%, 11/30/99 1,000,000 999,560
----------------------------------------------------------------
6.125%, 12/31/01 1,500,000 1,521,030
----------------------------------------------------------------
6.00%, 07/31/02 300,000 303,360
----------------------------------------------------------------
6.625%, 05/15/07 500,000 529,475
----------------------------------------------------------------
6.125%, 08/15/07 500,000 514,010
----------------------------------------------------------------
6.875%, 08/15/25 500,000 557,695
----------------------------------------------------------------
6.375%, 08/15/27 500,000 527,670
----------------------------------------------------------------
6.125%, 11/15/27 500,000 513,895
----------------------------------------------------------------
5,466,695
----------------------------------------------------------------
U.S. TREASURY STRIPS(a) - 1.06%
6.80%, 11/15/18 1,250,000 356,675
----------------------------------------------------------------
Total U.S. Treasury Securities 5,823,370
----------------------------------------------------------------
|
AIM V.I. GOVERNMENT SECURITIES FUND
FS-135
PRINCIPAL MARKET
AMOUNT VALUE
REPURCHASE AGREEMENT - 4.42%(b)
Goldman, Sachs & Co., 6.53%, 01/02/98(c) $1,493,291 $ 1,493,291
----------------------------------------------------------------
TOTAL INVESTMENTS - 98.82% 33,399,857
----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.18% 399,939
----------------------------------------------------------------
NET ASSETS - 100.00% $33,799,796
================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) STRIPS are traded on a discount basis. In such cases the interest rate
shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Government obligations,
0% to 14%, due 01/08/98 to 08/15/23 with an aggregate market value at
12/31/97 of $918,902,583.
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-136
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS: Investments, at market value (cost $32,662,725) $ 33,399,857 ---------------------------------------------------------------------- Receivables for: Capital stock sold 173,205 ---------------------------------------------------------------------- Interest 258,350 ---------------------------------------------------------------------- Investment for deferred compensation plan 16,668 ---------------------------------------------------------------------- Organizational costs, net 967 ---------------------------------------------------------------------- Other assets 2,813 ---------------------------------------------------------------------- Total assets 33,851,860 ---------------------------------------------------------------------- LIABILITIES: Deferred compensation payable 16,668 ---------------------------------------------------------------------- Accrued advisory fees 14,074 ---------------------------------------------------------------------- Accrued directors' fees 2,519 ---------------------------------------------------------------------- Accrued administrative service fees 2,920 ---------------------------------------------------------------------- Accrued operating expenses 15,883 ---------------------------------------------------------------------- Total liabilities 52,064 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $ 33,799,796 ====================================================================== CAPITAL SHARES, $.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 3,167,800 ====================================================================== Net asset value, offering and redemption price per share $10.67 ====================================================================== |
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME: Interest $1,862,279 -------------------------------------------------------------------------- EXPENSES: Advisory fees 138,550 -------------------------------------------------------------------------- Administrative services fees 37,872 -------------------------------------------------------------------------- Custodian fees 13,275 -------------------------------------------------------------------------- Directors' fees and expenses 8,571 -------------------------------------------------------------------------- Professional fees 23,862 -------------------------------------------------------------------------- Organizational costs 2,903 -------------------------------------------------------------------------- Other 16,788 -------------------------------------------------------------------------- Total expenses 241,821 -------------------------------------------------------------------------- Net investment income 1,620,458 -------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES: Net realized gain (loss) on sales of investment securities (100,162) -------------------------------------------------------------------------- Net unrealized appreciation of investment securities 728,502 -------------------------------------------------------------------------- Net gain on investment securities 628,340 -------------------------------------------------------------------------- Net increase in net assets resulting from operations $2,248,798 ========================================================================== |
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-137
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
----------- -----------
OPERATIONS:
Net investment income $ 1,620,458 $ 1,246,854
----------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities (100,162) (33,180)
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities 728,502 (626,394)
----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 2,248,798 587,280
----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (15,600) (1,251,057)
----------------------------------------------------------------------------
Net equalization credits -- 247,547
----------------------------------------------------------------------------
Net increase from capital stock transactions 7,040,082 5,397,355
----------------------------------------------------------------------------
Net increase in net assets 9,273,280 4,981,125
----------------------------------------------------------------------------
NET ASSETS:
Beginning of year 24,526,516 19,545,391
----------------------------------------------------------------------------
End of year $33,799,796 $24,526,516
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $31,984,676 $24,348,661
----------------------------------------------------------------------------
Undistributed net investment income 1,585,397 653,121
----------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (507,409) (483,896)
----------------------------------------------------------------------------
Unrealized appreciation of investment securities 737,132 8,630
----------------------------------------------------------------------------
$33,799,796 $24,526,516
============================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Government Securities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the U.S. Government. Currently,
shares of the Fund are sold only to insurance company separate accounts to
fund the benefits of variable annuity contracts and variable life insurance
policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - Debt obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities, and instrumentalities are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate, maturity and seasoning differential.
Securities for which market prices are not provided by the pricing service
are valued at the mean between last bid and asked prices based upon quotes
furnished by independent sources. Securities for which market quotations
are either not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Distributions to shareholders are recorded on the ex-dividend date.
Realized gains or losses from securities transactions are recorded on the
identified cost basis. On December 31, 1997, undistributed net realized
gain (loss) was increased and undistributed
AIM V.I. GOVERNMENT SECURITIES FUND
FS-138
net investment income decreased by $76,649 as a result of permanent book/tax
differences due to the differing book/tax treatment for principal paydown
losses on mortgage back securities. Net assets of the Fund were unaffected by
the reclassifications discussed above.
C. Federal Income Taxes - For federal income tax purposes, each portfolio in
the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
The Fund had capital loss carryforwards (which may be carried forward to
offset future taxable capital gains, if any) of $507,409, which expires, if
not previously utilized, through the year 2004. The Fund cannot distribute
capital gains to shareholders until the tax loss carryforwards have been
utilized.
D. Equalization - The Fund previously followed the accounting practice known
as equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount
of undistributed net investment income, is credited or charged to
undistributed net income when the transaction is recorded so that the
undistributed net investment income per share is unaffected by sales or
redemptions of Fund shares. During the year ended December 31, 1997, the
Fund discontinued equalization accounting and reclassified the cumulative
equalization debits of $595,933 from undistributed net investment income to
paid-in capital. This change has no effect on the net assets, the results
of operations or net asset value per share of the Fund.
E. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment
advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of
0.50% of the first $250 million of the Fund's average daily net assets, plus
0.45% of the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $37,872 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,280 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $24,965,236 and $16,850,495, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
Aggregate unrealized appreciation of investment securities $757,075 ----------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (19,943) ----------------------------------------------------------------------- Net unrealized appreciation of investment securities $737,132 ======================================================================= |
Investments have the same cost for tax and financial statement purposes.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- -------- ----------
Sold 1,272,288 $13,023,561 872,793 $8,373,957
------------------------------------------------------------------------
Issued as reinvestment of
distributions 1,468 15,600 126,754 1,220,637
------------------------------------------------------------------------
Reacquired (591,274) (5,999,079) (435,586) (4,197,239)
------------------------------------------------------------------------
682,482 $ 7,040,082 563,961 $5,397,355
========================================================================
|
AIM V.I. GOVERNMENT SECURITIES FUND
FS-139
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995 and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
---------------------------- -------------------
1997 1996 1995 1995 1994
------- ------- ------- ------- -------
Net asset value,
beginning of period $ 9.87 $ 10.17 $ 9.39 $ 10.24 $ 10.00
--------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.59 0.58 0.54 0.53 0.38
--------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.22 (0.35) 0.74 (0.88) 0.10
--------------------------------------------------------------------------------------
Total from investment
operations 0.81 0.23 1.28 (0.35) 0.48
--------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.01) (0.53) (0.50) (0.50) (0.24)
--------------------------------------------------------------------------------------
Net asset value, end of
period $ 10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24
======================================================================================
Total return(a) 8.16% 2.29% 13.84% (3.42)% 4.78%
======================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $33,800 $24,527 $19,545 $12,887 $10,643
======================================================================================
Ratio of expenses to
average net assets 0.87%(b) 0.91% 1.19%(c) 0.95%(d) 1.00%(c)(d)
======================================================================================
Ratio of net investment
income to average net
assets 5.85%(b) 5.80% 5.78%(c) 5.51%(e) 4.74%(c)(e)
======================================================================================
Portfolio turnover rate 66% 32% 41% 29% 0%
======================================================================================
|
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $27,710,072.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.10% and 1.80% (annualized) for January, 1995 and 1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.35% and 3.94% (annualized) for January, 1995 and
1994, respectively.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-140
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. Growth Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Growth Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994 in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. GROWTH FUND
FS-141
SCHEDULE OF INVESTMENTS
December 31, 1997
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS - 78.99%
AEROSPACE/DEFENSE - 0.64%
Coltec Industries, Inc.(a) 6,500 $ 150,718
---------------------------------------------------------------
Sundstrand Corp. 30,000 1,511,250
---------------------------------------------------------------
1,661,968
---------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.64%
DIMON, Inc. 23,600 619,500
---------------------------------------------------------------
Universal Corp. 25,000 1,028,124
---------------------------------------------------------------
1,647,624
---------------------------------------------------------------
AIR FREIGHT - 0.23%
CNF Transportation Inc. 15,500 594,812
---------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.31%
Federal-Mogul Corp. 16,200 656,100
---------------------------------------------------------------
MascoTech, Inc. 8,400 154,350
---------------------------------------------------------------
810,450
---------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.55%
First Union Corp. 28,000 1,435,000
---------------------------------------------------------------
BANKS (MONEY CENTER) - 2.43%
BankAmerica Corp. 18,000 1,314,000
---------------------------------------------------------------
Chase Manhattan Corp. 35,000 3,832,500
---------------------------------------------------------------
Citicorp 9,000 1,137,936
---------------------------------------------------------------
6,284,436
---------------------------------------------------------------
BANKS (REGIONAL) - 0.26%
North Fork Bancorporation, Inc. 20,000 671,250
---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.66%
Chancellor Media Corp.(a) 11,100 828,338
---------------------------------------------------------------
Jacor Communications, Inc.(a) 16,500 876,562
---------------------------------------------------------------
1,704,900
---------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.56%
Crompton & Knowles Corp. 28,000 742,000
---------------------------------------------------------------
Millennium Chemicals Inc. 30,000 706,875
---------------------------------------------------------------
1,448,875
---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.52%
Lucent Technologies, Inc.(b)(c) 22,000 1,757,250
---------------------------------------------------------------
QUALCOMM, Inc.(a) 16,000 808,000
---------------------------------------------------------------
Tellabs, Inc.(a) 26,000 1,374,750
---------------------------------------------------------------
3,940,000
---------------------------------------------------------------
COMPUTERS (HARDWARE) - 2.96%
Compaq Computer Corp. 37,500 2,116,405
---------------------------------------------------------------
Dell Computer Corp.(a) 20,000 1,680,000
---------------------------------------------------------------
International Business Machines Corp. 37,000 3,868,812
---------------------------------------------------------------
7,665,217
---------------------------------------------------------------
|
MARKET
SHARES VALUE
COMPUTERS (NETWORKING) - 0.26%
Cisco Systems, Inc.(a) 12,000 $ 669,000
-----------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.53%
EMC Corp.(a) 50,000 1,371,873
-----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 4.45%
America Online, Inc.(a)(b)(c) 15,500 1,382,404
-----------------------------------------------------------------
BMC Software, Inc.(a) 20,000 1,312,500
-----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 31,000 759,500
-----------------------------------------------------------------
Computer Associates International, Inc. 34,500 1,824,186
-----------------------------------------------------------------
Compuware Corp.(a) 40,000 1,280,000
-----------------------------------------------------------------
Microsoft Corp.(a) 32,000 4,136,000
-----------------------------------------------------------------
Unisys Corp.(a) 60,000 832,500
-----------------------------------------------------------------
11,527,090
-----------------------------------------------------------------
CONSUMER FINANCE - 2.55%
ContiFinancial Corp.(a) 12,800 322,400
-----------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 42,000 1,611,750
-----------------------------------------------------------------
Household International, Inc. 10,000 1,275,625
-----------------------------------------------------------------
Money Store, Inc. (The) 29,000 609,000
-----------------------------------------------------------------
SLM Holding Corp. 20,000 2,782,500
-----------------------------------------------------------------
6,601,275
-----------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 1.15%
AmeriSource Health Corp.-Class A(a) 24,000 1,398,000
-----------------------------------------------------------------
Cardinal Health, Inc. 9,000 676,125
-----------------------------------------------------------------
Sysco Corp. 20,000 911,250
-----------------------------------------------------------------
2,985,375
-----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.31%
American Power Conversion Corp.(a) 20,000 472,500
-----------------------------------------------------------------
General Electric Co. 46,700 3,426,612
-----------------------------------------------------------------
SCI Systems, Inc.(a) 7,800 339,788
-----------------------------------------------------------------
Solectron Corp.(a) 22,600 939,312
-----------------------------------------------------------------
Symbol Technologies, Inc. 21,200 800,300
-----------------------------------------------------------------
5,978,512
-----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.59%
Perkin-Elmer Corp. 5,500 390,844
-----------------------------------------------------------------
Waters Corp.(a) 30,500 1,147,562
-----------------------------------------------------------------
1,538,406
-----------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.34%
Intel Corp. 12,600 885,150
-----------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 0.21%
Applied Materials, Inc.(a)(b)(c) 18,000 542,250
-----------------------------------------------------------------
|
AIM V.I. GROWTH FUND
FS-142
MARKET
SHARES VALUE
FINANCIAL (DIVERSIFIED) - 3.22%
American Express Co. 17,000 $ 1,517,250
---------------------------------------------------------------------
Amresco, Inc.(a) 33,000 998,250
---------------------------------------------------------------------
Fannie Mae 30,000 1,711,875
---------------------------------------------------------------------
Freddie Mac 36,000 1,509,750
---------------------------------------------------------------------
MBIA, Inc. 12,600 841,836
---------------------------------------------------------------------
MGIC Investment Corp. 13,000 864,500
---------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 15,000 886,875
---------------------------------------------------------------------
8,330,336
---------------------------------------------------------------------
FOODS - 0.33%
ConAgra, Inc.(b) 22,000 721,874
---------------------------------------------------------------------
Sara Lee Corp. 2,300 129,518
---------------------------------------------------------------------
851,392
---------------------------------------------------------------------
FOOTWEAR - 0.26%
Wolverine World Wide, Inc. 30,000 678,750
---------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 2.97%
Abbott Laboratories 14,000 917,874
---------------------------------------------------------------------
American Home Products Corp. 11,800 902,700
---------------------------------------------------------------------
Bristol-Myers Squibb Co.(b) 24,100 2,280,462
---------------------------------------------------------------------
Johnson & Johnson 20,000 1,317,500
---------------------------------------------------------------------
Warner-Lambert Co. 18,400 2,281,600
---------------------------------------------------------------------
7,700,136
---------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 1.64%
Dura Pharmaceuticals, Inc.(a) 12,700 582,612
---------------------------------------------------------------------
ICN Pharmaceuticals, Inc. 38,300 1,869,519
---------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 55,000 1,784,062
---------------------------------------------------------------------
4,236,193
---------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 3.11%
Lilly (Eli) & Co. 15,000 1,044,375
---------------------------------------------------------------------
Merck & Co., Inc. 41,000 4,356,250
---------------------------------------------------------------------
Pfizer Inc. 14,300 1,066,244
---------------------------------------------------------------------
Schering-Plough Corp. 25,500 1,584,188
---------------------------------------------------------------------
8,051,057
---------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.58%
Quorum Health Group, Inc.(a) 37,000 966,625
---------------------------------------------------------------------
Universal Health Services, Inc.-Class B(a) 10,700 539,012
---------------------------------------------------------------------
1,505,637
---------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.64%
Health Care and Retirement Corp.(a) 6,700 269,675
---------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 50,000 1,387,500
---------------------------------------------------------------------
1,657,175
---------------------------------------------------------------------
|
MARKET
SHARES VALUE
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.79%
Arterial Vascular Engineering, Inc.(a) 26,200 $ 1,703,000
------------------------------------------------------------------------
Becton, Dickinson & Co. 40,000 2,000,000
------------------------------------------------------------------------
DePuy, Inc. 7,800 224,250
------------------------------------------------------------------------
Guidant Corp. 15,000 933,750
------------------------------------------------------------------------
Stryker Corp. 29,800 1,110,050
------------------------------------------------------------------------
Sybron International Corp.(a) 26,400 1,239,150
------------------------------------------------------------------------
7,210,200
------------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.44%
Furniture Brands International, Inc.(a) 21,000 430,500
------------------------------------------------------------------------
Maytag Corp. 19,200 716,400
------------------------------------------------------------------------
1,146,900
------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.72%
Dial Corp. (The) 40,000 832,500
------------------------------------------------------------------------
Procter & Gamble Co. 13,000 1,037,563
------------------------------------------------------------------------
1,870,063
------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.55%
Conseco, Inc. 30,000 1,363,125
------------------------------------------------------------------------
Equitable Companies, Inc. 20,000 995,000
------------------------------------------------------------------------
Nationwide Financial Services, Inc.-Class A(a) 25,000 903,125
------------------------------------------------------------------------
Torchmark Corp. 18,000 757,125
------------------------------------------------------------------------
4,018,375
------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 2.20%
Ace, Ltd. 14,400 1,389,600
------------------------------------------------------------------------
Allmerica Financial Corp. 16,000 799,000
------------------------------------------------------------------------
American International Group, Inc. 8,600 935,250
------------------------------------------------------------------------
Travelers Group, Inc. 47,602 2,564,558
------------------------------------------------------------------------
5,688,408
------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 1.93%
Allstate Corp. 19,900 1,808,412
------------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 35,000 1,443,750
------------------------------------------------------------------------
EXEL Ltd. 13,200 836,550
------------------------------------------------------------------------
Fremont General Corp. 16,500 903,375
------------------------------------------------------------------------
4,992,087
------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.18%
Merrill Lynch & Co., Inc. 42,000 3,063,375
------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.85%
Franklin Resources, Inc. 12,350 1,073,678
------------------------------------------------------------------------
T. Rowe Price Associates, Inc. 18,000 1,131,750
------------------------------------------------------------------------
2,205,428
------------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 0.36%
Harley-Davidson, Inc. 33,500 917,062
------------------------------------------------------------------------
|
AIM V.I. GROWTH FUND
FS-143
MARKET
SHARES VALUE
LODGING (HOTELS) - 1.40%
Carnival Corp.-Class A 31,000 $ 1,716,625
------------------------------------------------------------------
Host Marriott Corp.(a) 7,400 145,225
------------------------------------------------------------------
ITT Corp. 14,000 1,160,250
------------------------------------------------------------------
Promus Hotel Corp.(a) 14,460 607,320
------------------------------------------------------------------
3,629,420
------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.82%
Dover Corp.(a) 37,800 1,365,525
------------------------------------------------------------------
Ingersoll-Rand Co. 18,450 747,225
------------------------------------------------------------------
2,112,750
------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.47%
Carlisle Companies, Inc. 4,000 171,000
------------------------------------------------------------------
Crane Co. 6,600 286,275
------------------------------------------------------------------
Eaton Corp. 7,500 669,375
------------------------------------------------------------------
Thermo Electron Corp.(a) 45,000 2,002,500
------------------------------------------------------------------
U.S. Industries, Inc. 22,500 677,812
------------------------------------------------------------------
3,806,962
------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.31%
Diebold, Inc. 15,650 792,280
------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 4.31%
BJ Services Co.(a) 18,500 1,330,844
------------------------------------------------------------------
Cooper Cameron Corp.(a) 22,000 1,342,000
------------------------------------------------------------------
Diamond Offshore Drilling, Inc. 30,000 1,443,750
------------------------------------------------------------------
ENSCO International, Inc.(a) 19,000 636,500
------------------------------------------------------------------
Halliburton Co. 12,000 623,250
------------------------------------------------------------------
Nabors Industries, Inc.(a) 40,000 1,257,500
------------------------------------------------------------------
Newpark Resources, Inc.(a) 15,600 273,000
------------------------------------------------------------------
Santa Fe International Corp. 30,500 1,240,968
------------------------------------------------------------------
Schlumberger Ltd. 17,200 1,384,600
------------------------------------------------------------------
Transocean Offshore Inc. 2,300 110,830
------------------------------------------------------------------
Western Atlas Inc.(a) 20,500 1,517,000
------------------------------------------------------------------
11,160,242
------------------------------------------------------------------
PERSONAL CARE - 1.16%
Avon Products, Inc. 25,000 1,534,375
------------------------------------------------------------------
Gillette Co. 14,500 1,456,344
------------------------------------------------------------------
2,990,719
------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.63%
AES Corp.(a) 35,000 1,631,875
------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.63%
Gannett Co., Inc. 14,000 865,375
------------------------------------------------------------------
New York Times Co.-Class A 11,700 773,663
------------------------------------------------------------------
1,639,038
------------------------------------------------------------------
|
MARKET
SHARES VALUE
REAL ESTATE INVESTMENT TRUST - 1.16%
Crescent Real Estate Equities, Co. 20,000 $ 787,500
------------------------------------------------------------------
Patriot American Hospitality, Inc. 32,000 922,000
------------------------------------------------------------------
Starwood Lodging Trust 22,000 1,273,250
------------------------------------------------------------------
2,982,750
------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.32%
Home Depot, Inc.(b)(c) 13,950 821,306
------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.56%
CompUSA, Inc.(a) 38,100 1,181,100
------------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 45,000 1,310,625
------------------------------------------------------------------
Tech Data Corp.(a) 39,900 1,551,112
------------------------------------------------------------------
4,042,837
------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.81%
Federated Department Stores, Inc. 15,000 645,938
------------------------------------------------------------------
Nordstrom, Inc. 1,900 114,712
------------------------------------------------------------------
Proffitt's, Inc.(a) 47,000 1,336,562
------------------------------------------------------------------
2,097,212
------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.94%
Consolidated Stores Corp.(a) 23,750 1,043,516
------------------------------------------------------------------
Family Dollar Stores, Inc. 19,200 562,800
------------------------------------------------------------------
Ross Stores, Inc. 23,000 836,625
------------------------------------------------------------------
2,442,941
------------------------------------------------------------------
RETAIL (DRUG STORES) - 1.01%
CVS Corp. 18,000 1,153,125
------------------------------------------------------------------
Rite Aid Corp. 25,000 1,467,188
------------------------------------------------------------------
2,620,313
------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.70%
Albertson's, Inc. 24,200 1,146,475
------------------------------------------------------------------
Kroger Co.(a) 47,000 1,736,063
------------------------------------------------------------------
Safeway, Inc.(a)(b) 24,000 1,518,000
------------------------------------------------------------------
4,400,538
------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 2.22%
Costco Companies, Inc.(a) 38,000 1,695,750
------------------------------------------------------------------
Dayton Hudson Corp. 24,500 1,653,750
------------------------------------------------------------------
Fred Meyer, Inc.(a) 40,000 1,455,000
------------------------------------------------------------------
Wal-Mart Stores, Inc. 24,100 950,444
------------------------------------------------------------------
5,754,944
------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.04%
Bed Bath & Beyond, Inc.(a)(b)(c) 18,000 693,000
------------------------------------------------------------------
Office Depot, Inc.(a) 57,300 1,371,618
------------------------------------------------------------------
Payless ShoeSource, Inc.(a) 9,500 637,688
------------------------------------------------------------------
2,702,306
------------------------------------------------------------------
|
AIM V.I. GROWTH FUND
FS-144
MARKET
SHARES VALUE
RETAIL (SPECIALTY-APPAREL) - 0.41%
Intimate Brands, Inc. 9,900 $ 238,218
--------------------------------------------------------------------------
TJX Companies, Inc. 24,000 825,000
--------------------------------------------------------------------------
1,063,218
--------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 1.43%
Ahmanson (H.F.) & Co. 28,700 1,921,105
--------------------------------------------------------------------------
Charter One Financial, Inc. 10,840 684,275
--------------------------------------------------------------------------
Washington Mutual, Inc. 17,000 1,084,812
--------------------------------------------------------------------------
3,690,192
--------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.52%
Outdoor Systems, Inc.(a) 19,800 759,825
--------------------------------------------------------------------------
Universal Outdoor Holdings, Inc. 11,400 592,800
--------------------------------------------------------------------------
1,352,625
--------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 2.14%
Cendant Corp.(b)(c) 84,108 2,891,228
--------------------------------------------------------------------------
Service Corp. International 71,700 2,648,454
--------------------------------------------------------------------------
5,539,682
--------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.50%
Equifax, Inc. 65,600 2,324,700
--------------------------------------------------------------------------
Fiserv, Inc.(a) 11,400 560,024
--------------------------------------------------------------------------
National Data Corp. 27,264 984,910
--------------------------------------------------------------------------
3,869,634
--------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.25%
AccuStaff, Inc.(a) 28,100 646,300
--------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.56%
AT&T Corp. 25,000 1,531,250
--------------------------------------------------------------------------
CIENA Corp.(a) 15,000 916,875
--------------------------------------------------------------------------
MCI Communications Corp. 20,000 856,250
--------------------------------------------------------------------------
WorldCom, Inc.(a) 24,000 726,000
--------------------------------------------------------------------------
4,030,375
--------------------------------------------------------------------------
TELEPHONE - 0.60%
Bell Atlantic Corp. 17,000 1,547,000
--------------------------------------------------------------------------
TEXTILES (APPAREL) - 0.29%
Warnaco Group, Inc. (The) 23,800 746,725
--------------------------------------------------------------------------
TOBACCO - 0.56%
Philip Morris Companies, Inc. 32,000 1,450,000
--------------------------------------------------------------------------
WASTE MANAGEMENT - 0.32%
USA Waste Services, Inc.(a) 20,900 820,324
--------------------------------------------------------------------------
Total Domestic Common Stocks 204,470,545
--------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 1.15%
FINANCIAL (DIVERSIFIED) - 0.89%
MGIC Investment Corp.-$3.12 Conv. Pfd. 15,000 1,665,000
--------------------------------------------------------------------------
SunAmerica, Inc.-Series E, $3.10 Dep. Conv. Pfd. 4,900 637,000
--------------------------------------------------------------------------
2,302,000
--------------------------------------------------------------------------
|
MARKET
SHARES VALUE
LODGING (HOTELS) - 0.26%
Host Marriott Corp., $3.375 Conv. Pfd. 10,950 $ 672,746
------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 2,974,746
------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
DOMESTIC CONVERTIBLE CORPORATE NOTES - 0.67%
ELECTRICAL EQUIPMENT - 0.67%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%,
05/01/06(d) (acquired 10/31/96-12/06/96; cost
$1,166,399) $ 923,000 1,728,945
------------------------------------------------------------------------------
Total Domestic Convertible Corporate Notes 1,728,945
------------------------------------------------------------------------------
SHARES
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 6.27%
BERMUDA - 0.52%
Tyco International Ltd. (Manufacturing-Diversified) 30,000 1,351,875
------------------------------------------------------------------------------
CANADA - 0.77%
Northern Telecom Ltd.-ADR (Communications
Equipment)(b)(c) 9,300 827,700
------------------------------------------------------------------------------
Philip Services Corp. (Waste Management)(a) 80,000 1,150,000
------------------------------------------------------------------------------
1,977,700
------------------------------------------------------------------------------
FRANCE - 1.77%
Banque Nationale de Paris (Banks-Major Regional) 26,000 1,381,972
------------------------------------------------------------------------------
ELF Aquitaine S.A. (Oil & Gas-Drilling & Equipment) 11,000 1,279,388
------------------------------------------------------------------------------
Renault S.A. (Automobiles)(b) 22,500 632,922
------------------------------------------------------------------------------
Societe Generale (Banks-Major Regional) 9,500 1,294,342
------------------------------------------------------------------------------
4,588,624
------------------------------------------------------------------------------
GERMANY - 0.15%
Adidas A.G. (Footwear) 2,950 387,976
------------------------------------------------------------------------------
IRELAND - 0.24%
Elan Corp. PLC-ADR (Health Care-Drugs-Generic &
Other)(a) 12,100 619,368
------------------------------------------------------------------------------
NETHERLANDS - 0.36%
Akzo Nobel N.V. (Chemicals-Diversified) 5,450 939,668
------------------------------------------------------------------------------
SINGAPORE - 0.11%
Asia Pulp & Paper Co. Ltd.-ADR (Paper & Forest
Products) 28,100 282,756
------------------------------------------------------------------------------
SWEDEN - 0.46%
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 32,000 1,194,000
------------------------------------------------------------------------------
SWITZERLAND - 1.33%
Novartis A.G. (Healthcare-Diversified) 570 924,324
------------------------------------------------------------------------------
UBS-Union Bank of Switzerland (Banks-Major Regional) 1,750 2,528,908
------------------------------------------------------------------------------
3,453,232
------------------------------------------------------------------------------
UNITED KINGDOM - 0.56%
SmithKline Beecham PLC-ADR (Health Care-Drugs-Major
Pharmaceuticals) 28,200 1,450,536
------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 16,245,735
------------------------------------------------------------------------------
|
AIM V.I. GROWTH FUND
FS-145
PRINCIPAL MARKET
AMOUNT VALUE
FOREIGN CONVERTIBLE BONDS - 0.33%
SWITZERLAND - 0.33%
Sandoz Capital BVI Ltd. (Financial-Diversified), Sr.
Conv. Deb., 2.00%, 10/06/02 (acquired 11/04/96-
11/08/96; cost $612,162)(d) $ 550,000 $ 848,375
-------------------------------------------------------------------------------
Total Foreign Convertible Bonds 848,375
-------------------------------------------------------------------------------
Total Investments, excluding repurchase agreements 226,268,346
-------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 12.82%(e)
Smith Barney, Inc., 6.75%, 01/02/98(f) 33,186,429 33,186,429
-------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.23% 259,454,775
-------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.23)% (603,005)
-------------------------------------------------------------------------------
NET ASSETS - 100.00% $258,851,770
===============================================================================
|
Investment Abbreviations:
ADR-American Depositary Receipt
Conv.-Convertible
Deb.-Debentures
Pfd.-Preferred
Sr.-Senior
Sub.-Subordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) A portion of this security is subject to put options purchased. See Note 8.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/97 was $2,577,320 which
represented 1.00% of the Fund's net assets.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreements entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
December 31, 1997 of $408,000,323.
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-146
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS: Investments, excluding repurchase agreements, at market value (cost $173,804,805) $226,268,346 ---------------------------------------------------------------------- Repurchase agreements (cost $33,186,249) 33,186,429 ---------------------------------------------------------------------- Receivables for: Capital stock sold 104,657 ---------------------------------------------------------------------- Investments sold 1,355,180 ---------------------------------------------------------------------- Dividends and interest 171,225 ---------------------------------------------------------------------- Options written 137,059 ---------------------------------------------------------------------- Organizational costs, net 965 ---------------------------------------------------------------------- Investment for deferred compensation plan 17,734 ---------------------------------------------------------------------- Other assets 1,495 ---------------------------------------------------------------------- Total assets 261,243,090 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 1,327,198 ---------------------------------------------------------------------- Capital stock reacquired 139,112 ---------------------------------------------------------------------- Options written 731,831 ---------------------------------------------------------------------- Deferred compensation plan 17,734 ---------------------------------------------------------------------- Accrued advisory fees 134,357 ---------------------------------------------------------------------- Accrued directors' fees 2,202 ---------------------------------------------------------------------- Accrued administrative service fees 3,053 ---------------------------------------------------------------------- Accrued operating expenses 35,833 ---------------------------------------------------------------------- Total liabilities 2,391,320 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $258,851,770 ====================================================================== CAPITAL SHARES, $.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 13,054,326 ====================================================================== Net asset value, offering and redemption price per share $19.83 ====================================================================== |
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME:
Dividends (net of $18,515 foreign withholding tax) $ 1,864,707
----------------------------------------------------------------------------
Interest 990,927
----------------------------------------------------------------------------
Total investment income 2,855,634
----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,453,488
----------------------------------------------------------------------------
Administrative service fees 44,692
----------------------------------------------------------------------------
Custodian fees 68,311
----------------------------------------------------------------------------
Directors' fees and expenses 8,967
----------------------------------------------------------------------------
Organizational costs 2,892
----------------------------------------------------------------------------
Other 67,219
----------------------------------------------------------------------------
Total expenses 1,645,569
----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,708)
----------------------------------------------------------------------------
Net expenses 1,643,861
----------------------------------------------------------------------------
Net investment income 1,211,773
----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTIONS CONTRACTS:
Net realized gain (loss) from:
Investment securities 19,739,112
----------------------------------------------------------------------------
Foreign currencies (41,236)
----------------------------------------------------------------------------
Futures contracts 2,272,116
----------------------------------------------------------------------------
Options contracts 139,988
----------------------------------------------------------------------------
22,109,980
----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 28,602,661
----------------------------------------------------------------------------
Foreign currencies 351
----------------------------------------------------------------------------
Futures contracts (83,436)
----------------------------------------------------------------------------
Options contracts (449,591)
----------------------------------------------------------------------------
28,069,985
----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, futures
and options contracts 50,179,965
----------------------------------------------------------------------------
Net increase in net assets resulting from operations $51,391,738
============================================================================
|
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-147
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
------------ ------------
OPERATIONS:
Net investment income $ 1,211,773 $ 1,113,772
------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and options
contracts 22,109,980 8,362,709
------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and
options contracts 28,069,985 13,695,426
------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 51,391,738 23,171,907
------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (1,119,140) (662,515)
------------------------------------------------------------------------------
Distributions to shareholders from realized
capital gains (8,443,286) (7,442,940)
------------------------------------------------------------------------------
Net increase from capital stock transactions 38,384,566 60,971,328
------------------------------------------------------------------------------
Net increase in net assets 80,213,878 76,037,780
------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 178,637,892 102,600,112
------------------------------------------------------------------------------
End of year $258,851,770 $178,637,892
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $183,975,681 $145,591,115
------------------------------------------------------------------------------
Undistributed net investment income 1,182,806 1,090,173
------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
options contracts 21,643,385 7,976,691
------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and options
contracts 52,049,898 23,979,913
------------------------------------------------------------------------------
$258,851,770 $178,637,892
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth Fund (the "Fund"). The Fund's investment objective is
to seek growth of capital principally through investment in common stocks of
seasoned and better capitalized companies considered by AIM to have strong
earnings momentum. Currently, shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable annuity contracts
and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. If no mean is available, as is the case
in some foreign markets, the closing bid will be used absent a last sales
price. Each security reported on the NASDAQ National Market System is valued
at the last sales price on the valuation date or absent a last sales price,
at the mean of the closing bid and asked prices. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
AIM V.I. GROWTH FUND
FS-148
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
E. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
F. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
G. Put options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The option's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
H. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
I. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I
M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $44,692 for such
services.
AIM V.I. GROWTH FUND
FS-149
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,727 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolios trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $863 during the year ended December 31, 1997. The Fund also
received reductions in custodian fees of $845 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $1,708 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended December 31, 1997 was
$278,678,426 and $271,014,953, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
Aggregate unrealized appreciation of investment securities $54,538,052 -------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (2,523,682) -------------------------------------------------------------------------- Net unrealized appreciation of investment securities $52,014,370 ========================================================================== |
Cost of investments for tax purposes is $174,253,976.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
Sold 2,757,339 $ 51,600,352 3,676,649 $57,637,947
----------------------------------------------------------------------------
Issued as reinvestment of
distributions 492,909 9,562,426 511,063 8,105,455
----------------------------------------------------------------------------
Reacquired (1,185,922) (22,778,212) (304,826) (4,772,074)
----------------------------------------------------------------------------
2,064,326 $ 38,384,566 3,882,886 $60,971,328
============================================================================
|
NOTE 7 - CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997
are summarized as follows:
OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
Beginning of year 824 $ 342,973
------------------------------------------
Written 5,180 1,732,123
------------------------------------------
Closed (2,655) (1,028,115)
------------------------------------------
Exercised (1,251) (372,509)
------------------------------------------
Expired (283) (142,568)
------------------------------------------
End of year 1,815 $ 531,904
==========================================
|
Open call options written at December 31, 1997 were as follows:
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ------------ --------------
America Online Inc. Jan. 98 80 155 $ 80,782 $158,875 $ (78,093)
Applied Materials Jan. 98 37.5 90 25,042 1,406 23,636
Bed Bath & Beyond, Inc. Feb. 98 35 180 25,334 84,375 (59,041)
Bristol-Myers Squibb Co. Jan. 98 95 241 106,562 52,719 53,843
ConAgra, Inc. Mar. 98 37.5 220 39,214 9,625 29,589
Cendant Corp. Jan. 98 75 350 61,044 266,875 (205,831)
Home Depot, Inc. Jan. 98 55 139 44,757 54,731 (9,974)
Lucent Technologies,
Inc. Jan. 98 85 220 64,495 15,125 49,370
Northern Telecom Ltd. Mar. 98 95 93 52,512 41,269 11,243
Safeway, Inc. Jan. 98 60 127 32,162 46,831 (14,669)
----- -------- -------- ---------
1,815 $531,904 $731,831 $(199,927)
===== ======== ======== =========
|
AIM V.I. GROWTH FUND
FS-150
NOTE 8 - PUT OPTIONS CONTRACTS PURCHASED
Transactions in put options purchased during the year ended December 31, 1997
are summarized as follows:
OPTION CONTRACTS
-------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- ---------
Beginning of year -- $ --
----------------------------------------
Purchased 2,047 565,769
----------------------------------------
Closed (500) (182,680)
----------------------------------------
Expired (230) (32,315)
----------------------------------------
End of year 1,317 $ 350,774
========================================
|
Open put options held at December 31, 1997 were as follows:
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS PAID MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ------------ --------------
America Online Inc. Jan. 98 70 155 $ 70,928 $ 3,875 $ (67,053)
Applied Materials, Inc. Jan. 98 32.5 180 51,165 57,375 6,210
Bed Bath & Beyond, Inc. Feb. 98 30 180 26,415 3,938 (22,477)
Cendant Corp. Jan. 98 65 350 75,521 6,563 (68,958)
Home Depot, Inc. Jan. 98 50 139 14,178 1,303 (12,875)
Lucent Technologies,
Inc. Jan. 98 75 220 72,160 19,250 (52,910)
Northern Telecom Ltd. Mar. 98 85 93 40,407 44,754 4,347
----- -------- -------- ---------
1,317 $350,774 $137,058 $(213,716)
===== ======== ======== =========
|
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995, and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
---------------------------------- -----------------
1997 1996 1995 1995 1994
-------- -------- -------- ------- -------
Net asset value,
beginning of period $ 16.25 $ 14.44 $ 10.71 $ 11.59 $ 10.00
----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.08 0.07 0.09 0.06 0.02
----------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 4.27 2.52 3.65 (0.88) 1.59
----------------------------------------------------------------------------------
Total from investment
operations 4.35 2.59 3.74 (0.82) 1.61
----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.09) (0.06) (0.01) (0.06) (0.02)
----------------------------------------------------------------------------------
Distributions from net
realized gains (0.68) (0.72) -- -- --
----------------------------------------------------------------------------------
Total distributions (0.77) (0.78) (0.01) (0.06) (0.02)
----------------------------------------------------------------------------------
Net asset value, end of
period $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59
==================================================================================
Total return(a) 26.87% 18.09% 34.89% (7.11)% 16.07%
==================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000s omitted) $258,852 $178,638 $102,600 $45,497 $25,115
==================================================================================
Ratio of expenses to
average net assets 0.73%(b)(c) 0.78% 0.84%(d) 0.95% 0.85%(d)(e)
==================================================================================
Ratio of net investment
income to average net
assets 0.54%(b) 0.79% 0.95%(d) 0.71% 0.51%(d)(e)
==================================================================================
Portfolio turnover rate 132% 143% 125% 179% 99%
==================================================================================
Average brokerage
commission rate paid(f) $ 0.0618 $ 0.0629 N/A N/A N/A
==================================================================================
|
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $224,542,366.
(c) Ratio includes indirectly paid expenses. Excluding indirectly
paid expenses, the ratio of expenses to average net assets would
have been the same.
(d) Annualized.
(e) After fee waivers and/or expense reimbursement. Annualized
ratios of expenses and net investment income (loss) to average
net assets prior to fee waivers and/or expense reimbursements
were 1.50% and (0.14)%, respectively.
(f) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities
for the period divided by the total number of related shares
purchased and sold, which is required to be disclosed for fiscal
years beginning September 1, 1995 and thereafter.
AIM V.I. GROWTH FUND
FS-151
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. Growth and Income Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995 and the period May 2, 1994 (commencement of operations) through January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Growth and Income Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995 and the period May 2, 1994 (commencement of operations) through January 31, 1995, in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. GROWTH AND INCOME FUND
FS-152
SCHEDULE OF INVESTMENTS
December 31, 1997
MARKET
SHARES VALUE
COMMON STOCKS - 80.98%
AIRLINES - 0.68%
Continental Airlines, Inc.(a) 90,000 $ 4,331,250
----------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.72%
Lear Corp.(a) 70,000 3,325,000
----------------------------------------------------------------------
Tower Automotive, Inc.(a) 30,000 1,261,875
----------------------------------------------------------------------
4,586,875
----------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 2.33%
Banc One Corp. 70,000 3,801,875
----------------------------------------------------------------------
Schweizerischer Bankverein (Switzerland)(a) 10,000 3,106,397
----------------------------------------------------------------------
UBS-Union Bank of Switzerland (Switzerland) 4,000 5,780,362
----------------------------------------------------------------------
Wells Fargo & Co. 6,500 2,206,344
----------------------------------------------------------------------
14,894,978
----------------------------------------------------------------------
BANKS (MONEY CENTER) - 4.03%
BankAmerica Corp. 55,000 4,015,000
----------------------------------------------------------------------
Chase Manhattan Corp. 135,000 14,782,500
----------------------------------------------------------------------
Citicorp 55,000 6,954,062
----------------------------------------------------------------------
25,751,562
----------------------------------------------------------------------
BANKS (REGIONAL) - 0.29%
Marshall & Ilsley Corp. 30,000 1,863,750
----------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.20%
Lubrizol Corp. (The) 35,000 1,290,625
----------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.46%
ADC Telecommunications, Inc.(a) 95,000 3,966,250
----------------------------------------------------------------------
Comverse Technology, Inc.(a) 35,000 1,365,000
----------------------------------------------------------------------
ECI Telecommunications Ltd. (Israel) 80,000 2,040,000
----------------------------------------------------------------------
Lucent Technologies, Inc. 25,000 1,996,875
----------------------------------------------------------------------
Nokia Oyj - Class A - A-ADR (Finland) 25,000 1,750,000
----------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Sweden) 45,000 1,679,062
----------------------------------------------------------------------
Tellabs, Inc.(a) 55,000 2,908,125
----------------------------------------------------------------------
15,705,312
----------------------------------------------------------------------
COMPUTERS (HARDWARE) - 2.72%
Compaq Computer Corp. 100,000 5,643,750
----------------------------------------------------------------------
Dell Computer Corp.(a)(b) 30,000 2,520,000
----------------------------------------------------------------------
International Business Machines Corp. 65,000 6,796,563
----------------------------------------------------------------------
Sun Microsystems, Inc.(a) 60,000 2,392,500
----------------------------------------------------------------------
17,352,813
----------------------------------------------------------------------
COMPUTERS (NETWORKING) - 1.08%
Bay Networks, Inc.(a) 140,000 3,578,750
----------------------------------------------------------------------
Cisco Systems, Inc.(a) 60,000 3,345,000
----------------------------------------------------------------------
6,923,750
----------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.43%
EMC Corp.(a) 100,000 2,743,750
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
COMPUTERS (SOFTWARE & SERVICES) - 3.56%
America Online, Inc.(a)(b) 40,000 $ 3,567,500
----------------------------------------------------------------------
Computer Associates International, Inc. 150,000 7,931,250
----------------------------------------------------------------------
Compuware Corp.(a) 44,000 1,408,000
----------------------------------------------------------------------
HBO & Co. 50,000 2,400,000
----------------------------------------------------------------------
Microsoft Corp.(a) 40,000 5,170,000
----------------------------------------------------------------------
Sterling Commerce, Inc.(a) 60,000 2,306,250
----------------------------------------------------------------------
22,783,000
----------------------------------------------------------------------
CONSUMER FINANCE - 1.58%
Household International, Inc. 40,000 5,102,500
----------------------------------------------------------------------
MBNA Corp. 80,000 2,185,000
----------------------------------------------------------------------
SLM Holding Corp. 20,000 2,782,500
----------------------------------------------------------------------
10,070,000
----------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 1.44%
AmeriSource Health Corp.-Class A(a) 21,300 1,240,725
----------------------------------------------------------------------
Bergen Brunswig Corp.-Class A 100,000 4,212,500
----------------------------------------------------------------------
Cardinal Health, Inc. 30,000 2,253,750
----------------------------------------------------------------------
Sysco Corp. 32,500 1,480,781
----------------------------------------------------------------------
9,187,756
----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.03%
General Electric Co.(b) 90,000 6,603,750
----------------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS) - 0.18%
Kent Electronics Corp.(a) 45,000 1,130,625
----------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.73%
Intel Corp. 45,000 3,161,250
----------------------------------------------------------------------
Microchip Technology, Inc.(a) 50,000 1,500,000
----------------------------------------------------------------------
4,661,250
----------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 5.82%
American Express Co. 70,000 6,247,500
----------------------------------------------------------------------
CIT Group, Inc. (The)(a) 35,000 1,128,750
----------------------------------------------------------------------
Fannie Mae 135,000 7,703,437
----------------------------------------------------------------------
Freddie Mac 175,000 7,339,063
----------------------------------------------------------------------
MBIA, Inc. 50,000 3,340,625
----------------------------------------------------------------------
MGIC Investment Corp. 25,000 1,662,500
----------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 165,000 9,755,625
----------------------------------------------------------------------
37,177,500
----------------------------------------------------------------------
FOODS - 0.54%
Ralston-Ralston Purina Group 16,000 1,487,000
----------------------------------------------------------------------
Sara Lee Corp. 35,000 1,970,938
----------------------------------------------------------------------
3,457,938
----------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.36%
Mirage Resorts, Inc.(a) 100,000 2,275,000
----------------------------------------------------------------------
|
AIM V.I. GROWTH AND INCOME FUND
FS-153
MARKET
SHARES VALUE
HEALTH CARE (DIVERSIFIED) - 4.39%
Abbott Laboratories 25,000 $ 1,639,063
-----------------------------------------------------------------------
American Home Products Corp.(b) 100,000 7,650,000
-----------------------------------------------------------------------
Bristol-Myers Squibb Co. 85,000 8,043,125
-----------------------------------------------------------------------
Johnson & Johnson 50,000 3,293,750
-----------------------------------------------------------------------
Warner-Lambert Co. 60,000 7,440,000
-----------------------------------------------------------------------
28,065,938
-----------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 4.44%
Lilly (Eli) & Co. 30,000 2,088,750
-----------------------------------------------------------------------
Merck & Co., Inc. 70,000 7,437,500
-----------------------------------------------------------------------
Pfizer Inc. 115,000 8,574,688
-----------------------------------------------------------------------
SmithKline Beecham PLC-ADR (United Kingdom) 200,000 10,287,500
-----------------------------------------------------------------------
28,388,438
-----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.78%
Health Management Associates, Inc.-Class A(a) 65,000 1,641,250
-----------------------------------------------------------------------
Tenet Healthcare Corp.(a) 100,000 3,312,500
-----------------------------------------------------------------------
4,953,750
-----------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.28%
HEALTHSOUTH Corp.(a) 65,000 1,803,750
-----------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 1.17%
MedPartners, Inc.(a) 250,000 5,593,750
-----------------------------------------------------------------------
PhyCor, Inc.(a) 70,000 1,890,000
-----------------------------------------------------------------------
7,483,750
-----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.85%
Arterial Vascular Engineering, Inc.(a) 61,600 4,004,000
-----------------------------------------------------------------------
Boston Scientific Corp.(a) 44,000 2,018,500
-----------------------------------------------------------------------
Henry Schein, Inc.(a) 70,000 2,450,000
-----------------------------------------------------------------------
Medtronic, Inc. 64,000 3,348,000
-----------------------------------------------------------------------
11,820,500
-----------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.65%
Covance, Inc.(a) 45,000 894,375
-----------------------------------------------------------------------
Omnicare, Inc. 105,000 3,255,000
-----------------------------------------------------------------------
4,149,375
-----------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.16%
Leggett & Platt, Inc. 24,900 1,042,688
-----------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.59%
Colgate-Palmolive Co. 65,000 4,777,500
-----------------------------------------------------------------------
Kimberly-Clark Corp. 60,000 2,958,750
-----------------------------------------------------------------------
Procter & Gamble Co. (The) 30,000 2,394,375
-----------------------------------------------------------------------
10,130,625
-----------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.54%
Provident Companies, Inc. 90,000 3,476,250
-----------------------------------------------------------------------
|
MARKET
SHARES VALUE
INSURANCE (MULTI-LINE) - 2.47%
Ace, Ltd. 40,000 $ 3,860,000
-------------------------------------------------------------------------
American International Group, Inc. 65,000 7,068,750
-------------------------------------------------------------------------
Travelers Group, Inc. 90,000 4,848,750
-------------------------------------------------------------------------
15,777,500
-------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 1.56%
Allstate Corp. 90,000 8,178,750
-------------------------------------------------------------------------
Travelers Property Casualty Corp.-Class A 40,000 1,760,000
-------------------------------------------------------------------------
9,938,750
-------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.64%
E*TRADE Group, Inc.(a) 170,000 3,910,000
-------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 90,000 6,564,375
-------------------------------------------------------------------------
10,474,375
-------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.44%
Franklin Resources, Inc. 32,000 2,782,000
-------------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 1.42%
Brunswick Corp. 300,000 9,093,750
-------------------------------------------------------------------------
LODGING-HOTELS - 0.68%
Carnival Corp.-Class A 41,600 2,303,600
-------------------------------------------------------------------------
ITT Corp.(a) 25,000 2,071,875
-------------------------------------------------------------------------
4,375,475
-------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.94%
Eaton Corp. 25,000 2,231,250
-------------------------------------------------------------------------
Hillenbrand Industries, Inc. 30,000 1,535,625
-------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 50,000 2,253,125
-------------------------------------------------------------------------
6,020,000
-------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.34%
Diebold, Inc. 43,500 2,202,188
-------------------------------------------------------------------------
NATURAL GAS - 0.52%
El Paso Natural Gas Co. 50,000 3,325,000
-------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.77%
Boise Cascade Office Products Corp.(a) 10,400 155,350
-------------------------------------------------------------------------
Danka Business Systems PLC-ADR (United Kingdom) 89,200 1,421,625
-------------------------------------------------------------------------
Wallace Computer Services, Inc. 85,900 3,339,363
-------------------------------------------------------------------------
4,916,338
-------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 1.38%
Exxon Corp. 55,000 3,365,312
-------------------------------------------------------------------------
Royal Dutch Petroleum Co.-ADR-New York Shares
(Netherlands) 60,000 3,251,250
-------------------------------------------------------------------------
YPF Sociedad Anonima-ADR (Argentina) 65,000 2,222,188
-------------------------------------------------------------------------
8,838,750
-------------------------------------------------------------------------
|
AIM V.I. GROWTH AND INCOME FUND
FS-154
MARKET
SHARES VALUE
OIL & GAS (DRILLING & EQUIPMENT) - 2.32%
BJ Services Co.(a) 45,000 $ 3,237,188
----------------------------------------------------------------------
EVI, Inc.(a)(b) 45,000 2,328,750
----------------------------------------------------------------------
Halliburton 47,500 2,467,031
----------------------------------------------------------------------
Hvide Marine, Inc.-Class A(a) 60,000 1,545,000
----------------------------------------------------------------------
Petroleum Geo-Services ASA-ADR (Norway)(a) 35,000 2,266,250
----------------------------------------------------------------------
Santa Fe International Corp. 60,000 2,441,250
----------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 3,500 277,375
----------------------------------------------------------------------
Transocean Offshore Inc. 6,100 276,788
----------------------------------------------------------------------
14,839,632
----------------------------------------------------------------------
OIL & GAS (REFINING & MARKETING) - 0.45%
Tosco Corp. 76,000 2,873,750
----------------------------------------------------------------------
PERSONAL CARE - 1.16%
Avon Products, Inc.(b) 55,000 3,375,625
----------------------------------------------------------------------
Gillette Co. 40,000 4,017,500
----------------------------------------------------------------------
7,393,125
----------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.52%
Xerox Corp. 45,000 3,321,562
----------------------------------------------------------------------
PUBLISHING - 0.38%
Dow Jones & Co., Inc. 45,000 2,415,937
----------------------------------------------------------------------
RAILROADS - 0.03%
Kansas City Southern Industries, Inc. 5,700 180,975
----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 1.71%
Cali Realty Corp. 50,000 2,050,000
----------------------------------------------------------------------
Crescent Real Estate Equities, Co. 60,000 2,362,500
----------------------------------------------------------------------
Patriot American Hospitality, Inc. 80,000 2,305,000
----------------------------------------------------------------------
Starwood Lodging Trust 40,000 2,315,000
----------------------------------------------------------------------
Vornado Realty Trust 40,000 1,877,500
----------------------------------------------------------------------
10,910,000
----------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONIC) - 0.56%
CompUSA, Inc.(a)(b) 115,000 3,565,000
----------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 1.85%
Carson Pirie Scott & Co.(a) 35,000 1,754,375
----------------------------------------------------------------------
Federated Department Stores, Inc.(a) 50,000 2,153,125
----------------------------------------------------------------------
J.C. Penney Co., Inc. 55,000 3,317,187
----------------------------------------------------------------------
Kohl's Corp.(a) 30,000 2,043,750
----------------------------------------------------------------------
Proffitt's, Inc.(a) 90,000 2,559,375
----------------------------------------------------------------------
11,827,812
----------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.31%
Consolidated Stores Corp.(a) 45,000 1,977,187
----------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.32%
Walgreen Co. 65,000 2,039,375
----------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.40%
Albertson's, Inc. 30,200 1,430,725
----------------------------------------------------------------------
Blue Square-Israel Ltd.-ADR (Israel) 90,000 1,113,750
----------------------------------------------------------------------
2,544,475
----------------------------------------------------------------------
|
MARKET
SHARES VALUE
RETAIL (GENERAL MERCHANDISE) - 0.35%
Costco Companies, Inc.(a) 50,000 $ 2,231,250
------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.77%
Corporate Express, Inc.(a) 280,000 3,605,000
------------------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 53,200 1,293,425
------------------------------------------------------------------------
4,898,425
------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.20%
Stage Stores, Inc.(a) 35,000 1,308,125
------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.80%
Washington Mutual, Inc. 80,000 5,105,000
------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 3.57%
Cendant Corp.(a)(b) 301,000 10,346,875
------------------------------------------------------------------------
Service Corp. International 275,000 10,157,812
------------------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 50,000 2,331,250
------------------------------------------------------------------------
22,835,937
------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.07%
Ceridian Corp.(a) 55,000 2,519,687
------------------------------------------------------------------------
Equifax, Inc. 60,000 2,126,250
------------------------------------------------------------------------
Fiserv, Inc.(a) 45,000 2,210,625
------------------------------------------------------------------------
6,856,562
------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.33%
AT&T Corp. 55,000 3,368,750
------------------------------------------------------------------------
MCI Communications Corp. 120,000 5,137,500
------------------------------------------------------------------------
8,506,250
------------------------------------------------------------------------
TELEPHONE - 2.17%
Cincinnati Bell, Inc. 330,000 10,230,000
------------------------------------------------------------------------
SBC Communications, Inc. 50,000 3,662,500
------------------------------------------------------------------------
13,892,500
------------------------------------------------------------------------
TOBACCO - 1.91%
Philip Morris Companies, Inc. 270,000 12,234,375
------------------------------------------------------------------------
WASTE MANAGEMENT - 0.61%
USA Waste Services, Inc.(a) 100,000 3,925,000
------------------------------------------------------------------------
Total Common Stocks 517,532,928
------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 5.42%
HEALTH CARE (MANAGED CARE) - 0.69%
Medpartners Inc.-$1.44 Conv. Pfd. 200,000 4,400,000
------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.22%
Conseco Inc.-$4.278 Conv. PRIDES 50,000 7,800,000
------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.11%
Hvide Capital Trust-$3.25 Conv. Pfd. (Acquired
06/24/97; Cost $600,000)(c) 12,000 682,092
------------------------------------------------------------------------
OIL & GAS (REFINING & MARKETING) - 0.15%
Tosco Financial Trust-$2.875 Conv. Pfd. 15,300 1,000,238
------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.57%
AES Trust I-Series A-$2.69 Conv. Pfd. 51,000 3,659,250
------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.36%
TJX Companies, Inc.-Series E-$7.00 Conv. Pfd. 6,000 2,280,000
------------------------------------------------------------------------
|
AIM V.I. GROWTH AND INCOME FUND
FS-155
MARKET
SHARES VALUE
SERVICES (COMMERCIAL & CONSUMER) - 0.17%
Automatic Common Exchange Security Trust II-$1.55
Conv. Pfd. 45,000 $ 1,057,500
------------------------------------------------------------------------------
SHIPPING - 0.18%
CNF Trust I-$2.50 Conv. Pfd. 20,000 1,170,000
------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.97%
WorldCom, Inc.-$2.68 Dep. Conv. Pfd. 120,000 12,600,000
------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 34,649,080
------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS - 6.27%
COMPUTERS (SOFTWARE & SERVICES) - 0.59%
Platinum Technology, Inc., Conv. Sub. Notes, 6.25%,
12/15/02 (Acquired 12/11/97; Cost $1,997,000)(c) $ 2,000,000 2,147,500
------------------------------------------------------------------------------
Veritas Software Corp., Conv. Sub. Notes, 5.25%,
11/01/04 (Acquired 10/09/97; Cost $1,500,000)(c) 1,500,000 1,627,500
------------------------------------------------------------------------------
3,775,000
------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.44%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%, 05/01/06
(Acquired 10/24/96-12/04/97; Cost $2,409,413)(c) 1,500,000 2,809,770
------------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.22%
Analog Devices, Conv. Sub. Notes, 3.50%, 12/01/00 1,000,000 1,419,680
------------------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 0.44%
Dura Pharmaceuticals Inc., Sub. Notes, 3.50%,
07/15/02 2,500,000 2,810,350
------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 1.04%
NCS Healthcare Inc., Conv. Sub. Notes, 5.75%,
08/15/04 2,500,000 2,550,550
------------------------------------------------------------------------------
Omnicare, Inc., Sub. Deb., 5.00%, 12/01/07 (Acquired
12/04/97; Cost $4,000,000)(c) 4,000,000 4,060,000
------------------------------------------------------------------------------
6,610,550
------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.39%
Thermo Electron Corp., Conv. Sub. Deb., 4.25%,
01/01/03 (Acquired 06/20/97-06/27/97; Cost
$2,294,492)(c) 2,000,000 2,500,000
------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.40%
U.S. Filter Corp., Conv. Sub. Notes, 4.50%, 12/15/01 2,500,000 2,575,000
------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.35%
Danka Business Systems PLC, (United Kingdom) Conv.
Sub. Notes, 6.75%, 04/01/02 2,500,000 2,237,450
------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.04%
Diamond Offshore Drilling, Inc., Conv. Sub. Notes,
3.75%, 02/15/07 3,500,000 4,795,420
------------------------------------------------------------------------------
Nabors Industries, Inc., Conv. Sub. Notes, 5.00%,
05/15/06 1,000,000 1,837,670
------------------------------------------------------------------------------
6,633,090
------------------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.21%
Home Depot, Inc., Conv. Sub. Notes, 3.25%, 10/01/01 1,000,000 1,347,170
------------------------------------------------------------------------------
|
PRINCIPAL MARKET
AMOUNT VALUE
RETAIL (SPECIALTY) - 0.36%
Staples Inc., Conv. Sub. Deb., 4.50%, 10/01/00
(Acquired 10/23/97-12/30/97; Cost $2,299,750)(c) $ 1,750,000 $ 2,303,438
------------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.49%
Career Horizons, Inc., Conv. Bonds, 7.00%, 11/01/02 1,500,000 3,100,500
------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.30%
Tel-Save Holdings, Inc., Conv. Sub. Notes, 5.00%,
12/15/04 (Acquired 12/05/97; Cost $2,000,000)(c) 2,000,000 1,930,000
------------------------------------------------------------------------------
Total Convertible Corporate Bonds 40,051,998
------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 5.24%
9.125%, 05/15/99(d) 9,000,000 9,405,720
------------------------------------------------------------------------------
11.75%, 02/15/01(d) 10,000,000 11,731,000
------------------------------------------------------------------------------
13.125%, 05/15/01(d) 5,000,000 6,134,500
------------------------------------------------------------------------------
13.375%, 08/15/01 5,000,000 6,244,250
------------------------------------------------------------------------------
Total U.S. Treasury Securities 33,515,470
------------------------------------------------------------------------------
REPURCHASE AGREEMENT(e) - 4.42%
Smith Barney, Inc. 6.75%, 01/02/98(f) 28,276,446 28,276,446
------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 102.33% 654,025,922
------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (2.33)% (14,913,377)
------------------------------------------------------------------------------
NET ASSETS - 100.00% $639,112,545
==============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security
(b) A portion of these securities are subject to call options written. See
Note 7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/97 was $18,060,300,
which represented 2.83% of the Fund's net assets.
(d) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See note 9.
(e) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor.
(f) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Dep. - Depositary
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sub. - Subordinated
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-156
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS: Investments, at market value (cost $566,330,159) $654,025,922 ---------------------------------------------------------------------- Cash 16,995 ---------------------------------------------------------------------- Receivables for: Investments sold 9,550,866 ---------------------------------------------------------------------- Capital stock sold 978,416 ---------------------------------------------------------------------- Dividends and interest 1,693,975 ---------------------------------------------------------------------- Options purchased 145,453 ---------------------------------------------------------------------- Variation margin 37,500 ---------------------------------------------------------------------- Investment for deferred compensation plan 14,757 ---------------------------------------------------------------------- Other assets 12,621 ---------------------------------------------------------------------- Total assets 666,476,505 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 26,264,800 ---------------------------------------------------------------------- Capital stock reacquired 93,155 ---------------------------------------------------------------------- Options written 609,300 ---------------------------------------------------------------------- Deferred compensation plan 14,757 ---------------------------------------------------------------------- Accrued advisory fees 322,312 ---------------------------------------------------------------------- Accrued administrative services fees 3,500 ---------------------------------------------------------------------- Accrued directors' fees 1,653 ---------------------------------------------------------------------- Accrued operating expenses 54,483 ---------------------------------------------------------------------- Total liabilities 27,363,960 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $639,112,545 ====================================================================== CAPITAL SHARES, $.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 33,868,543 ====================================================================== Net asset value, offering and redemption price per share $ 18.87 ====================================================================== |
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME:
Dividends (net of $36,441 foreign withholding tax) $ 5,115,419
-----------------------------------------------------------------------------
Interest 2,487,104
-----------------------------------------------------------------------------
Total investment income 7,602,523
-----------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,609,695
-----------------------------------------------------------------------------
Administrative services fees 43,065
-----------------------------------------------------------------------------
Custodian fees 84,481
-----------------------------------------------------------------------------
Directors' fees and expenses 9,116
-----------------------------------------------------------------------------
Other 93,580
-----------------------------------------------------------------------------
Total expenses 2,839,937
-----------------------------------------------------------------------------
Less: Expenses paid indirectly (5,032)
-----------------------------------------------------------------------------
Net expenses 2,834,905
-----------------------------------------------------------------------------
Net investment income 4,767,618
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCY TRANSACTIONS, FUTURES, AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 9,687,148
-----------------------------------------------------------------------------
Foreign currency transactions 80,193
-----------------------------------------------------------------------------
Future contracts (236,996)
-----------------------------------------------------------------------------
Option contracts 205,761
-----------------------------------------------------------------------------
9,736,106
-----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 67,471,540
-----------------------------------------------------------------------------
Futures contracts (277,200)
-----------------------------------------------------------------------------
Option contracts (204,922)
-----------------------------------------------------------------------------
66,989,418
-----------------------------------------------------------------------------
Net gain from investment securities, foreign currency
transactions, futures and option contracts 76,725,524
-----------------------------------------------------------------------------
Net increase in net assets resulting from operations $81,493,142
=============================================================================
|
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-157
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
------------ ------------
OPERATIONS:
Net investment income $ 4,767,618 $ 2,140,854
-------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currency transactions, futures and option
contracts 9,736,106 465,498
-------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, futures and option contracts 66,989,418 17,682,951
-------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 81,493,142 20,289,303
-------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (326,695) (1,850,460)
-------------------------------------------------------------------------------
Distributions from net realized gains (490,042) (401,149)
-------------------------------------------------------------------------------
Net increase from capital stock transactions 349,104,509 152,726,725
-------------------------------------------------------------------------------
Net increase in net assets 429,780,914 170,764,419
-------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 209,331,631 38,567,212
-------------------------------------------------------------------------------
End of year $639,112,545 $209,331,631
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $537,626,187 $188,521,678
-------------------------------------------------------------------------------
Undistributed net investment income 4,850,844 329,728
-------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currency
transactions, futures and option contracts 9,421,873 256,002
-------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currency transactions and option
contracts 87,213,641 20,224,223
-------------------------------------------------------------------------------
$639,112,545 $209,331,631
===============================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth and Income Fund (the "Fund"). The Fund's investment
objective is to seek growth of capital, with current income as a secondary
objective. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between the last bid and
asked prices based upon quotes furnished by independent sources. Securities
for which market quotations either are not readily available or are
questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors. Short-term obligations having 60 days
or less to maturity are valued at amortized cost which approximates market
value. Generally, trading in foreign securities is
AIM V.I. GROWTH AND INCOME FUND
FS-158
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis. On December 31, 1997,
undistributed net investment income was increased and undistributed net
realized gains decreased by $80,193 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written. The Fund will
not write a covered call option if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 25% of the net assets of the
Fund.
H. Put options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
options's underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The options's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting
AIM V.I. GROWTH AND INCOME FUND
FS-159
services to the Fund. During the year ended December 31, 1997, AIM was
reimbursed $43,065 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,950 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $1,957 during the year ended December 31, 1997. The Fund
also received reductions in custodian fees of $3,075 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $5,032 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $892,669,891 and $547,036,684, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1997 is as follows:
Aggregate unrealized appreciation of investment securities $94,187,176 -------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (8,077,496) -------------------------------------------------------------------------- Net unrealized appreciation of investment securities $86,109,680 ========================================================================== |
Cost of investments for tax purposes is $567,916,242.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Sold 20,645,975 $361,699,824 10,983,786 $153,919,542
------------------------------------------------------------------------------
Issued as reinvestment of
distributions 44,268 816,737 154,220 2,251,608
------------------------------------------------------------------------------
Reacquired (745,032) (13,412,052) (255,903) (3,444,425)
------------------------------------------------------------------------------
19,945,211 $349,104,509 10,882,103 $152,726,725
==============================================================================
|
NOTE 7 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997
are summarized as follows:
OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
Beginning of year -- $ --
-----------------------------------------
Written 10,942 2,589,611
-----------------------------------------
Closed (5,011) (1,443,882)
-----------------------------------------
Exercised (140) (65,272)
-----------------------------------------
Expired (2,691) (456,212)
-----------------------------------------
End of year 3,100 $624,245
=========================================
|
AIM V.I. GROWTH AND INCOME FUND
FS-160
Open call option contracts written at December 31, 1997 were as follows:
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1997 MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ------------ --------------
America Online, Inc. Jan $ 90 150 $ 35,500 $ 48,750 $ (13,250)
--------------------------------------------------------------------------------------
American Home Products
Corp. Jan 80 300 19,399 14,063 5,336
--------------------------------------------------------------------------------------
Avon Products, Inc. Jan 55 250 170,869 165,625 5,244
--------------------------------------------------------------------------------------
Cendant Corp. Feb 35 900 91,993 137,812 (45,819)
--------------------------------------------------------------------------------------
CompUSA, Inc. Feb 35 600 80,697 101,175 (20,478)
--------------------------------------------------------------------------------------
Dell Computer Corp. Jan 100 250 28,937 6,250 22,687
--------------------------------------------------------------------------------------
EVI, Inc. Feb 55 450 139,270 73,125 66,145
--------------------------------------------------------------------------------------
General Electric Co. Mar 75 200 57,580 62,500 (4,920)
--------------------------------------------------------------------------------------
3,100 $624,245 $609,300 $ 14,945
======================================================================================
|
NOTE 8 - PUT OPTIONS PURCHASED
Transactions in put options purchased during the year ended December 31, 1997
are summarized as follows:
PUT OPTION
CONTRACTS
-------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- ---------
Beginning of year -- $ --
---------------------------------------
Purchased 2,437 484,119
---------------------------------------
Closed (475) (118,799)
---------------------------------------
End of year 1,962 $365,320
=======================================
|
Open put option contracts purchased at December 31, 1997 were as follows:
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1997 MARKET APPRECIATION
MONTH PRICE CONTRACTS PAID VALUE (DEPRECIATION)
-------- ------ --------- -------- ------------ --------------
American Home Products
Corp. Apr $70 300 $ 85,367 $ 58,125 $ (27,242)
---------------------------------------------------------------------------------------
Diamond Offshore
Drilling, Inc. Jan 40 400 72,700 7,500 (65,200)
---------------------------------------------------------------------------------------
EVI, Inc. Jan 40 225 65,600 2,813 (62,787)
---------------------------------------------------------------------------------------
EVI, Inc. Jan 45 225 51,300 10,547 (40,753)
---------------------------------------------------------------------------------------
Halliburton Co. Jan 45 237 31,817 7,406 (24,411)
---------------------------------------------------------------------------------------
Nabors Industries, Inc. Jan 30 275 33,619 51,562 17,943
---------------------------------------------------------------------------------------
Santa Fe International
Corp. Jan 35 300 24,917 7,500 (17,417)
---------------------------------------------------------------------------------------
1,962 $365,320 $145,453 $(219,867)
=======================================================================================
|
NOTE 9- OPEN FUTURES CONTRACTS
On December 31, 1997, $538,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
UNREALIZED
NUMBER OF MONTH/ APPRECIATION
CONTRACTS COMMITMENT (DEPRECIATION)
--------- ---------- --------------
Russell 2000 Index 30 Mar 98 $(354,625)
-------------------------------------------------------
S&P 500 Index 30 Mar 98 77,425
-------------------------------------------------------
$(277,200)
=======================================================
|
AIM V.I. GROWTH AND INCOME FUND
FS-161
NOTE 10 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995 and the period May 2, 1994 (date
operations commenced) through January 31, 1995.
December 31,
--------------------------------- January 31,
1997 1996 1995 1995
-------- -------- ------- -----------
Net asset value,
beginning of period $ 15.03 $ 12.68 $ 9.98 $10.00
-------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.13 0.16 0.14 0.11
-------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 3.74 2.36 3.11 (0.02)
-------------------------------------------------------------------------------
Total from investment
operations 3.87 2.52 3.25 0.09
-------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.01) (0.14) (0.14) (0.11)
-------------------------------------------------------------------------------
Distributions from
capital gains (0.02) (0.03) (0.41) --
-------------------------------------------------------------------------------
Total distributions (0.03) (0.17) (0.55) (0.11)
-------------------------------------------------------------------------------
Net asset value, end of
period $ 18.87 $ 15.03 $ 12.68 $ 9.98
===============================================================================
Total return(a) 25.72% 19.95% 32.65% 0.90%
===============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000s omitted) $639,113 $209,332 $38,567 $7,380
===============================================================================
Ratio of expenses to
average net assets 0.69%(b)(c) 0.78% 0.78%(d) 1.07%(d)(e)
===============================================================================
Ratio of net investment
income to average net
assets 1.15%(b) 2.05% 1.92%(d) 1.95%(d)(e)
===============================================================================
Portfolio turnover rate 135% 148% 145% 96%
===============================================================================
Average brokerage
commission rate paid(f) $ 0.0612 $ 0.0644 N/A N/A
===============================================================================
|
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $414,115,808.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.72% (annualized) and 1.30% (annualized),
respectively.
(f) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. GROWTH AND INCOME FUND
FS-162
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. International Equity Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian and brokers. Where brokers did not reply to our confirmation requests, we carried out other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. International Equity Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993 (commencement of operations) through January 31, 1994 in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-163
SCHEDULE OF INVESTMENTS
December 31, 1997
MARKET
SHARES VALUE
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 94.10%
ARGENTINA - 2.81%
Banco de Galicia y Buenos Aires S.A. de C.V.-ADR
(Banks-Regional) 35,574 $ 916,031
------------------------------------------------------------------------------
Banco Rio de La Plata S.A. (Banks-Money Center)(a) 40,000 560,000
------------------------------------------------------------------------------
Perez Companc S.A.-Class B (Oil & Gas-Refining &
Marketing) 167,141 1,193,614
------------------------------------------------------------------------------
Telefonica de Argentina S.A.-ADR (Telephone) 41,000 1,527,250
------------------------------------------------------------------------------
YPF Sociedad Anonima-ADR (Oil-International
Integrated) 50,400 1,723,050
------------------------------------------------------------------------------
5,919,945
------------------------------------------------------------------------------
AUSTRALIA - 1.92%
Boral Ltd. (Engineering & Construction) 402,000 1,016,574
------------------------------------------------------------------------------
Coca-Cola Amatil Ltd. (Beverages-Non-Alcoholic) 80,241 599,638
------------------------------------------------------------------------------
QBE Insurance Group Ltd. (Insurance-Property-
Casualty) 231,019 1,039,963
------------------------------------------------------------------------------
Telstra Corp. Ltd. (Telephone) 157,160 331,870
------------------------------------------------------------------------------
Westpac Banking Corp., Ltd. (Banking) 168,000 1,074,793
------------------------------------------------------------------------------
4,062,838
------------------------------------------------------------------------------
AUSTRIA - 0.75%
OMV A.G. (Oil & Gas-Refining & Marketing) 6,500 900,526
------------------------------------------------------------------------------
VA Technologie A.G. (Engineering & Construction) 4,550 690,884
------------------------------------------------------------------------------
1,591,410
------------------------------------------------------------------------------
BELGIUM - 1.21%
Barco Industries (Manufacturing-Diversified) 4,000 734,123
------------------------------------------------------------------------------
COLRUYT S.A. (Retail-Food Chains) 1,500 766,174
------------------------------------------------------------------------------
UCB S.A. (Manufacturing-Diversified) 320 1,056,274
------------------------------------------------------------------------------
2,556,571
------------------------------------------------------------------------------
BRAZIL - 2.19%
Companhia Energetica de Minas Gerais (Electric
Companies) 17,000 738,614
------------------------------------------------------------------------------
Petroleo Brasileiro S.A.-Petrobras, Pfd. (Oil & Gas-
Exploration & Production) 3,013 704,645
------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A.-Telebras-ADR
(Telephone) 14,700 1,711,631
------------------------------------------------------------------------------
Telecomunicacoes de Sao Paulo S.A.-TELESP, Pfd.
(Telephone) 5,500 1,463,595
------------------------------------------------------------------------------
4,618,485
------------------------------------------------------------------------------
CANADA - 3.59%
Bank of Montreal (Banks-Money Center) 11,800 523,096
------------------------------------------------------------------------------
Canadian National Railway Co. (Railroads) 9,000 425,250
------------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil & Gas-
Exploration & Production)(a) 33,000 706,623
------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
CANADA - (CONTINUED)
Canadian Pacific, Ltd. (Railroads) 15,000 $ 408,750
------------------------------------------------------------------------------
Magna International, Inc.-Class A (Machinery-
Diversified) 10,050 630,125
------------------------------------------------------------------------------
Northern Telecom Ltd.-ADR (Communications Equipment) 6,000 534,000
------------------------------------------------------------------------------
Petro-Canada (Oil-Domestic Integrated) 54,000 982,471
------------------------------------------------------------------------------
Royal Bank of Canada (Savings & Loan Companies) 18,800 994,563
------------------------------------------------------------------------------
Suncor, Inc. (Oil-International Integrated) 38,000 1,302,963
------------------------------------------------------------------------------
Toronto-Dominion Bank (Banks-Regional) 28,100 1,057,892
------------------------------------------------------------------------------
7,565,733
------------------------------------------------------------------------------
CHILE - 0.64%
Cia. de Telecomunicaciones de Chile S.A.-ADR
(Telephone) 25,500 761,813
------------------------------------------------------------------------------
Quinenco S.A.-ADR (Financial-Diversified)(a) 50,500 580,750
------------------------------------------------------------------------------
1,342,563
------------------------------------------------------------------------------
DENMARK - 1.17%
Novo Nordisk A/S (Health Care-Drugs-Generic & Other) 17,200 2,460,048
------------------------------------------------------------------------------
FINLAND - 0.46%
Nokia Oy A.B.-Class A (Telecommunications-
Cellular/Wireless) 14,000 978,545
------------------------------------------------------------------------------
FRANCE - 10.47%
Accor S.A. (Lodging-Hotels) 2,900 539,188
------------------------------------------------------------------------------
Alcatel Alsthom (Manufacturing-Diversified) 8,000 1,016,865
------------------------------------------------------------------------------
AXA S.A. (Insurance-Multi-Line) 13,000 1,005,915
------------------------------------------------------------------------------
Banque Nationale de Paris (Banks-Major Regional) 24,300 1,291,613
------------------------------------------------------------------------------
Cap Gemini Sogeti S.A. (Computers-Software &
Services) 16,000 1,311,955
------------------------------------------------------------------------------
Compagnie Francaise d'Etudes et de Construction
Technip (Oil & Gas-Refining & Marketing) 4,250 448,409
------------------------------------------------------------------------------
Elf Aquitaine S.A. (Oil & Gas-Refining & Marketing) 9,000 1,046,772
------------------------------------------------------------------------------
Essilor International (Manufacturing-Specialized) 2,275 680,402
------------------------------------------------------------------------------
Lafarge S.A. (Engineering & Construction) 13,600 892,355
------------------------------------------------------------------------------
Legrand S.A. (Housewares) 3,000 597,657
------------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Retail-General
Merchandise) 3,560 1,899,337
------------------------------------------------------------------------------
Promodes (Retail-Food Chains) 2,750 1,140,940
------------------------------------------------------------------------------
Renault S.A.(Automobiles)(a) 45,000 1,265,847
------------------------------------------------------------------------------
Renault S.A.(Automobiles) (Acquired 07/31/97; cost
$581,584)(a)(b) 21,000 590,729
------------------------------------------------------------------------------
Rexel S.A. (Distributors-Food & Health) 2,000 623,079
------------------------------------------------------------------------------
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-164
MARKET
SHARES VALUE
FRANCE - (CONTINUED)
Rhone-Poulenc-Class A (Chemicals-Diversified) 26,500 $ 1,187,073
------------------------------------------------------------------------------
Schneider S.A. (Housewares) 15,800 857,928
------------------------------------------------------------------------------
Societe BIC S.A. (Office Equipment & Supplies) 22,000 1,605,815
------------------------------------------------------------------------------
Societe Generale (Banks-Major Regional) 17,000 2,316,192
------------------------------------------------------------------------------
Sodexho S.A. (Services-Commercial & Consumer) 900 481,964
------------------------------------------------------------------------------
Total S.A.-Class B (Oil & Gas-Refining & Marketing) 10,300 1,120,960
------------------------------------------------------------------------------
Valeo S.A. (Auto Parts & Equipment) 2,500 169,561
------------------------------------------------------------------------------
22,090,556
------------------------------------------------------------------------------
GERMANY - 5.43%
Adidas A.G. (Footwear) 4,100 539,222
------------------------------------------------------------------------------
Adidas A.G. (Footwear) (Acquired 04/11/97; cost
$837,524)(b) 7,950 1,045,564
------------------------------------------------------------------------------
Allianz A.G. (Insurance-Multi-Line) 2,300 595,775
------------------------------------------------------------------------------
Bayerische Vereinsbank A.G. (Banks-Major Regional) 18,000 1,177,654
------------------------------------------------------------------------------
Commerzbank A.G. (Banks-Major Regional) 29,500 1,160,978
------------------------------------------------------------------------------
Continental A.G. (Auto Parts & Equipment) 28,000 617,899
------------------------------------------------------------------------------
Dresdner Bank A.G. (Banks-Major Regional) 24,000 1,107,282
------------------------------------------------------------------------------
Henkel KGaA (Chemicals-Diversified) 12,650 798,096
------------------------------------------------------------------------------
Mannesmann A.G. (Machinery-Diversified) 2,380 1,202,568
------------------------------------------------------------------------------
Porsche A.G. (Automobiles) 300 500,278
------------------------------------------------------------------------------
SAP A.G. (Computers-Software & Services) 2,650 805,017
------------------------------------------------------------------------------
SAP A.G., Pfd. (Computers-Software & Services) 2,700 883,241
------------------------------------------------------------------------------
VEBA A.G. (Manufacturing-Diversified) 15,000 1,021,401
------------------------------------------------------------------------------
11,454,975
------------------------------------------------------------------------------
HONG KONG - 3.99%
Cheung Kong (Holdings) Ltd. (Land Development) 86,000 563,234
------------------------------------------------------------------------------
China Telecom (Hong Kong) Ltd.-ADR
(Telecommunications-Cellular/Wireless)(a) 16,900 567,206
------------------------------------------------------------------------------
Cosco Pacific Ltd. (Financial-Diversified) 962,000 782,114
------------------------------------------------------------------------------
First Pacific Company Ltd. (Distributors-Food &
Health) 1,137,368 550,411
------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. (Natural Gas) 878,352 1,700,256
------------------------------------------------------------------------------
HSBC Holdings PLC (Banks-Major Regional) 48,000 1,183,120
------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail-Food Chains) 242,000 1,517,770
------------------------------------------------------------------------------
New World Infrastructure Ltd. (Services-Commercial &
Consumer)(a) 290,000 653,052
------------------------------------------------------------------------------
Ng Fung Hong Ltd. (Foods) 460,000 483,804
------------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Land Development) 59,600 415,331
------------------------------------------------------------------------------
8,416,298
------------------------------------------------------------------------------
INDONESIA - 0.61%
Gulf Indonesia Resources Ltd. (Oil-International
Integrated)(a) 45,700 1,005,400
------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
INDONESIA - (CONTINUED)
PT Indosat (Telecommunications-Cellular/Wireless) 91,000 $ 168,764
-------------------------------------------------------------------------------
PT Indosat-ADR (Telecommunications-Cellular/Wireless) 6,400 123,600
-------------------------------------------------------------------------------
1,297,764
-------------------------------------------------------------------------------
IRELAND - 0.67%
Bank of Ireland (Banks-Major Regional) 38,500 591,211
-------------------------------------------------------------------------------
Elan Corp. PLC-ADR (Health Care-Drugs-Generic &
Other)(a) 16,000 819,000
-------------------------------------------------------------------------------
1,410,211
-------------------------------------------------------------------------------
ITALY - 4.61%
Assicurazioni Generali (Insurance-Multi-Line) 49,100 1,208,237
-------------------------------------------------------------------------------
Credito Italiano S.p.A. (Banks-Major Regional) 610,000 1,886,897
-------------------------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A. (Oil & Gas-Refining
& Marketing) 201,000 1,147,825
-------------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banks-Major
Regional) 81,000 960,324
-------------------------------------------------------------------------------
Pirelli S.p.A. (Electrical Equipment) 387,441 1,026,970
-------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications-
Cellular/Wireless) 365,000 1,684,076
-------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 283,333 1,812,434
-------------------------------------------------------------------------------
9,726,763
-------------------------------------------------------------------------------
JAPAN - 13.87%
Advantest Corp. (Electronics-Instrumentation) 24,530 1,390,227
-------------------------------------------------------------------------------
Bridgestone Corp. (Auto Parts & Equipment) 47,000 1,018,687
-------------------------------------------------------------------------------
Canon, Inc. (Office Equipment & Supplies) 80,000 1,862,602
-------------------------------------------------------------------------------
Fuji Photo Film Co. (Leisure Time-Products) 52,000 1,991,269
-------------------------------------------------------------------------------
Hitachi Cable, Ltd. (Metal Fabricators) 124,000 795,834
-------------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobiles) 61,000 2,237,803
-------------------------------------------------------------------------------
Hoya Corp.(Manufacturing-Specialized) 24,000 753,619
-------------------------------------------------------------------------------
Ibiden Co., Ltd. (Electronics-Component Distributors) 118,000 1,427,893
-------------------------------------------------------------------------------
Matsushita Electric Industrial Co. Ltd. (Electrical
Equipment) 57,000 833,806
-------------------------------------------------------------------------------
Minebea Company Ltd. (Electronics-Component
Distributors) 157,000 1,683,388
-------------------------------------------------------------------------------
Murata Manufacturing Co., Ltd. (Electronics-
Component Distributors) 31,000 778,739
-------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. (Telephone) 2,320 1,990,044
-------------------------------------------------------------------------------
Nippon Television Network (Broadcasting-Television,
Radio & Cable) 2,690 789,056
-------------------------------------------------------------------------------
NTT Data Communications Systems Co. (Computers-
Software & Services) 450 2,422,838
-------------------------------------------------------------------------------
Ricoh Corp. Ltd. (Office Equipment & Supplies) 108,000 1,339,971
-------------------------------------------------------------------------------
Rohm Co. (Electronics-Component Distributors) 20,000 2,037,221
-------------------------------------------------------------------------------
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-165
MARKET
SHARES VALUE
JAPAN - (CONTINUED)
SMC Corp.(Machinery-Diversified) 10,200 $ 898,369
-------------------------------------------------------------------------------
Sony Corp. (Electronics-Component Distributors) 23,000 2,043,348
-------------------------------------------------------------------------------
TDK Corp. (Electrical Equipment) 24,000 1,808,685
-------------------------------------------------------------------------------
Tokyo Electron Ltd. (Electronics-Semiconductors) 36,500 1,168,492
-------------------------------------------------------------------------------
29,271,891
-------------------------------------------------------------------------------
MEXICO - 5.10%
Cifra S.A. de C.V. (Retail-General Merchandise) 538,000 1,206,592
-------------------------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR (Beverages-Non-Alcoholic) 31,600 1,832,800
-------------------------------------------------------------------------------
Fomento Economico Mexicano, S.A. de C.V.-Class B
(Beverages-Alcoholic) 232,000 1,862,784
-------------------------------------------------------------------------------
Grupo Industrial Maseca S.A. de C.V.-Class B (Foods) 646,200 667,779
-------------------------------------------------------------------------------
Grupo Televisa S.A.-GDR (Entertainment)(a) 35,600 1,377,275
-------------------------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de C.V.-Class A (Paper
& Forest Products) 322,000 1,552,048
-------------------------------------------------------------------------------
Panamerican Beverages, Inc.-Class A (Beverages-Non-
Alcoholic) 60,200 1,964,025
-------------------------------------------------------------------------------
TV Azteca, S.A. de C.V.-ADR (Broadcasting-Television,
Radio & Cable)(a) 13,400 302,337
-------------------------------------------------------------------------------
10,765,640
-------------------------------------------------------------------------------
NETHERLAND - 5.24%
Akzo Nobel N.V. (Chemicals-Diversified) 7,350 1,267,260
-------------------------------------------------------------------------------
CMG PLC (Computers-Software & Services) 35,400 883,407
-------------------------------------------------------------------------------
Getronics N.V. (Computers-Software & Services) 29,200 930,299
-------------------------------------------------------------------------------
Koninklijke Ahold N.V. (Retail-Food Chains) 38,000 991,394
-------------------------------------------------------------------------------
Koninklijke Nutricia Verenigde Bedrijven N.V. (Foods) 15,000 454,960
-------------------------------------------------------------------------------
Koninklijke Pakhoed N.V. (Shipping) 24,700 712,623
-------------------------------------------------------------------------------
Oce-Van Der Grinten N.V. (Office Equipment &
Supplies) 4,500 490,469
-------------------------------------------------------------------------------
Philips Electronics N.V. (Household Furniture &
Appliances) 16,400 983,523
-------------------------------------------------------------------------------
Randstad Holdings N.V. (Services-Commercial &
Consumer) 13,000 489,187
-------------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Oil-International
Integrated) 18,000 988,040
-------------------------------------------------------------------------------
Stork N.V. (Manufacturing-Diversified) 13,000 448,795
-------------------------------------------------------------------------------
Vendex International N.V. (Retail-General
Merchandise) 20,500 1,131,334
-------------------------------------------------------------------------------
VNU-Verenigde Nederlandse Uitgeversbedrijven Verenigd
Bezit (Publishing) 32,500 916,825
-------------------------------------------------------------------------------
Wolters Kluwer N.V. (Specialty Printing) 2,900 374,577
-------------------------------------------------------------------------------
11,062,693
-------------------------------------------------------------------------------
NORWAY - 0.63%
Petroleum Geo-Services A.S.A. (Oil-International
Integrated)(a) 21,000 1,322,644
-------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
PHILIPPINES - 0.36%
Metro Pacific Corp. (Manufacturing-Diversified) 4,745,440 $ 131,232
-------------------------------------------------------------------------------
Philippine Long Distance Telephone Co. (Telephone) 16,660 361,995
-------------------------------------------------------------------------------
Philippine Long Distance Telephone Co.-ADR
(Telephone) 11,600 261,000
-------------------------------------------------------------------------------
754,227
-------------------------------------------------------------------------------
PORTUGAL - 1.69%
Cimpor-Cimentos de Portugal S.A. (Construction-Cement
& Aggregates) 17,650 462,610
-------------------------------------------------------------------------------
Electricidade de Portugal, S.A.-ADR (Electric
Companies)(a) 13,800 534,750
-------------------------------------------------------------------------------
Portugal Telecom S.A. (Telephone) 50,000 2,320,021
-------------------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Telecommunications-Cellular/Wireless)(a) 2,400 255,713
-------------------------------------------------------------------------------
3,573,094
-------------------------------------------------------------------------------
SINGAPORE - 0.96%
City Developments Ltd. (Land Development) 155,000 717,295
-------------------------------------------------------------------------------
DBS Land Ltd. (Land Development) 408,000 624,527
-------------------------------------------------------------------------------
Overseas Union Bank Ltd. (Banks-Major Regional) 181,200 693,408
-------------------------------------------------------------------------------
2,035,230
-------------------------------------------------------------------------------
SPAIN - 2.35%
Banco Bilbao Vizcaya, S.A. (Banks-Major Regional) 42,900 1,388,231
-------------------------------------------------------------------------------
Endesa S.A. (Electric Companies) 49,200 873,554
-------------------------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 83,800 1,102,849
-------------------------------------------------------------------------------
Telefonica de Espana (Telephone) 56,000 1,598,950
-------------------------------------------------------------------------------
4,963,584
-------------------------------------------------------------------------------
SWEDEN - 2.06%
Electrolux A.B. (Household Furniture & Appliances) 15,700 1,089,522
-------------------------------------------------------------------------------
Hennes & Mauritz A.B.-Class B (Retail-Specialty-
Apparel) 37,000 1,631,003
-------------------------------------------------------------------------------
Sparbanken Sverige A.B.-Class A (Banks-Major
Regional) 52,000 1,182,131
-------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 12,000 447,750
-------------------------------------------------------------------------------
4,350,406
-------------------------------------------------------------------------------
SWITZERLAND - 4.85%
Ciba Specialty Chemicals A.G. (Chemicals-
Specialty)(a) 11,800 1,404,858
-------------------------------------------------------------------------------
Clariant A.G. (Chemicals-Specialty) 1,900 1,586,042
-------------------------------------------------------------------------------
Credit Suisse Group (Banks-Major Regional) 7,700 1,190,694
-------------------------------------------------------------------------------
Holderbank Financiere Glarus A.G.-Class B
(Construction-Cement & Aggregates) 1,190 970,565
-------------------------------------------------------------------------------
Nestle S.A. (Foods) 770 1,153,288
-------------------------------------------------------------------------------
Novartis A.G. (Health Care-Diversified) 1,368 2,218,378
-------------------------------------------------------------------------------
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-166
MARKET
SHARES VALUE
SWITZERLAND - (CONTINUED)
Schweizerischer Bankverein (Banks-Major Regional) 3,300 $ 1,025,111
-------------------------------------------------------------------------------
Zurich Versicherungs-Gesellschaft (Insurance-Multi-
Line) 1,450 690,523
-------------------------------------------------------------------------------
10,239,459
-------------------------------------------------------------------------------
TAIWAN - 0.10%
Taiwan Semiconductor Manufacturing Co. Ltd.-ADR
(Electronics-Semiconductors)(a) 12,000 218,250
-------------------------------------------------------------------------------
UNITED KINGDOM - 16.37%
Airtours PLC (Services-Commercial & Consumer) 45,150 919,486
-------------------------------------------------------------------------------
Amersham International PLC (Health Care-Drugs-Generic
& Other) 21,000 780,149
-------------------------------------------------------------------------------
Barclays PLC (Banks-Major Regional) 25,000 664,330
-------------------------------------------------------------------------------
Blue Circle Industries PLC (Construction-Cement &
Aggregates) 155,000 869,337
-------------------------------------------------------------------------------
Bodycote International PLC (Chemicals-Specialty) 40,500 600,965
-------------------------------------------------------------------------------
Bodycote International PLC (Chemicals-Specialty),
Rts. expiring 01/09/98 10,125 66,515
-------------------------------------------------------------------------------
British Aerospace PLC (Aerospace/Defense) 42,000 1,196,780
-------------------------------------------------------------------------------
British Petroleum Co. PLC (Oil & Gas-Refining &
Marketing) 140,000 1,839,432
-------------------------------------------------------------------------------
Cable & Wireless PLC (Telecommunications-
Cellular/Wireless) 117,000 1,028,029
-------------------------------------------------------------------------------
Compass Group PLC (Services-Commercial & Consumer) 78,000 959,494
-------------------------------------------------------------------------------
Dixons Group PLC (Retail-Specialty) 107,000 1,073,719
-------------------------------------------------------------------------------
EMAP PLC (Publishing) 62,500 929,981
-------------------------------------------------------------------------------
General Electric Co. PLC (Manufacturing-Diversified) 168,100 1,089,132
-------------------------------------------------------------------------------
GKN PLC (Manufacturing-Diversified) 50,000 1,024,005
-------------------------------------------------------------------------------
Granada Group PLC (Leisure Time-Products) 43,000 656,776
-------------------------------------------------------------------------------
Hays PLC (Services-Commercial & Consumer) 104,000 1,386,932
-------------------------------------------------------------------------------
Kingfisher PLC (Retail-Department Stores) 80,000 1,114,170
-------------------------------------------------------------------------------
Ladbroke Group PLC (Leisure Time-Products) 365,200 1,583,467
-------------------------------------------------------------------------------
Lloyds TSB Group PLC (Banks-Major Regional) 57,000 736,742
-------------------------------------------------------------------------------
Misys PLC (Services-Commercial & Consumer) 25,000 755,481
-------------------------------------------------------------------------------
Next PLC (Retail-General Merchandise) 97,500 1,108,093
-------------------------------------------------------------------------------
Pearson PLC (Specialty Printing) 95,000 1,234,144
-------------------------------------------------------------------------------
Provident Financial PLC (Consumer Finance) 92,800 1,219,281
-------------------------------------------------------------------------------
Railtrack Group PLC (Shipping) 145,000 2,302,821
-------------------------------------------------------------------------------
Rentokil Initial PLC (Services-Commercial & Consumer) 274,000 1,192,510
-------------------------------------------------------------------------------
Royal & Sun Alliance Insurance Group PLC (Insurance-
Multi-Line) 133,000 1,338,992
-------------------------------------------------------------------------------
Siebe PLC (Electronics-Component/Distributors) 38,000 745,791
-------------------------------------------------------------------------------
Smiths Industries PLC (Machinery-Diversified) 26,000 362,105
-------------------------------------------------------------------------------
|
MARKET
SHARES VALUE
UNITED KINGDOM - (CONTINUED)
Tarmac PLC (Engineering & Construction) 844,500 $ 1,581,140
------------------------------------------------------------------------------
Unilever PLC (Foods) 208,000 1,779,782
------------------------------------------------------------------------------
Vodafone Group PLC (Telecommunications-
Cellular/Wireless) 185,000 1,333,835
------------------------------------------------------------------------------
WPP Group PLC (Services-Advertising/Marketing) 240,000 1,068,184
------------------------------------------------------------------------------
34,541,600
------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 198,591,423
------------------------------------------------------------------------------
PRINCIPAL
AMOUNT(c)
FOREIGN CONVERTIBLE BONDS - 0.80%(c)
FRANCE - 0.47%
AXA-UAP (Insurance-Multi-Line), Conv. Sr. Deb.,
4.50%, 01/01/99 FRF 3,307,500 986,177
------------------------------------------------------------------------------
HONG KONG - 0.13%
New World Infrastructure Ltd. (Services-Commercial
& Consumer), Conv. Bonds, 5.00%, 07/15/01 HKD 280,000 278,600
------------------------------------------------------------------------------
JAPAN - 0.20%
Ricoh Co., Ltd. (Office Equipment & Supplies),
Conv. Bonds, 0.35%, 03/31/03 JPY40,000,000 416,328
------------------------------------------------------------------------------
Total Foreign Convertible Bonds 1,681,105
------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 3.82%(d)
Smith Barney, Inc., 6.75%, 01/02/98(e) $ 8,056,299 8,056,299
------------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.72% 208,328,827
------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.28% 2,693,758
------------------------------------------------------------------------------
NET ASSETS - 100.00% $211,022,585
==============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
market value of these securities at December 31 , 1997 was $1,636,293
which represented 0.78% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized $395,097,000 U. S. Government obligations, 0%
to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Abbreviations ADR - American Depositary Receipt HKD - Hong Kong dollar Conv.- Convertible JPY - Japanese Yen Deb. - Debentures Pfd. - Preferred FRF - French Franc Rts. - Rights GDR - Global Depositary Receipt Sr. - Senior |
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-167
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS: Investments, at market value (cost $168,107,886) $208,328,827 ---------------------------------------------------------------------- Foreign currencies, at market value (cost $1,156,244) 1,138,250 ---------------------------------------------------------------------- Receivables for: Capital stock sold 125,981 ---------------------------------------------------------------------- Foreign currency sold 8,691 ---------------------------------------------------------------------- Investments sold 2,416,689 ---------------------------------------------------------------------- Dividends and interest 309,815 ---------------------------------------------------------------------- Organizational costs, net 964 ---------------------------------------------------------------------- Investment for deferred compensation plan 17,615 ---------------------------------------------------------------------- Total assets 212,346,832 ---------------------------------------------------------------------- LIABILITIES: Payables for: Capital stock reacquired 204,927 ---------------------------------------------------------------------- Foreign currency purchased 667 ---------------------------------------------------------------------- Investments purchased 918,035 ---------------------------------------------------------------------- Deferred compensation plan 17,615 ---------------------------------------------------------------------- Accrued advisory fees 134,159 ---------------------------------------------------------------------- Accrued administrative services fees 4,547 ---------------------------------------------------------------------- Accrued directors' fees 1,609 ---------------------------------------------------------------------- Accrued operating expenses 42,688 ---------------------------------------------------------------------- Total liabilities 1,324,247 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $211,022,585 ====================================================================== CAPITAL SHARES, $.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 12,319,556 ====================================================================== Net asset value, offering and redemption price per share $17.13 ====================================================================== |
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME:
Dividends (net of $404,480 foreign withholding tax) $ 2,884,830
----------------------------------------------------------------------------
Interest 366,128
----------------------------------------------------------------------------
Total investment income 3,250,958
----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,519,323
----------------------------------------------------------------------------
Administrative services fees 59,724
----------------------------------------------------------------------------
Custodian fees 226,066
----------------------------------------------------------------------------
Directors' fees and expenses 8,453
----------------------------------------------------------------------------
Organizational costs 2,892
----------------------------------------------------------------------------
Other 62,939
----------------------------------------------------------------------------
Total expenses 1,879,397
----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,205)
----------------------------------------------------------------------------
Net expenses 1,878,192
----------------------------------------------------------------------------
Net investment income 1,372,766
----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (523,791)
----------------------------------------------------------------------------
Foreign currency transactions (219,642)
----------------------------------------------------------------------------
(743,433)
----------------------------------------------------------------------------
NET UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 11,912,209
----------------------------------------------------------------------------
Foreign currency transactions (33,863)
----------------------------------------------------------------------------
11,878,346
----------------------------------------------------------------------------
Net gain on investment securities and foreign currencies 11,134,913
----------------------------------------------------------------------------
Net increase in net assets resulting from operations $12,507,679
============================================================================
|
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-168
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
------------ ------------
OPERATIONS:
Net investment income $ 1,372,766 $ 962,870
------------------------------------------------------------------------------
Net realized gain (loss) from investment
securities and foreign currency transactions (743,433) 4,388,374
------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and foreign currency transactions 11,878,346 17,071,573
------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 12,507,679 22,422,817
------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (955,397) (377,734)
------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (3,362,028) --
------------------------------------------------------------------------------
Net increase from capital stock transactions 37,094,253 61,436,140
------------------------------------------------------------------------------
Net increase in net assets 45,284,507 83,481,223
------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 165,738,078 82,256,855
------------------------------------------------------------------------------
End of year $211,022,585 $165,738,078
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $170,283,064 $133,188,811
------------------------------------------------------------------------------
Undistributed net investment income 1,134,854 937,128
------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currency
transactions (580,780) 3,305,038
------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currency transactions 40,185,447 28,307,101
------------------------------------------------------------------------------
$211,022,585 $165,738,078
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to AIM V.I. International Equity Fund (the "Fund"). The Fund's investment
objective is to seek to provide long-term growth of capital by investing in a
diversified portfolio of international equity securities the issuers of which
are considered by AIM to have strong earnings momentum. Currently, shares of
the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in
AIM V.I. INTERNATIONAL EQUITY FUND
FS-169
foreign securities is substantially completed each day at various times prior
to the close of the New York Stock Exchange. The values of such securities
used in computing the net asset value of the Fund's shares are determined as
of such times. Foreign currency exchange rates are also generally determined
prior to the close of the New York Stock Exchange. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the New York
Stock Exchange which will not be reflected in the computation of the Fund's
net asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on an accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1997
undistributed net investment income was decreased and undistributed net
realized gain (loss) increased by $219,643 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
E. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
F. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $250 million of the Fund's average daily net assets, plus 0.70% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $59,724 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,684 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $715 during the year ended December 31, 1997. The Fund also
received reductions in custodian fees of $490 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $1,205 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $145,204,122 and $110,775,339, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1997 is as follows:
Aggregate unrealized appreciation of investment securities $48,320,669 -------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (8,100,740) -------------------------------------------------------------------------- Net unrealized appreciation of investment securities $40,219,929 ========================================================================== |
Cost of investments for tax purposes is $168,108,898.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
Sold 2,963,552 $ 50,938,182 4,432,824 $66,189,679
----------------------------------------------------------------------------
Issued as reinvestment of
distributions 257,449 4,317,425 23,877 377,734
----------------------------------------------------------------------------
Reacquired (1,031,143) (18,161,354) (347,543) (5,131,273)
----------------------------------------------------------------------------
2,189,858 $ 37,094,253 4,109,158 $61,436,140
============================================================================
|
AIM V.I. INTERNATIONAL EQUITY FUND
FS-170
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995 and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
--------------------------------- -------------------
1997 1996 1995 1995 1994
-------- -------- ------- ------- -------
Net asset value,
beginning of period $ 16.36 $ 13.66 $ 11.03 $ 12.49 $ 10.00
--------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.10 0.07 0.07 0.06 --
--------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 1.03 2.67 2.58 (1.49) 2.49
--------------------------------------------------------------------------------------------
Total from investment
operations 1.13 2.74 2.65 (1.43) 2.49
--------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.08) (0.04) (0.02) (0.03) --
--------------------------------------------------------------------------------------------
Distributions from net
realized capital gains (0.28) -- -- -- --
--------------------------------------------------------------------------------------------
Total distributions (0.36) (0.04) (0.02) (0.03) --
--------------------------------------------------------------------------------------------
Net asset value, end of
period $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49
============================================================================================
Total return(a) 6.94% 20.05% 24.04% (11.48)% 24.90%
============================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $211,023 $165,738 $82,257 $55,019 $23,533
============================================================================================
Ratio of expenses to
average net assets 0.93%(b)(c) 0.96% 1.15%(d) 1.27%(e) 1.98%(d)(e)
============================================================================================
Ratio of net investment
income to average net
assets 0.68%(b) 0.78% 0.75%(d) 0.60%(f) (0.15)%(d)(f)
============================================================================================
Portfolio turnover rate 57% 59% 67% 64% 26%
============================================================================================
Average brokerage
commission rate paid(g) $ 0.0173 $ 0.0209 N/A N/A N/A
============================================================================================
|
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $202,576,375.
(c) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have remained the same.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.28% and 3.06% (annualized), for January 1995 and 1994 respectively.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.59% and (1.23)% (annualized), for January 1995 and
1994 respectively.
(g) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-171
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. Money Market Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Money Market Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993 (commencement of operations), through January 31, 1994, in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. MONEY MARKET FUND
FS-172
SCHEDULE OF INVESTMENTS
December 31, 1997
PAR
(000) VALUE
COMMERCIAL PAPER - 53.34%(a)
ASSET-BACKED SECURITIES - 15.35%
Ciesco, L.P.,
5.67%, 02/09/98 $1,000 $ 993,858
-----------------------------------------------------------------------
Clipper Receivables Corp.,
6.00%, 01/28/98 1,067 1,062,198
-----------------------------------------------------------------------
Fleet Funding Corp.,
5.83%, 01/30/98 2,900 2,886,380
-----------------------------------------------------------------------
Preferred Receivables Funding Corp.,
5.64%, 01/06/98 1,075 1,074,158
-----------------------------------------------------------------------
Sheffield Receivables Corp.,
5.81%, 02/02/98 3,000 2,984,507
-----------------------------------------------------------------------
9,001,101
-----------------------------------------------------------------------
AUTOMOBILE - 1.68%
Daimler-Benz North America Corp.,
5.75%, 03/26/98 1,000 986,583
-----------------------------------------------------------------------
BROADCAST MEDIA - 1.67%
Scripps (E. W.) Co.,
5.74%, 03/12/98 992 980,928
-----------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 5.10%
International Business Machines Corp.,
6.25%, 01/15/98 3,000 2,992,708
-----------------------------------------------------------------------
DRUGS - 4.09%
Novartis Finance Corp.,
6.35%, 01/06/98 2,400 2,397,883
-----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.55%
Hitachi America, Ltd.,
5.95%, 01/29/98 1,500 1,493,058
-----------------------------------------------------------------------
FINANCE (BUSINESS CREDIT) - 7.71%
General Electric Capital Corp.,
5.70%, 02/27/98 1,000 990,975
-----------------------------------------------------------------------
5.68%, 03/03/98 1,548 1,533,101
-----------------------------------------------------------------------
National Rural Utilities Cooperative Finance Corp.,
5.54%, 01/14/98 2,000 1,995,999
-----------------------------------------------------------------------
4,520,075
-----------------------------------------------------------------------
FINANCE (MISCELLANEOUS) - 1.70%
USAA Capital Corp.,
6.50%, 01/16/98 1,000 997,292
-----------------------------------------------------------------------
|
PAR
(000) VALUE
FINANCE (PERSONAL CREDIT) - 2.97%
Associates Corp. of North America,
5.68%, 02/11/98 $1,750 $ 1,738,679
-----------------------------------------------------------------------
FOOD PROCESSING - 3.39%
Cargill Financial Services Corp.,
5.57%, 02/20/98 2,000 1,984,527
-----------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 1.68%
MetLife Funding Inc.,
5.71%, 03/20/98 1,000 987,628
-----------------------------------------------------------------------
MACHINERY - 1.70%
Dover Corp.,
6.50%, 01/16/98 1,000 997,292
-----------------------------------------------------------------------
METAL MINING - 2.04%
RTZ America, Inc.,
5.57%, 01/07/98 1,200 1,198,886
-----------------------------------------------------------------------
OIL & GAS (INTEGRATED) - 1.71%
Shell Martinez Refining Co.,
5.81%, 03/11/98(b) 1,000 1,000,000
-----------------------------------------------------------------------
Total Commercial Paper 31,276,640
-----------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 17.33%(C)
Goldman, Sachs & Co.,
5.6875%, 04/20/98(d) 2,060 2,060,000
-----------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.,
7.05%, 08/17/98(e) 3,000 3,000,000
-----------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.,
6.82%, 04/06/98(f) 2,100 2,100,000
-----------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co.,
6.85%, 05/26/98(g) 3,000 3,000,000
-----------------------------------------------------------------------
Total Master Note Agreements 10,160,000
-----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 4.26%
Federal National Mortgage Association,
5.504%, 06/02/99(h) 2,000 2,000,000
-----------------------------------------------------------------------
Student Loan Marketing Association,
5.619%, 08/20/98(h) 500 499,973
-----------------------------------------------------------------------
Total U.S. Government Agency Securities 2,499,973
-----------------------------------------------------------------------
Total Investments, excluding Repurchase Agreements 43,936,613
-----------------------------------------------------------------------
|
AIM V.I. MONEY MARKET FUND
FS-173
PAR
(000) VALUE
REPURCHASE AGREEMENTS - 25.15%(i)
Goldman, Sachs & Co.,
6.53%, 01/02/98(j) $4,744 $ 4,744,154
----------------------------------------------------------------
Smith Barney, Inc.,
6.75%, 01/02/98(k) 10,000 10,000,000
----------------------------------------------------------------
Total Repurchase Agreements 14,744,154
----------------------------------------------------------------
TOTAL INVESTMENTS - 100.08% 58,680,767(/1/)
----------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.08%) (46,146)
----------------------------------------------------------------
NET ASSETS - 100.00% $58,634,621
================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases, the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(b) Trust certificates representing an interest in a trust (comprised of
eligible debt obligations) entitling the Fund to receive interest. The Fund
has the right, upon seven calendar days' notice to the trustee, to put its
certificates to the trust at par value plus accrued interest. Because trust
certificates involve a trust and a third party put feature, they involve
complexities and potential risks that may not be present where the debt
obligation is owned directly. Rate shown is the rate in effect on 12/31/97.
(c) The investments in master note agreements are through participation in
joint accounts with other mutual funds, private accounts, and certain
nonregistered investment companies managed by the investment advisor or its
affiliates.
(d) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 7 business days' notice to the issuer. Interest
rates on master notes are redetermined periodically. Rate shown is the rate
in effect on 12/31/97.
(e) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 2 days' notice to the issuer. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 12/31/97.
(f) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 7 days' notice to the issuer. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 12/31/97.
(g) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 3 business days' written notice to the issuer.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on 12/31/97.
(h) Interest rates are redetermined weekly. Rate shown is the rate in effect on
12/31/97.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Treasury obligations, 0%
to 14% due 01/08/98 to 08/15/23 with an aggregate market value at 12/31/97
of $918,902,583.
(k) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
(l) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-174
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS:
Investments, excluding repurchase agreements, at
value (amortized cost) $ 43,936,613
----------------------------------------------------------------------
Repurchase agreements 14,744,154
----------------------------------------------------------------------
Interest receivable 69,211
----------------------------------------------------------------------
Organizational costs, net 964
----------------------------------------------------------------------
Investment for deferred compensation plan 17,151
----------------------------------------------------------------------
Other assets 11,335
----------------------------------------------------------------------
Total assets 58,779,428
----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 89,207
----------------------------------------------------------------------
Deferred compensation plan 17,151
----------------------------------------------------------------------
Accrued advisory fees 20,245
----------------------------------------------------------------------
Accrued administrative service fees 2,858
----------------------------------------------------------------------
Accrued directors' fees 1,843
----------------------------------------------------------------------
Accrued operating expenses 13,503
----------------------------------------------------------------------
Total liabilities 144,807
----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 58,634,621
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
----------------------------------------------------------------------
Outstanding 58,634,564
======================================================================
Net asset value, offering and redemption price per share $ 1.00
======================================================================
|
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
INVESTMENT INCOME: Interest $3,562,612 ----------------------------------------------------------------- EXPENSES: Advisory fees 254,546 ----------------------------------------------------------------- Administrative service fees 38,289 ----------------------------------------------------------------- Custodian fees 25,713 ----------------------------------------------------------------- Directors' fees and expenses 7,904 ----------------------------------------------------------------- Legal fees 18,787 ----------------------------------------------------------------- Organizational costs 2,892 ----------------------------------------------------------------- Other 24,587 ----------------------------------------------------------------- Total expenses 372,718 ----------------------------------------------------------------- Less: Expenses paid indirectly (160) ----------------------------------------------------------------- Net expenses 372,558 ----------------------------------------------------------------- Net investment income 3,190,054 ----------------------------------------------------------------- Net increase in net assets resulting from operations $3,190,054 ================================================================= |
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-175
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
----------- -----------
OPERATIONS:
Net investment income $ 3,190,054 $ 3,207,475
----------------------------------------------------------------------------
Net realized gain on sales of investment
securities -- 16,294
----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,190,054 3,223,769
----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (3,190,054) (3,207,475)
----------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions (4,894,872) (1,992,555)
----------------------------------------------------------------------------
Net increase (decrease) in net assets (4,894,872) (1,976,261)
----------------------------------------------------------------------------
NET ASSETS:
Beginning of year 63,529,493 65,505,754
----------------------------------------------------------------------------
End of year $58,634,621 $63,529,493
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $58,634,564 $63,529,436
----------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities 57 57
----------------------------------------------------------------------------
$58,634,621 $63,529,493
============================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Money Market Fund (the "Fund"). The Fund's investment
objective is to seek to provide as high a level of current income as is
consistent with the preservation of capital and liquidity. Currently, shares
of the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - The Fund's securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter, assumes a
constant amortization to maturity of any discount or premiums.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is recorded as earned from settlement date and is
recorded on the accrual basis. Distributions to shareholders are declared and
paid daily.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements. The Fund has a
capital loss carryforward (which may be carried forward to offset future
taxable gains, if any) of $846 which expires, if not previously utilized,
in the year 2003. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized.
D. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I
M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.40% of
the first $250 million of the Fund's average daily net assets, plus 0.35% of
the Fund's average daily net assets in excess of $250 million.
AIM V.I. MONEY MARKET FUND
FS-176
Pursuant to a master administrative services agreement between the Company and
AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $38,289 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,396 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $160 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of the
Fund's total expenses of $160 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
Sold 88,948,357 $ 88,948,357 76,145,573 $ 76,145,573
---------------------- ----------- ------------ ----------- ------------
Issued as reinvestment
of distributions 3,190,054 3,190,054 3,207,475 3,207,475
---------------------- ----------- ------------ ----------- ------------
Reacquired (97,033,283) (97,033,283) (81,345,603) (81,345,603)
---------------------- ----------- ------------ ----------- ------------
(4,894,872) $ (4,894,872) (1,992,555) $ (1,992,555)
=========== ============ =========== ============
|
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995 and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
------------------------------- -------------------
1997 1996 1995 1995 1994
------- ------- ------- ------- -------
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.05 0.05 0.05 0.04 0.02
--------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.04) (0.02)
--------------------------------------------------------------------------------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================================================
Total return 5.14% 4.97% 5.69%(a) 3.98% 2.27%(a)
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000s omitted) $58,635 $63,529 $65,506 $31,017 $13,891
================================================================================
Ratio of expenses to
average net assets 0.59%(b)(c) 0.55% 0.53%(a) 0.63%(d) 0.95%(a)(e)
================================================================================
Ratio of net investment
income to average net
assets 5.01%(b) 4.84% 5.40%(a) 4.14%(d) 2.29%(a)(e)
================================================================================
|
(a) Annualized.
(b) Ratios are based on average net assets of $63,641,415.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(d) After fee waivers and/or expense reimbursements. Prior to fee waivers
and/or expense reimbursements the ratios of expenses and net investment
income to average net assets were 0.70% and 4.07%, respectively.
(e) After fee waivers and/or expense reimbursements. Prior to fee waivers
and/or expense reimbursements the annualized ratios of expenses and net
investment income to average net assets were 1.53% and 1.70%, respectively.
AIM V.I. MONEY MARKET FUND
FS-177
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM V.I. Value Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1997, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993 (commencement of operations) through January 31, 1994. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1997, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Value Fund, as of December 31, 1997, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the two years in the period then ended, the eleven month period ended December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993 (commencement of operations) through January 31, 1994 in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
|
AIM V.I. VALUE FUND
FS-178
SCHEDULE OF INVESTMENTS
December 31, 1997
MARKET
SHARES VALUE
DOMESTIC COMMON STOCKS - 65.86%
AEROSPACE/DEFENSE - 0.69%
Boeing Co. (The) 33,000 $ 1,614,937
-----------------------------------------------------------
Lockheed Martin Corp. 1,800 177,300
-----------------------------------------------------------
Orbital Sciences Corp.(a) 20,100 597,975
-----------------------------------------------------------
Precision Castparts Corp. 38,800 2,340,125
-----------------------------------------------------------
4,730,337
-----------------------------------------------------------
AIR FREIGHT - 0.26%
Airborne Freight Corp. 18,200 1,130,675
-----------------------------------------------------------
Federal Express Corp.(a) 11,400 696,112
-----------------------------------------------------------
1,826,787
-----------------------------------------------------------
AIRLINES - 0.66%
Continental Airlines, Inc.(a) 94,000 4,523,750
-----------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.86%
Banc One Corp. 103,000 5,594,185
-----------------------------------------------------------
Wachovia Corp. 4,600 373,175
-----------------------------------------------------------
5,967,360
-----------------------------------------------------------
BANKS (MONEY CENTER) - 5.00%
BankAmerica Corp.(b) 166,000 12,118,000
-----------------------------------------------------------
Chase Manhattan Corp. 92,600 10,139,700
-----------------------------------------------------------
Citicorp(b) 97,000 12,264,438
-----------------------------------------------------------
34,522,138
-----------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE) - 0.33%
US West Media Group(a) 78,300 2,260,912
-----------------------------------------------------------
BUILDING MATERIALS - 0.18%
Masco Corp. 25,000 1,271,875
-----------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.39%
Cytec Industries Inc.(a) 58,000 2,722,375
-----------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.30%
Comverse Technology, Inc.(a) 54,000 2,106,000
-----------------------------------------------------------
COMPUTERS (HARDWARE) - 1.71%
Compaq Computer Corp. 52,000 2,934,750
-----------------------------------------------------------
Stratus Computer, Inc.(a) 37,000 1,399,063
-----------------------------------------------------------
Sun Microsystems, Inc.(a) 187,000 7,456,625
-----------------------------------------------------------
11,790,438
-----------------------------------------------------------
COMPUTERS (NETWORKING) - 0.31%
Bay Networks, Inc.(a) 84,000 2,147,250
-----------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.95%
Adaptec, Inc.(a) 50,000 1,856,250
-----------------------------------------------------------
Quantum Corp.(a)(b) 234,000 4,694,625
-----------------------------------------------------------
6,550,875
-----------------------------------------------------------
|
MARKET
SHARES VALUE
COMPUTERS (SOFTWARE & SERVICES) - 3.27%
America Online, Inc.(a) 13,000 $ 1,159,438
-----------------------------------------------------------------
American Management Systems, Inc.(a) 41,000 799,500
-----------------------------------------------------------------
Autodesk, Inc. 10,000 370,000
-----------------------------------------------------------------
Computer Associates International, Inc. 230,500 12,187,687
-----------------------------------------------------------------
Network Associates, Inc.(a) 42,168 2,229,622
-----------------------------------------------------------------
Sybase, Inc.(a) 150,000 1,996,875
-----------------------------------------------------------------
Unisys Corp.(a) 275,000 3,815,625
-----------------------------------------------------------------
22,558,747
-----------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.30%
American Greetings Corp.-Class A 53,000 2,073,625
-----------------------------------------------------------------
CONSUMER FINANCE - 1.19%
Household International, Inc. 24,500 3,125,281
-----------------------------------------------------------------
MBNA Corp. 89,000 2,430,812
-----------------------------------------------------------------
SLM Holding Corp. 19,000 2,643,375
-----------------------------------------------------------------
8,199,468
-----------------------------------------------------------------
ELECTRIC COMPANIES - 0.34%
Allegheny Energy, Inc. 37,200 1,209,000
-----------------------------------------------------------------
Carolina Power & Light Co. 13,700 581,394
-----------------------------------------------------------------
Wisconsin Energy Corp. 18,700 537,625
-----------------------------------------------------------------
2,328,019
-----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.82%
American Power Conversion Corp.(a) 125,000 2,953,124
-----------------------------------------------------------------
AVX Corp. 9,700 178,844
-----------------------------------------------------------------
SCI Systems, Inc.(a) 45,000 1,960,313
-----------------------------------------------------------------
Symbol Technologies, Inc. 14,800 558,700
-----------------------------------------------------------------
5,650,981
-----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.12%
Waters Corp.(a) 21,900 823,988
-----------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.67%
Maxim Integrated Products, Inc.(a) 65,000 2,242,500
-----------------------------------------------------------------
Microchip Technology, Inc.(a) 37,000 1,110,000
-----------------------------------------------------------------
National Semiconductor Corp.(a) 50,000 1,296,875
-----------------------------------------------------------------
4,649,375
-----------------------------------------------------------------
ENTERTAINMENT - 0.54%
Viacom, Inc.-Class B(a) 89,700 3,716,944
-----------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 4.99%
Ambac Financial Group, Inc. 63,000 2,898,000
-----------------------------------------------------------------
Fannie Mae 207,000 11,811,937
-----------------------------------------------------------------
Freddie Mac 254,000 10,652,125
-----------------------------------------------------------------
|
AIM V.I. VALUE FUND
FS-179
MARKET
SHARES VALUE
FINANCIAL (DIVERSIFIED) - (CONTINUED)
MBIA, Inc. 57,400 $ 3,835,038
---------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 89,000 5,262,125
---------------------------------------------------------------------
34,459,225
---------------------------------------------------------------------
FOODS - 0.19%
Interstate Bakeries Corp. 34,400 1,285,700
---------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 0.75%
Bristol-Myers Squibb Co. 55,000 5,204,375
---------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 0.90%
ICN Pharmaceuticals, Inc. 85,060 4,151,991
---------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 64,200 2,082,488
---------------------------------------------------------------------
6,234,479
---------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.67%
Quorum Health Group, Inc.(a) 138,050 3,606,556
---------------------------------------------------------------------
Tenet Healthcare Corp.(a)(b) 31,000 1,026,875
---------------------------------------------------------------------
4,633,431
---------------------------------------------------------------------
HEALTH CARE (LONG-TERM CARE) - 0.46%
Genesis Health Ventures, Inc.(a) 62,500 1,648,438
---------------------------------------------------------------------
Health Care and Retirement Corp.(a) 38,400 1,545,600
---------------------------------------------------------------------
3,194,038
---------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 2.12%
MedPartners, Inc.(a) 462,030 10,337,921
---------------------------------------------------------------------
PhyCor, Inc.(a) 160,000 4,320,000
---------------------------------------------------------------------
14,657,921
---------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.61%
Allegiance Corp. 26,500 939,094
---------------------------------------------------------------------
Baxter International Inc. 91,000 4,589,813
---------------------------------------------------------------------
Becton, Dickinson & Co. 42,000 2,100,000
---------------------------------------------------------------------
Sybron International Corp.(a) 74,800 3,510,924
---------------------------------------------------------------------
11,139,831
---------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.25%
FPA Medical Management, Inc.(a) 10,500 195,563
---------------------------------------------------------------------
Omnicare, Inc. 50,000 1,550,000
---------------------------------------------------------------------
1,745,563
---------------------------------------------------------------------
HOMEBUILDING - 0.08%
Clayton Homes, Inc. 30,000 540,000
---------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.45%
Colgate-Palmolive Co. 42,000 3,087,000
---------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.42%
Conseco, Inc. 122,000 5,543,375
---------------------------------------------------------------------
Equitable Companies, Inc. 21,000 1,044,750
---------------------------------------------------------------------
Provident Companies, Inc. 84,000 3,244,500
---------------------------------------------------------------------
9,832,625
---------------------------------------------------------------------
|
MARKET
SHARES VALUE
INSURANCE (MULTI-LINE) - 5.11%
Ace, Ltd. 68,000 $ 6,562,000
----------------------------------------------------------------------
American International Group, Inc.(b) 165,000 17,943,750
----------------------------------------------------------------------
CIGNA Corp. 8,400 1,453,725
----------------------------------------------------------------------
Hartford Financial Services Group Inc. (The) 67,000 6,268,688
----------------------------------------------------------------------
Travelers Group, Inc. 57,000 3,070,875
----------------------------------------------------------------------
35,299,038
----------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 5.58%
Allstate Corp. 274,100 24,908,838
----------------------------------------------------------------------
Chubb Corp. 12,000 907,500
----------------------------------------------------------------------
Exel Ltd. 110,000 6,971,250
----------------------------------------------------------------------
Progressive Corp. 32,000 3,836,000
----------------------------------------------------------------------
Transatlantic Holdings, Inc. 27,050 1,934,075
----------------------------------------------------------------------
38,557,663
----------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.10%
Merrill Lynch & Co., Inc. 104,000 7,585,500
----------------------------------------------------------------------
LODGING (HOTELS) - 2.06%
Carnival Corp.-Class A 150,000 8,306,250
----------------------------------------------------------------------
Host Marriott Corp.(a) 34,000 667,250
----------------------------------------------------------------------
Promus Hotel Corp.(a) 58,100 2,440,200
----------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 52,100 2,777,581
----------------------------------------------------------------------
14,191,281
----------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.63%
Eaton Corp. 17,800 1,588,650
----------------------------------------------------------------------
Hillenbrand Industries, Inc. 22,000 1,126,125
----------------------------------------------------------------------
Tyco International Ltd. 36,200 1,631,263
----------------------------------------------------------------------
4,346,038
----------------------------------------------------------------------
NATURAL GAS - 1.00%
El Paso Natural Gas Co. 71,500 4,754,750
----------------------------------------------------------------------
Williams Companies, Inc. (The) 76,000 2,156,500
----------------------------------------------------------------------
6,911,250
----------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.14%
Wallace Computer Services, Inc. 25,400 987,425
----------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.80%
Baker Hughes, Inc. 26,000 1,134,250
----------------------------------------------------------------------
BJ Services Co.(a) 30,000 2,158,125
----------------------------------------------------------------------
Cooper Cameron Corp.(a) 20,000 1,220,000
----------------------------------------------------------------------
Noble Drilling Corp.(a) 32,000 980,000
----------------------------------------------------------------------
5,492,375
----------------------------------------------------------------------
OIL & GAS (REFINING & MARKETING) - 0.52%
Tosco Corp. 95,280 3,602,775
----------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 1.19%
Xerox Corp. 111,000 8,193,188
----------------------------------------------------------------------
|
AIM V.I. VALUE FUND
FS-180
MARKET
SHARES VALUE
PUBLISHING - 0.04%
Meredith Corp. 7,100 $ 253,381
--------------------------------------------------------------------
RAILROADS - 0.25%
Kansas City Southern Industries, Inc. 55,000 1,746,250
--------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 0.30%
Cali Realty Corp. 50,000 2,050,000
--------------------------------------------------------------------
RESTAURANTS - 0.36%
Cracker Barrel Old Country Store, Inc. 61,800 2,062,575
--------------------------------------------------------------------
Papa John's International, Inc.(a) 11,700 408,038
--------------------------------------------------------------------
2,470,613
--------------------------------------------------------------------
RETAIL (COMPUTER & ELECTRONICS) - 0.43%
CompUSA, Inc.(a) 39,000 1,209,000
--------------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 54,000 1,572,750
--------------------------------------------------------------------
Tech Data Corp.(a)(b) 5,200 202,150
--------------------------------------------------------------------
2,983,900
--------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.84%
Kroger Co.(a) 72,500 2,677,969
--------------------------------------------------------------------
Safeway, Inc.(a) 49,900 3,156,175
--------------------------------------------------------------------
5,834,144
--------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.43%
Dayton-Hudson Corp. 44,000 2,970,000
--------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.50%
Corporate Express, Inc.(a) 270,000 3,476,250
--------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.86%
Charter One Financial, Inc. 19,950 1,259,344
--------------------------------------------------------------------
Washington Mutual, Inc. 72,820 4,646,826
--------------------------------------------------------------------
5,906,170
--------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.89%
Cendant Corp.(a) 50,465 1,734,738
--------------------------------------------------------------------
Service Corp. International 170,000 6,279,375
--------------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 108,000 5,035,500
--------------------------------------------------------------------
13,049,613
--------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.15%
National Data Corp. 29,000 1,047,625
--------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.31%
AccuStaff, Inc.(a) 93,000 2,139,000
--------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.17%
Nextel Communications, Inc.(a) 46,200 1,201,200
--------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 6.36%
AT&T Corp.(b) 69,700 4,269,125
--------------------------------------------------------------------
LCI International, Inc.(a) 73,800 2,269,350
--------------------------------------------------------------------
MCI Communications Corp. 315,000 13,485,937
--------------------------------------------------------------------
Sprint Corp. 48,100 2,819,862
--------------------------------------------------------------------
WorldCom, Inc.(a) 698,019 21,115,075
--------------------------------------------------------------------
43,959,349
--------------------------------------------------------------------
|
MARKET
SHARES VALUE
TOBACCO-1.57%
Philip Morris Companies, Inc.(b) 240,000 $ 10,875,000
-------------------------------------------------------------------------------
WASTE MANAGEMENT - 0.49%
USA Waste Services, Inc.(a) 86,000 3,375,500
-------------------------------------------------------------------------------
Total Domestic Common Stocks 454,939,960
-------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 11.79%
BRAZIL - 0.34%
Uniao de Bancos Brasileiros S.A.-GDR (Banks-
Regional)(a) 73,000 2,349,688
-------------------------------------------------------------------------------
CANADA - 4.56%
Bank of Montreal (Banks-Money Center) 42,000 1,861,866
-------------------------------------------------------------------------------
Canadian National Railway Co.-ADR (Railroads) 35,000 1,653,750
-------------------------------------------------------------------------------
Philip Services Corp.-ADR (Waste Management)(a) 113,000 1,624,375
-------------------------------------------------------------------------------
Royal Bank of Canada (Banks-Major Regional) 498,200 26,355,915
-------------------------------------------------------------------------------
31,495,906
-------------------------------------------------------------------------------
DENMARK-0.27%
Novo Nordisk A/S (Health Care-Drugs-Generic & Other) 13,000 1,859,338
-------------------------------------------------------------------------------
FINLAND - 0.73%
Nokia Oyj A.B.-Class A-ADR (Communications Equipment) 72,000 5,040,000
-------------------------------------------------------------------------------
ITALY - 1.11%
Credito Italiano S.p.A. (Banks-Major Regional) 1,200,000 3,711,928
-------------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banks-Major
Regional) 185,000 2,193,332
-------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 280,083 1,791,645
-------------------------------------------------------------------------------
7,696,905
-------------------------------------------------------------------------------
NETHERLANDS - 0.29%
Akzo Nobel N.V. (Chemicals-Diversified) 11,500 1,982,788
-------------------------------------------------------------------------------
PHILIPPINES - 0.01%
Metro Pacific Corp. (Manufacturing-Diversified) 1,145,130 31,668
-------------------------------------------------------------------------------
PORTUGAL - 0.07%
Portugal Telecom S.A. (Telephone) 10,700 496,485
-------------------------------------------------------------------------------
SPAIN - 0.14%
Endesa S.A. (Electric Companies) 21,400 379,961
-------------------------------------------------------------------------------
Telefonica de Espana (Telephone) 19,900 568,198
-------------------------------------------------------------------------------
948,159
-------------------------------------------------------------------------------
SWEDEN - 1.27%
Nordbanken Holding AB (Banks-Major Regional) 665,000 3,760,564
-------------------------------------------------------------------------------
Sparbanken Sverige A.B.-Class A (Banks-Major
Regional) 189,150 4,300,000
-------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 20,000 746,250
-------------------------------------------------------------------------------
8,806,814
-------------------------------------------------------------------------------
|
AIM V.I. VALUE FUND
FS-181
MARKET
SHARES VALUE
SWITZERLAND - 0.59%
Novartis A.G. (Health Care-Diversified) 2,520 $ 4,086,486
------------------------------------------------------------------------------
UNITED KINGDOM - 2.41%
Danka Business Systems PLC-ADR (Office Equipment &
Supplies) 64,700 1,031,156
------------------------------------------------------------------------------
Ladbroke Group PLC (Leisure Time-Products) 250,000 1,083,951
------------------------------------------------------------------------------
Railtrack Group PLC (Shipping) 142,900 2,269,470
------------------------------------------------------------------------------
SmithKline Beecham PLC-ADR (Health Care-Drugs-Major
Pharmaceutical)(b) 237,100 12,195,831
------------------------------------------------------------------------------
Standard Chartered PLC (Banks-Major Regional) 9,666 103,190
------------------------------------------------------------------------------
16,683,598
------------------------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 81,477,835
------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 0.38%
HEALTH CARE (MANAGED CARE) - 0.14%
Medpartners Inc. - $1.44 Conv. Pfd. 43,000 946,000
------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.08%
Conseco Inc.-$4.278 Conv. PRIDES 3,600 561,600
------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.16%
WorldCom, Inc.-$2.68 Conv. Pfd. 10,400 1,092,000
------------------------------------------------------------------------------
Total Convertible Preferred Stocks 2,599,600
------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
U.S. TREASURY SECURITIES - 0.94%
U.S. TREASURY BILLS(c) - 0.94%
5.31%, 01/08/98 6,500,000 6,497,985
------------------------------------------------------------------------------
Total Investments, excluding repurchase agreements 545,515,380
------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 24.67%(d)
SBC Warburg, Inc.
6.55%, 01/02/98(e) 68,385,924 68,385,924
------------------------------------------------------------------------------
Smith Barney, Inc.
6.75%, 01/02/98(f) 102,063,243 102,063,243
------------------------------------------------------------------------------
Total Repurchase Agreements 170,449,167
------------------------------------------------------------------------------
TOTAL INVESTMENTS - 103.64% 715,964,547
==============================================================================
LIABILITIES LESS OTHER ASSETS - (3.64%) (25,123,054)
==============================================================================
NET ASSETS - 100.00% $690,841,493
==============================================================================
|
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$500,181,944. Collateralized by $601,835,000 U.S. Government obligations,
0% to 10.75% due 05/21/98 to 08/15/23 with an aggregate market value at
12/31/97 of $510,077,411.
(f) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Investment Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-182
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
ASSETS: Investments, excluding repurchase agreements at market value (cost $444,423,441) $545,515,380 ---------------------------------------------------------------------- Repurchase agreements (cost $170,449,167) 170,449,167 ---------------------------------------------------------------------- Cash 21,147 ---------------------------------------------------------------------- Foreign currencies, at market value (cost $401,576) 395,713 ---------------------------------------------------------------------- Receivables for: Investments sold 3,513,484 ---------------------------------------------------------------------- Capital stock sold 896,072 ---------------------------------------------------------------------- Dividends and interest 645,292 ---------------------------------------------------------------------- Options written 15,614 ---------------------------------------------------------------------- Investment for deferred compensation plan 19,336 ---------------------------------------------------------------------- Organizational costs, net 964 ---------------------------------------------------------------------- Other assets 21,828 ---------------------------------------------------------------------- Total assets 721,493,997 ---------------------------------------------------------------------- LIABILITIES: Payables for: Investments purchased 29,455,924 ---------------------------------------------------------------------- Capital stock reacquired 2,277 ---------------------------------------------------------------------- Options written 719,781 ---------------------------------------------------------------------- Deferred compensation 19,336 ---------------------------------------------------------------------- Accrued advisory fees 354,260 ---------------------------------------------------------------------- Accrued directors' fees 2,624 ---------------------------------------------------------------------- Accrued administrative service fees 4,212 ---------------------------------------------------------------------- Accrued operating expenses 94,090 ---------------------------------------------------------------------- Total liabilities 30,652,504 ---------------------------------------------------------------------- Net assets applicable to shares outstanding $690,841,493 ====================================================================== CAPITAL SHARES, $.001 PAR VALUE PER SHARE: Authorized 250,000,000 ---------------------------------------------------------------------- Outstanding 33,161,794 ====================================================================== Net asset value, offering and redemption price per share $20.83 ====================================================================== |
STATEMENT OF OPERATIONS
For the year ended December 31 , 1997
INVESTMENT INCOME:
Dividends (net of $195,995 foreign withholding tax) $ 6,123,798
--------------------------------------------------------------------------
Interest 3,138,907
--------------------------------------------------------------------------
Total investment income 9,262,705
--------------------------------------------------------------------------
EXPENSES:
Advisory fees 3,303,799
--------------------------------------------------------------------------
Administrative service fees 53,632
--------------------------------------------------------------------------
Custodian fees 174,624
--------------------------------------------------------------------------
Directors' fees and expenses 10,946
--------------------------------------------------------------------------
Organizational costs 2,892
--------------------------------------------------------------------------
Other 141,677
--------------------------------------------------------------------------
Total expenses 3,687,570
--------------------------------------------------------------------------
Less: Expenses paid indirectly (3,824)
--------------------------------------------------------------------------
Net expenses 3,683,746
--------------------------------------------------------------------------
Net investment income 5,578,959
--------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 46,384,362
--------------------------------------------------------------------------
Foreign currencies 10,509
--------------------------------------------------------------------------
Option contracts 1,476,233
--------------------------------------------------------------------------
47,871,104
--------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 51,082,762
--------------------------------------------------------------------------
Foreign currencies 33,204
--------------------------------------------------------------------------
Option contracts 370,110
--------------------------------------------------------------------------
51,486,076
--------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
option contracts 99,357,180
--------------------------------------------------------------------------
Net increase in net assets resulting from operations $104,936,139
==========================================================================
|
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-183
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
1997 1996
------------ ------------
OPERATIONS:
Net investment income $ 5,578,959 $ 6,092,474
------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and option contracts 47,871,104 19,315,881
------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies and option
contracts 51,486,076 19,921,129
------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 104,936,139 45,329,484
------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (6,026,082) (1,864,217)
------------------------------------------------------------------------------
Distributions to shareholders from realized
capital gains (18,500,854) (18,073,097)
------------------------------------------------------------------------------
Net increase from capital stock transactions 240,697,144 87,131,189
------------------------------------------------------------------------------
Net increase in net assets 321,106,347 112,523,359
------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 369,735,146 257,211,787
------------------------------------------------------------------------------
End of year $690,841,493 $369,735,146
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $536,384,006 $295,686,862
------------------------------------------------------------------------------
Undistributed net investment income 5,579,627 6,016,241
------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
option contracts 47,575,497 18,215,756
------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 101,302,363 49,816,287
------------------------------------------------------------------------------
$690,841,493 $369,735,146
==============================================================================
|
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Value Fund (the "Fund"). The Fund's investment objective is to
achieve long-term growth of capital by investing primarily in equity securities
judged by AIM to be undervalued relative to the current or projected earnings
of the companies issuing the securities or relative to current market values of
assets owned by the companies issuing the securities or relative to the equity
market generally. Income is a secondary objective. Currently, shares of the
Fund are sold only to insurance company separate accounts to fund the benefits
of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date, or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations are either not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at
AIM V.I. VALUE FUND
FS-184
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the New York Stock Exchange
which will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1997,
undistributed net investment income was increased and undistributed net
realized gains reduced by $10,509 in order to comply with the requirements
of the American Institute of Certified Public Accountants Statement of
Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
E. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contract may not correlate with changes in the securities being hedged.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
G. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for
the amount of a purchase or sale of a security denominated in a foreign
currency in order to "lock-in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
H. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "market-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I
M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to
AIM V.I. VALUE FUND
FS-185
reimburse certain administrative costs incurred in providing accounting
services to the Fund. During the year ended December 31, 1997, AIM was
reimbursed $53,632 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$5,309 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolios trades to brokers who paid a portion of
the Fund's expenses related to pricing services used by the Fund which reduced
the Fund's expenses by $2,218 during the year ended December 31, 1997. The
Fund also received reductions in custodian fees of $1,606 under an expense
offset arrangement. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $3,824 during the year ended
December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended December 31, 1997 was
$715,432,710 and $593,497,504, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
Aggregate unrealized appreciation of investment securities $109,556,705 --------------------------------------------------------------------------- Aggregate unrealized (depreciation) of investment securities (10,333,119) --------------------------------------------------------------------------- Net unrealized appreciation of investment securities $ 99,223,586 =========================================================================== |
Cost of investments for tax purposes is $446,291,794.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
1997 1996
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
Sold 12,245,239 $244,753,656 5,143,694 $86,219,671
-----------------------------------------------------------------------------
Issued as reinvestment of
distributions 1,188,320 24,526,936 1,179,025 19,937,315
-----------------------------------------------------------------------------
Reacquired (1,424,104) (28,583,448) (1,140,219) (19,025,797)
-----------------------------------------------------------------------------
12,009,455 $240,697,144 5,182,500 $87,131,189
=============================================================================
|
NOTE 7 - CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997
are summarized as follows:
OPTION CONTRACTS
--------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
Beginning of year 3,487 $1,119,905
Written 7,780 3,228,715
Closed (1,470) (675,031)
Exercised (3,000) (1,220,728)
Expired (4,695) (1,511,273)
------ ----------
End of year 2,102 $ 941,588
====== ==========
|
Open call options written at December 31, 1997 were as follows:
UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM DECEMBER 31, 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ----------------- --------------
AT&T Corp. Apr.98 60 200 $119,898 $103,750 $ 16,148
AT&T Corp. Apr.98 65 100 36,761 31,250 5,511
American International
Group, Inc. Feb.98 100 250 161,495 262,500 (101,005)
BankAmerica Corp. Apr.98 80 150 84,397 45,000 39,397
Citicorp Apr.98 135 250 255,836 168,750 87,087
Philip Morris Companies,
Inc. Jan.98 45 250 39,874 27,344 12,530
Quantum Corp. Feb.98 27.5 428 137,811 16,050 121,761
SmithKline Beecham PLC Jan.98 50 200 60,648 44,375 16,273
Tech Data Corp. Jan.98 45 24 4,978 450 4,528
Tenet Healthcare Corp. Feb.98 35 250 39,890 20,312 19,577
----- -------- -------- ---------
2,102 $941,588 $719,781 $ 221,807
===== ======== ======== =========
|
AIM V.I. VALUE FUND
FS-186
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995, and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
DECEMBER 31, JANUARY 31,
---------------------------------- ------------------
1997 1996 1995 1995 1994
-------- -------- -------- -------- -------
Net asset value,
beginning of period $ 17.48 $ 16.11 $ 11.83 $ 12.17 $ 10.00
------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.08 0.30 0.11 0.10 0.02
------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 4.05 2.09 4.18 (0.35) 2.17
------------------------------------------------------------------------------------
Total from investment
operations 4.13 2.39 4.29 (0.25) 2.19
------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.19) (0.10) (0.01) (0.09) (0.02)
------------------------------------------------------------------------------------
Distributions from
realized capital gains (0.59) (0.92) -- -- --
------------------------------------------------------------------------------------
Total distributions (0.78) (1.02) (0.01) (0.09) (0.02)
------------------------------------------------------------------------------------
Net asset value, end of
period $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17
====================================================================================
Total return(a) 23.69% 15.02% 36.25% (2.03)% 21.94%
====================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $690,841 $369,735 $257,212 $109,257 $38,255
====================================================================================
Ratio of expenses to
average net assets 0.70%(b)(c) 0.73% 0.75%(d) 0.82% 1.00%(d)(e)
====================================================================================
Ratio of net investment
income to average net
assets 1.05%(b) 2.00% 1.11%(d) 1.17% 0.51%(d)(e)
====================================================================================
Portfolio turnover rate 127% 129% 145% 143% 87%
====================================================================================
Average brokerage
commission rate paid(f) $ 0.0487 $ 0.0429 N/A N/A N/A
====================================================================================
|
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $529,874,605.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Annualized ratios of
expenses and net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 1.35% and 0.16%, respectively.
(f) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
AIM V.I. VALUE FUND
FS-187
PART C
OTHER INFORMATION
Item 24. (a) Financial Statements:
In Part A:
Not Applicable
In Part B:
Schedule of Investments, Statement of Assets and Liabilities, Statement of Operations, Statement of Changes in Net Assets and Notes to Financial Statements for the semi-annual period ended June 30, 1998 (unaudited) for all portfolios except (AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund). Report of Independent Auditors, Schedule of Investments, Statement of Assets and Liabilities, Statement of Operations, Statement of Changes in Net Assets, and Notes to Financial Statements for the fiscal years ended December 31, 1997, 1996, 1995 and January 31, 1995 and 1994 for the AIM V.I. Capital Appreciation Fund, the AIM V.I. Diversified Income Fund, the AIM V.I. Global Utilities Fund, the AIM V.I. Government Securities Fund, the AIM V.I. Growth Fund, the AIM V.I. Growth and Income Fund, the AIM V.I. International Equity Fund, the AIM V.I. Money Market Fund and the AIM V.I. Value Fund.
(b) Exhibits:
Exhibit
Number Description
------- -----------
(1) - (a) Articles Supplementary to Articles of Incorporation
of Registrant, as filed with the State of Maryland on
September 30, 1998, on is hereby filed electronically.
- (b) Articles Supplementary to Articles of Incorporation of
Registrant, as filed with the State of Maryland on
February 4, 1998 was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 13, 1998, and
is incorporated herein by reference.
- (c) Amendment to Articles of Incorporation of Registrant,
as filed with the State of Maryland on April 12, 1995, was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 6 on April 26, 1995, and was filed
electronically as an Exhibit to Post-Effective Amendment
No. 7 on April 29, 1996, and is incorporated herein by
reference.
- (d) Articles Supplementary to Articles of Incorporation of
Registrant, as filed with the State of Maryland on
April 12, 1994, were filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on May 2, 1994, and
|
were filed electronically as an Exhibit to Post-
Effective Amendment No. 7 on April 29, 1996, and
are incorporated herein by reference.
- (e) Amendment to Articles of Incorporation of
Registrant, as filed with the State of Maryland on
April 15, 1993, was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on
April 19, 1993, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (f) Amendment to Articles of Incorporation of
Registrant, as filed with the State of Maryland on
April 13, 1993, was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on
April 19, 1993, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (g) Articles of Incorporation of Registrant, as
filed with the State of Maryland on January 22,
1993, were filed as an Exhibit to Registrant's
Initial Registration Statement on January 25, 1993,
and were filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on April 29, 1996,
and are incorporated herein by reference.
(2) - (a) Amended and Restated Bylaws, dated effective
December 11, 1996, were filed as an Exhibit to
Post-Effective Amendment No. 8 on April 23, 1997
and are incorporated herein by reference.
(b) First Amendment, dated March 14, 1995, to By-
Laws of Registrant was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996.
- (c) By-Laws of Registrant were filed as an Exhibit
to Registrant's Initial Registration Statement on
January 25, 1993 and were filed electronically as
an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996.
(3) - Voting Trust Agreements - None.
(4) - (a) Form of Specimen Certificate for the AIM V.I.
Global Utilities Fund was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 6 on
April 26, 1995.
- (b) Form of Specimen Certificates for the AIM V.I.
Growth and Income Fund and the AIM V.I. Utilities
Fund (presently the AIM V.I. Global Utilities Fund)
were filed as an Exhibit to Registrant's Post-
Effective Amendment No. 2 on March 2, 1994.
- (c) Form of Specimen Certificates were filed as an
Exhibit to Registrant's Pre-Effective Amendment No.
1 on April 19, 1993.
|
(5) - (a) Form of Amendment No. 2 to Master Investment
Advisory Agreement, between Registrant and A I M
Advisors, Inc. is hereby filed electronically.
- (b) Copy of Amendment No. 1, dated April 15, 1998,
to Master Investment Advisory Agreement, between
Registrant and A I M Advisors, Inc. is hereby
filed electronically.
- (c) Copy of Master Investment Advisory Agreement,
dated February 28, 1997, between Registrant and
A I M Advisors, Inc. was filed as an Exhibit to
Post-Effective Amendment No. 8 on April 23, 1997 and
incorporated herein by reference.
- (d) Copy of Amendment, dated April 28, 1994, to
Master Investment Advisory Agreement, dated
October 18, 1993, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 3 on
May 2, 1994, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996.
- (e) Copy of Master Investment Advisory Agreement,
dated October 18, 1993, between Registrant and
A I M Advisors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and was filed electronically as
an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996.
- (f) Copy of Investment Advisory Agreement, dated
March 31, 1993, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on
April 19, 1993.
- (g) Form of Sub-Advisory Agreement between
Registrant and INVESCO Asset Management Limited is
hereby filed electronically.
- (h) Form of Amendment No. 2 to Foreign Country
Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement between
Registrant and A I M Advisors, Inc. is hereby filed
electronically.
- (i) Form of Amendment No. 1 to Foreign County
Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement between
Registrant and A I M Advisors, Inc. is hereby filed
electronically.
- (j) Copy of Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation
Agreement, dated September 9, 1998, between
Registrant and A I M Advisors, Inc. is hereby filed
electronically.
(6) - (a) Form of Amendment No. 2 to Master Distribution
Agreement, between Registrant and A I M
Distributors, Inc. is hereby filed electronically.
|
- (b) Copy of Amendment No. 1, dated April 15, 1998,
to Master Distribution Agreement, between
Registrant and A I M Distributors, Inc. is hereby
filed electronically.
- (c) Copy of Master Distribution Agreement, dated
February 28, 1997, between Registrant and A I M
Distributors, Inc. was filed as an Exhibit to Post-
Effective Amendment No. 8 on April 23, 1997 and is
incorporated herein by reference.
- (d) Copy of Amendment, dated April 28, 1994, to
Master Distribution Agreement, dated October 18,
1993, between Registrant and AIM Distributors, Inc.
was filed as an Exhibit to Registrant's Post-
Effective Amendment No. 3 on May 2, 1994, and was
filed electronically as an Exhibit to Post-
Effective Amendment No. 7 on April 29, 1996.
- (e) Copy of Master Distribution Agreement, dated
October 18, 1993, between Registrant and A I M
Distributors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and was filed electronically as
an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996.
- (f) Copy of Distribution Agreement, dated March 31,
1993, between Registrant and A I M Distributors,
Inc. was filed as an Exhibit to Registrant's
Pre-Effective Amendment No. 1 on April 19, 1993.
(7) - (a) Retirement Plan of Registrant's Non-Affiliated
Directors, effective March 8, 1994, as restated
September 18, 1995, was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (b) Retirement Plan of Registrant's Non-Affiliated
Directors, effective March 8, 1994, was filed as
an Exhibit to Registrant's Post-Effective Amendment
No. 4 on November 3, 1994.
- (c) Form of Deferred Compensation Agreement was
filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 13,
1998, and is incorporated herein by reference.
- (d) Form of Deferred Compensation Agreement of
Registrant's Non-Affiliated Directors, as approved
on December 5, 1995, was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (e) Form of Deferred Compensation Agreement of
Registrant's Non-Affiliated Directors was filed as
an Exhibit to Registrant's Post-Effective Amendment
No. 4 on November 3, 1994.
|
(8) - (a) Copy of Amendment, dated September 9, 1998, to
Custodian Agreement, dated March 31, 1993, between
Registrant and State Street Bank and Trust Company
is hereby filed electronically.
- (b) Copy of Amendment No. 2, dated September 19,
1995, to Custodian Agreement, dated March 31, 1993,
between Registrant and State Street Bank and Trust
Company was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 on April 29, 1996,
and is incorporated herein by reference.
- (c) Copy of Amendment No. 1, dated April 25, 1994,
to Custodian Agreement, dated March 31, 1993,
between Registrant and State Street Bank and
Trust Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 3 on
May 2, 1994, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (d) Copy of Custodian Agreement, dated March 31,
1993, between Registrant and State Street Bank and
Trust Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and was filed electronically as
an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
(9) - (a) Copy of Amendment No. 1, dated April 25, 1994,
to Transfer Agency Agreement, dated March 19, 1993,
between Registrant and State Street Bank and Trust
Company was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on May 2, 1994, and
was filed electronically as an Exhibit to Post-
Effective Amendment No. 7 on April 29, 1996, and is
incorporated herein by reference.
- (b) Copy of Transfer Agency Agreement, dated
March 19, 1993, between Registrant and State Street
Bank and Trust Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (c) Form of No. 1 to Master Administrative Services
Agreement, as amended, dated May 1, 1998, between
Registrant and A I M Advisors, Inc. is hereby filed
electronically.
- (d) Copy of Master Administrative Services
Agreement, as amended, dated May 1, 1998, between
Registrant and A I M Advisors, Inc. is hereby filed
electronically.
- (e) Copy of Master Administrative Services
agreement dated February 28, 1997, between
Registrant and A I M Advisors, Inc. was filed as an
Exhibit to Registrant's Post-Effective Amendment
No. 8 on April 23, 1997.
|
- (f) Copy of Amendment No.1, dated April 28, 1994, to Master Administrative Services Agreement, dated October 18, 1993, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 3 on May 2, 1994, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996.
- (g) Copy of Master Administrative Services Agreement, dated October 18, 1993, between the Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on November 5, 1993, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996.
- (h) Copy of Administrative Services Agreement, dated March 31, 1993, between the Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993.
- (i) Copy of Participation Agreement, dated April 30, 1997, between Registrant and Prudential Insurance Company of America was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (j) Copy of Amendment No. 1, dated June 15, 1998, to Participation Agreement dated November 4, 1997, between Registrant and Nationwide Life Insurance Company is hereby filed electronically.
- (k) Copy of Participation Agreement, dated November 4, 1997, between Registrant and Nationwide Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (l) Copy of Participation Agreement, dated December 31, 1997, between Registrant and Cova Financial Services Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (m) Copy of Participation Agreement, dated December 31, 1997, between Registrant and Cova Financial Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (n) Copy of Participation Agreement, dated November 20, 1997, between Registrant and AIG Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (o) Copy of Participation Agreement, dated November 20, 1997, between Registrant and American International Life Assurance Company of New
York was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (p) Copy of Participation Agreement, dated October 30, 1997, between Registrant and American Enterprise Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (q) Copy of Participation Agreement, dated October 30, 1997, between Registrant and American Centurion Life Assurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (r) Copy of Letter Agreement, dated October 30, 1997, between American Enterprise Life Insurance Company and American Centurion Life Assurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (s) Copy of Amendment No. 1, dated June 23, 1998, to Participation Agreement dated December 3, 1997, between Registrant and Security Life of Denver is hereby filed electronically.
- (t) Copy of Participation Agreement, dated December 3, 1997, between Registrant and Security Life of Denver was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (u) Copy of Participation Agreement, dated February 14, 1997, between Registrant and Pruco Life Insurance Company of New Jersey was filed as an Exhibit to Post-Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference.
- (v) Copy of Side Letter Agreement, dated December 18, 1996, between Registrant and Merrill, Lynch, Pierce, Fenner & Smith, Incorporated was filed as an Exhibit to Post-Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference.
- (w) Copy of Amendment No. 1, dated May 1, 1997, to Participation Agreement dated December 18, 1996, by and between Registrant and ML Life Insurance Company of New York was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (x) Copy of Participation Agreement, dated December 18, 1996, between Registrant and ML Life Insurance Company of New York was filed as an Exhibit to Post-Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference.
- (y) Copy of Amendment No. 1, dated May 1, 1997, to Participation Agreement, dated December 18, 1996, between Registrant and Merrill Lynch Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (z) Copy of Participation Agreement, dated December 18, 1996, between Registrant and Merrill Lynch Life Insurance Company was filed as an Exhibit to Post- Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference.
- (aa) Copy of Participation Agreement, dated October 7, 1996, between Registrant and IDS Life Insurance Company (supersedes and replaces Participation Agreement dated March 4, 1996) was filed as an Exhibit to Post-Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference.
- (bb) Copy of Side Letter Agreement, dated September 27, 1996, between Registrant, IDS Life Insurance Company and IDS Life Insurance Company of New York was filed electronically as an Exhibit to Post- Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (cc) Copy of Participation Agreement, dated October 7, 1996, between Registrant and IDS Life Insurance Company of New York was filed as an Exhibit to Post-Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference.
- (dd) Copy of Participation Agreement, dated October 1, 1996, between Registrant and Allstate Life Insurance Company of New York was filed as an Exhibit to Post-Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference.
- (ee) Copy of Side Letter Agreement, dated October 1, 1996, between Registrant and Allstate Life Insurance Company of New York is hereby filed electronically.
- (ff) Copy of Amendment No. 1, dated July 1, 1997, to Participation Agreement, dated September 21, 1996, between Registrant and Pruco Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (gg) Copy of Amendment No. 2, dated August 1, 1998 to Participation Agreement dated September 21, 1996, between Registrant and Pruco Life Insurance Company is hereby filed electronically.
- (hh) Copy of Participation Agreement, dated September 21, 1996, between Registrant and Pruco Life Insurance Company was filed as an
Exhibit to Post-Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference.
- (ii) Copy of Participation Agreement, dated April 8, 1996, between Registrant and Connecticut General Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference.
- (jj) Copy of Amendment No. 1, dated November 7, 1997 to Participation Agreement dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company is hereby filed electronically.
- (kk) Copy of Amendment No. 2, dated September 2, 1997, to Participation Agreement, dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (ll) Copy of Amendment No. 3, dated January 26, 1998 to Participation Agreement dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company is hereby filed electronically.
- (mm) Copy of Amendment No. 4, dated May 1, 1998 to Participation Agreement dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company is hereby filed electronically.
- (nn) Copy of Participation Agreement, dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference.
- (oo) Copy of Side Letter Agreement, dated December 1, 1995, among Registrant and Glenbrook Life and Annuity Company was filed as an Exhibit to Post- Effective Amendment No. 8 and is incorporated herein by reference.
- (pp) Copy of Participation Agreement, dated March 4, 1996, between Registrant and IDS Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996.
- (qq) Copy of Amendment No. 1, dated February 3, 1997, to Participation Agreement , dated February 10, 1995, between Registrant and Citicorp Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (rr) Copy of Participation Agreement, dated February 10, 1995, between Registrant and Citicorp Life Insurance Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 5 on February 28, 1995, and
was filed electronically as an Exhibit to Post- Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference.
- (ss) Copy of Amendment No. 1, dated February 3, 1997, to Participation Agreement, dated February 10, 1995, between Registrant and First Citicorp Life Insurance Company was filed electronically as an Exhibit to Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
- (tt) Copy of Participation Agreement, dated February 10, 1995, between Registrant and First Citicorp Life Insurance Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 5 on February 28, 1995 and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference.
- (uu) Copy of Participation Agreement, dated February 25, 1993, between Registrant, Connecticut General Life Insurance Company and A I M Distributors, Inc. was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference.
- (vv) Copy of Participation Agreement, dated June 30, 1998, between Registrant and Aetna Life Insurance and Annuity Insurance Company is hereby filed electronically.
- (ww) Copy of Participation Agreement, dated July 27, 1998, between Registrant and Allmerica Financial Life Insurance and Annuity Company is hereby filed electronically.
- (xx) Copy of Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company is hereby filed electronically.
- (yy) Copy of Participation Agreement, dated July 27, 1998, between Registrant and First Allmerica Financial Life Insurance Company is hereby filed electronically.
- (zz) Copy of Participation Agreement, dated May 1, 1998, between Registrant and Fortis Benefits Insurance Company is hereby filed electronically.
- (aaa) Copy of Participation Agreement, dated February 2, 1998, between Registrant and The Guardian Insurance & Annuity Company is hereby filed electronically.
- (bbb) Copy of Participation Agreement, dated
July 2, 1998, between Registrant and Hartford Life
Insurance Company is hereby filed electronically.
- (ccc) Copy of Participation Agreement, dated
April 21, 1998, between Registrant and Keyport Life
Insurance Company is hereby filed electronically.
- (ddd) Copy of Participation Agreement, dated
July 13, 1998, between Registrant and Keyport
Benefit Life Insurance Company is hereby filed
electronically.
- (eee) Copy of Participation Agreement, dated
June 16, 1998, between Registrant and Lincoln
National Life Insurance Company is hereby filed
electronically.
- (fff) Copy of Amendment No. 1, dated June 30, 1998
to Participation Agreement dated May 1, 1998,
between Registrant and PFL Life Insurance Company
is hereby filed electronically.
- (ggg) Copy of Participation Agreement, dated May 1,
1998, between Registrant and PFL Life Insurance
Company is hereby filed electronically.
- (hhh) Copy of Participation Agreement, dated
February 17, 1998, between Registrant and Sun Life
Assurance Company of Canada (U.S.) is hereby filed
electronically.
- (iii) Copy of Participation Agreement, dated
April 1, 1998, between Registrant and United Life &
Annuity Insurance Company is hereby filed
electronically.
- (jjj) Copy of Accounting Services Agreement, dated
March 31, 1993, between the Registrant and State
Street Bank and Trust Company was filed as an
Exhibit to Registrant's Pre-Effective Amendment No.
1 on April 19, 1993, and was filed electronically
as an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996.
(10) - (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 was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on
April 19, 1993.
- (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) was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 4 on November 3, 1994.
|
- (c) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds regarding the AIM V.I. Global
Utilities Fund name change was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 6 on
April 26, 1995.
- (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 was filed as an Exhibit to Registrant's Post-
Effective Agreement No. 9 on February 13, 1998.
- (e) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds is hereby filed electronically.
- (f) Consent of Messrs. Tait, Weller & Baker is
hereby filed electronically.
(11) - Other Opinions, Appraisals or Rulings and Consents
- None.
(12) - Financial Statements omitted from Item 23 - None.
(13) - (a) Copy of 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 is hereby filed electronically.
- (b) Copies of Agreements Concerning Initial
Capitalization of the AIM V.I. Growth and Income
Fund and the AIM V.I. Utilities Fund were filed as
an Exhibit to Registrant's Post-Effective Amendment
No. 4 on November 3, 1994, and were filed
electronically as an Exhibit to Post-Effective
Amendment No. 7 on April 29, 1996, and are
incorporated herein by reference.
- (c) Copies of 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 were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and were filed electronically as
an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and are incorporated herein by
reference.
(14) - Registrant's Retirement Plan Documents - None.
(15) - Registrant's Plan pursuant to Rule 12b-1 under the
1940 Act - None.
(16) - Schedule of Performance Quotations were filed as an
Exhibit to Registrant's Post-Effective Amendment
No. 3 on May 2, 1994.
|
(18) - Multiple Class Plan (Rule 18f-3) - None.
(27) - Financial Data Schedules - None.
Item 25. Persons Controlled by or under Common Control With Registrant
Furnish a list or diagram of all persons directly or indirectly controlled by or under common control with the Registrant and as to each such person indicate (1) if a company, the state or other sovereign power under the laws of which it is organized, and (2) the percentage of voting securities owned or other basis of control by the person, if any, immediately controlling it.
None.
Item 26. Number of Holders of Securities
State in substantially the tabular form indicated, as of a specified date within 90 days prior to the date of filing, the number of record holders of each class of securities of the Registrant.
Title of Class Number of Record Holders
-------------- as of September 15, 1998
------------------------
AIM V.I. Aggressive Growth Fund 2
AIM V.I. Balanced Fund 3
AIM V.I. Capital Appreciation Fund 29
AIM V.I. Capital Development Fund 2
AIM V.I. Diversified Income Fund 9
AIM V.I. Global Utilities Fund 5
AIM V.I. Government Securities Fund 9
AIM V.I. Growth Fund 12
AIM V.I. Growth and Income Fund 18
AIM V.I. High Yield Fund 3
AIM V.I. International Equity Fund 18
AIM V.I. Money Market Fund 3
AIM V.I. Value Fund 29
|
Item 27. Indemnification
State the general effect of any contract, arrangements or statute under which any director, officer, underwriter or affiliated person of the Registrant is insured or indemnified in any manner against any liability which may be incurred in such capacity, other than insurance provided by any director, officer, affiliated person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law and the Registrant's Charter and By-Laws, the Registrant may indemnify any person who was or is a director, officer, employee or agent of the Registrant to the maximum extent permitted by the Maryland General
Corporation Law. The specific terms of such indemnification are reflected in the Registrant's Charter and By-Laws, which are incorporated herein as part of this Registration Statement. No indemnification will be provided by the Registrant to any director or officer of the Registrant for any liability to the Registrant or shareholders to which such director or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
In addition, under the terms of the agreements described in response to Item 24(b) of this Part C, various third parties have agreed to indemnify the registrant, its directors and officers, and, in some cases, its investment advisor and/or principal underwriter, against certain liabilities that may arise in connection with the performance of the agreements. The specific terms of such indemnification are set out in the agreements, and are incorporated herein by reference.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, 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 director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, 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. Insurance coverage is provided under a joint Mutual Fund & Investment Advisory Professional Directors & Officers Liability Policy, issued by ICI Mutual Insurance Company, with a $25,000,000 limit of liability.
Item 28. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation or employment of a substantial nature in which each investment adviser of the Registrant, and each director, officer or partner of any such investment adviser, is or has been, at any time during the past two fiscal years, engaged for his own account or in the capacity of director, officer, employee, partner, or trustee.
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 captions "Management--Investment Advisor" of the Prospectus which comprises Part A of this Registration Statement, and to the discussion under the caption "Management" of the Statement of Additional Information which comprises Part B of this Registration Statement, and to Item 29(b) of this Part C of the Registration Statement.
Item 29. 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 Eastern Europe Fund
AIM Equity Funds, Inc. (Retail Classes)
GT Global Floating Rate Fund, Inc. d/b/a AIM Floating Rate Fund
AIM Funds Group
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Portfolios
AIM Investment Securities Funds (AIM Limited Maturity Treasury
Fund - Class A Shares)
AIM Series Trust
AIM Special Opportunities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
(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 Position and Offices Business Address* with Principal Underwriter with Registrant ---------------- -------------------------- --------------- Charles T. Bauer Chairman of the Board of Directors Chairman & Director Michael J. Cemo President & Director None Gary T. Crum Director Senior Vice President Robert H. Graham Senior Vice President & Director President & Director William G. Littlepage Senior Vice President & Director None James L. Salners Senior Vice President None John Caldwell Senior Vice President None Gordon J. Sprague Senior Vice President None Michael C. Vessels Senior Vice President None Marilyn M. Miller Senior Vice President None |
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
---------------- -------------------------- ---------------
B. J. Thompson First Vice President None
John J. Arthur Vice President & Treasurer Senior Vice President & Treasurer
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
William H. Kleh Vice President None
Carol F. Relihan Vice President Senior Vice President &
Secretary
James R. Anderson Vice President None
Mary K. Coleman Vice President None
Melville B. Cox Vice President; Chief Compliance Officer Vice President
Charles R. Dewey Vice President None
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Terri L. Ransdell Vice President None
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
Christopher T. Simutis Vice President None
Robert D. Van Sant, Jr. Vice President None
Gary K. Wendler Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
David E. Hessel Assistant Vice President, None
Assistant Treasurer & Controller
|
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
---------------- -------------------------- ---------------
Luke P. Beausoleil Assistant Vice President None
Tisha Christopher Assistant Vice President None
Glenda Dayton Assistant Vice President None
Mary E. Gentempo Assistant Vice President None
Kathleen M. Douglas Assistant Vice President None
Terri N. Fiedler Assistant Vice President None
Jeffrey L. Horne Assistant Vice President None
Melissa E. Hudson Assistant Vice President None
Jodie L. Johnson Assistant Vice President None
Kathryn A. Jordan Assistant Vice President None
Kim T. Lankford Assistant Vice President None
Wayne W. LaPlante Assistant Vice President None
Ivy B. McLemore Assistant Vice President None
David B. O'Neil Assistant Vice President None
Patricia M. Shyman Assistant Vice President None
Nicholas D. White Assistant Vice President None
Norman W. Woodson Assistant Vice President None
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
Stephen I. Winer Assistant Secretary Assistant Secretary
|
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
(c) Not Applicable
Item 30. Location of Accounts and Records
With respect to each account, book or other document required to be maintained by Section 31(a) of the 1940 Act and the Rules (17 CFR 270.31a-1 to 31a-3) promulgated thereunder, furnish the name and address of each person maintaining physical possession of each such account, book or other document.
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 by the Registrant's Custodian and Transfer Agent State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.
Item 31. Management Services
Furnish a summary of the substantive provisions of any management-related service contract not discussed in Part A or Part B of this Form (because the contract was not believed to be of interest to a purchaser of securities of the Registrant) under which services are provided to the Registrant, indicating the parties to the contract, the total dollars paid and by whom, for the last three fiscal years.
None.
Item 32. Undertakings
(a) Not Applicable
(b) Not Applicable
(c) The Registrant undertakes to furnish each person to whom a prospectus is delivered, a copy of the applicable Fund's latest annual report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant 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 2nd day of October, 1998.
REGISTRANT: AIM VARIABLE INSURANCE FUNDS, INC.
By: /s/ ROBERT H. GRAHAM
------------------------------------------
Robert H. Graham, 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/ CHARLES T. BAUER Chairman & Director 10/2/98
-----------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Director & President 10/2/98
----------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ BRUCE L. CROCKETT Director 10/2/98
-----------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Director 10/2/98
-----------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Director 10/2/98
-----------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Director 10/2/98
-----------------------
(Jack Fields)
/s/ CARL FRISCHLING Director 10/2/98
-----------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Director 10/2/98
-----------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Director 10/2/98
-----------------------
(Lewis F. Pennock)
/s/ IAN W. ROBINSON Director 10/2/98
-----------------------
(Ian W. Robinson)
/s/ LOUIS S. SKLAR Director 10/2/98
-----------------------
(Louis S. Sklar)
/s/ JOHN J. ARTHUR Senior Vice President & 10/2/98
----------------------- Treasurer (Principal Financial
(John J. Arthur) and Accounting Officer)
|
INDEX TO EXHIBITS
Exhibit
No.
-------
1 (a) Articles Supplementary to Articles of Incorporation of Registrant, as filed in the State of
Maryland on September 30, 1998
5 (a) Form of Amendment No. 2 to Master Investment Advisory Agreement, dated February 28, 1997, between
Registrant and A I M Advisors, Inc.
(b) Amendment No. 1, dated April 15, 1998, to Master Investment Advisory Agreement, dated February 28,
1997, between Registrant and A I M Advisors, Inc.
(g) Form of Sub-Advisory Agreement between Registrant and INVESCO Asset Management Limited
(h) Form of Amendment No. 2 to Foreign Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement between Registrant and A I M Advisors, Inc.
(i) Form of Amendment No. 1 to Foreign Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement between Registrant and A I M Advisors, Inc.
(j) Copy of Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation
Agreement between Registrant and A I M Advisors, Inc.
6 (a) Form of Amendment No. 2 to Master Distribution Agreement between Registrant and A I M Distributors,
Inc.
(b) Amendment No. 1, dated April 15, 1998, to Master Distribution Agreement, dated February 28, 1997,
between Registrant and A I M Distributors, Inc.
8 (a) Copy of Amendment, dated September 9, 1998 to Custodian Agreement, dated March 31, 1993, between
Registrant and State Street Bank and Trust Company
9 (c) Form of Amendment No. 1 to Master Administrative Services Agreement, as amended, dated May 1, 1998,
between Registrant and A I M Advisors, Inc.
(d) Master Administrative Services Agreement, as amended, dated May 1, 1998, between Registrant and
A I M Advisors, Inc.
(j) Copy of Amendment No. 1, dated June 15, 1998, to Participation Agreement dated November 4, 1997,
between Registrant and Nationwide Life Insurance Company.
(s) Copy of Amendment No. 1, dated June 23, 1998, to Participation Agreement dated December 3, 1997,
between Registrant and Security Life of Denver.
|
(ee) Copy of Side Letter Agreement, dated October 1, 1996, between Registrant and Allstate Life Insurance
Company of New York.
(gg) Copy of Amendment No. 2, dated August 1, 1998 to Participation Agreement dated September 21, 1996,
between Registrant and Pruco Life Insurance Company.
(jj) Copy of Amendment No. 1, dated November 7, 1997 to Participation Agreement dated December 19, 1995,
between Registrant and Glenbrook Life and Annuity Company.
(ll) Copy of Amendment No. 3, dated January 26, 1998 to Participation Agreement dated December 19, 1995,
between Registrant and Glenbrook Life and Annuity Company.
(mm) Copy of Amendment No. 4, dated May 1, 1998 to Participation Agreement dated December 19, 1995,
between Registrant and Glenbrook Life and Annuity Company.
(vv) Copy of Participation Agreement, dated June 30, 1998, between Registrant and Aetna Life Insurance and
Annuity Insurance Company.
(ww) Copy of Participation Agreement, dated July 27, 1998, between Registrant and Allmerica Financial Life
Insurance and Annuity Company.
(xx) Copy of Participation Agreement, dated June 1, 1998, between Registrant and American General Life
Insurance Company.
(yy) Copy of Participation Agreement, dated July 27, 1998, between Registrant and First Allmerica
Financial Life Insurance Company.
(zz) Copy of Participation Agreement, dated May 1, 1998, between Registrant and Fortis Benefits Insurance
Company.
(aaa) Copy of Participation Agreement, dated February 2, 1998, between Registrant and The Guardian
Insurance & Annuity Company.
(bbb) Copy of Participation Agreement, dated July 2, 1998, between Registrant and Hartford Life Insurance
Company.
(ccc) Copy of Participation Agreement, dated April 21, 1998, between Registrant and Keyport Life Insurance
Company.
(ddd) Copy of Participation Agreement, dated July 13, 1998, between Registrant and Keyport Benefit Life
Insurance Company.
(eee) Copy of Participation Agreement, dated June 16, 1998, between Registrant and Lincoln National Life
Insurance Company.
|
(fff) Copy of Amendment No. 1, dated June 30, 1998 to Participation Agreement dated May 1, 1998, between
Registrant and PFL Life Insurance Company.
(ggg) Copy of Participation Agreement, dated May 1, 1998, between Registrant and PFL Life Insurance
Company.
(hhh) Copy of Participation Agreement, dated February 17, 1998, between Registrant and Sun Life Assurance
Company of Canada (U.S.).
(iii) Copy of Participation Agreement, dated April 1, 1998, between Registrant and United Life & Annuity
Insurance Company.
10 (e) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
(f) Consent of Messrs. Tait, Weller & Baker
13 (a) 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
|
EXHIBIT 1(a)
AIM VARIABLE INSURANCE FUNDS, INC.
ARTICLES SUPPLEMENTARY
AIM VARIABLE INSURANCE FUNDS, INC., a Maryland corporation, having its principal office in the State of Maryland in Baltimore City (hereinafter called the "Corporation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The aggregate number of shares of Common Stock of the
Corporation is increased by five hundred million (500,000,000) shares, which
are classified and allocated as follows: two hundred fifty million
(250,000,000) shares to AIM V.I. Global Growth and Income Fund and two hundred
fifty million (250,000,000) shares to AIM V.I. Telecommunications Fund. The
shares of AIM V.I. Global Growth and Income Fund and AIM V.I.
Telecommunications Fund, as so classified by the Board of Directors shall have
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as set forth in ARTICLE FIFTH, paragraph (b) of the Corporation's
Articles of Incorporation and shall be subject to all provisions of the
Articles of Incorporation relating to stock of the Corporation generally.
SECOND: Immediately before the increase in the aggregate number of shares as set forth in Article FIRST hereto, the Corporation was authorized to issue 3,500,000,000 shares of the par value of $.001 each and of the aggregate par value of $3,500,000, of which 250,000,000 shares were initially classified as AIM V.I. Aggressive Growth Fund shares, 250,000,000 shares were initially classified as AIM V.I. Balanced Fund shares, 250,000,000 shares were initially classified as AIM V.I. Capital Appreciation Fund shares, 250,000,000 shares were initially classified as AIM V.I. Capital Development Fund shares, 250,000,000 shares were initially classified as AIM V.I. Diversified Income Fund shares, 250,000,000 shares were initially classified as AIM V.I. Global Utilities Fund shares, 250,000,000 shares were initially classified as AIM V.I. Government Securities Fund shares, 250,000,000 shares were initially classified as AIM V.I. Growth Fund shares, 250,000,000 shares were initially classified as AIM V.I. Growth and Income Fund shares, 250,000,000 shares were initially classified as AIM V.I. High Yield Fund shares, 250,000,000 shares were initially classified as AIM V.I. International Equity Fund shares, 250,000,000 shares were
initially classified as AIM V.I. Money Market Fund shares, 250,000,000 shares were initially classified as AIM V.I. Value Fund shares and the balance of which were unclassified.
THIRD: As hereby increased, the total number of shares of stock which the Corporation has authority to issue is 4,000,000,000 shares of the par value of $.001 each and of the aggregate par value of $4,000,000, of which 250,000,000 shares are classified as AIM V.I. Aggressive Growth Fund shares, 250,000,000 shares are classified as AIM V.I. Balanced Fund shares, 250,000,000 shares are classified as AIM V.I. Capital Appreciation Fund shares, 250,000,000 shares are classified as AIM V.I. Capital Development Fund shares, 250,000,000 shares are classified as AIM V.I. Diversified Income Fund shares, 250,000,000 shares are classified as AIM V.I. Global Growth and Income Fund shares, 250,000,000 shares are classified as AIM V.I. Global Utilities Fund shares, 250,000,000 are classified as AIM V.I. Government Securities Fund shares, 250,000,000 are classified as AIM V.I. Growth Fund shares, 250,000,000 are classified as AIM V.I. Growth and Income Fund shares, 250,000,000 shares are classified as AIM V.I. High Yield Fund shares, 250,000,000 are classified as AIM V.I. International Equity Fund shares, 250,000,000 are classified as AIM V.I. Money Market Fund shares, 250,000,000 shares are classified as AIM V.I. Telecommunications Fund shares, 250,000,000 are classified as AIM V.I. Value Fund shares and the balance of which are unclassified.
FOURTH: The Corporation is registered as an open-end investment company under the Investment Company Act of 1940, as amended.
FIFTH: The Board of Directors of the Corporation increased the total number of shares of Common Stock the Corporation has authority to issue pursuant to Section 2-105(c) of the Maryland General Corporation Law and classified the shares of AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund under authority contained in the Charter of the Corporation.
The undersigned President acknowledges these Articles Supplementary to be the corporate act of the Corporation and states that to the best of his knowledge, information and belief the matters and facts set forth in these Articles with respect to authorization and approval are true in all material respects and that this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, AIM VARIABLE INSURANCE FUNDS, INC. has caused these Articles Supplementary to be executed in its name and on its behalf by its President and witnessed by its Assistant Secretary on September 30, 1998.
AIM VARIABLE INSURANCE FUNDS, INC.
By: /s/ ROBERT H. GRAHAM
---------------------------------------
President
|
Witness:
/s/ NANCY L. MARTIN
-----------------------------------------------
Assistant Secretary
|
EXHIBIT 5(a)
AMENDMENT NO. 2
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This amendment dated as of ___________________________, 1998, amends the Master Investment Advisory Agreement (the "Agreement"), dated February 28, 1997, between AIM Variable Insurance Funds, Inc., a Maryland corporation, and A I M Advisors, Inc., a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the parties desire to amend the Agreement to add two new portfolios, AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund;
NOW, THEREFORE, the parties agree as follows:
1. Appendix A to the Agreement is hereby deleted in its entirety and replaced with the following:
APPENDIX A
TO
MASTER INVESTMENT ADVISORY AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS, INC.
The Company shall pay the Advisor as full compensation for all services rendered and all facilities furnished hereunder, a management fee for each Fund by applying the following annual rates to the average daily net assets of each Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of each Fund.
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. GROWTH FUND
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. VALUE FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million .................................................... 0.65%
Over $250 million ..................................................... 0.60%
|
AIM V.I. AGGRESSIVE GROWTH FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $150 million .................................................... 0.80%
Over $150 million ..................................................... 0.625%
|
AIM V.I. BALANCED FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $150 million .................................................... 0.75%
Over $150 million ..................................................... 0.50%
|
AIM V.I. CAPITAL DEVELOPMENT FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $350 million ................................................... 0.75%
Over $350 million .................................................... 0.625%
|
AIM V.I. DIVERSIFIED INCOME FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million ................................................... 0.60%
Over $250 million .................................................... 0.55%
|
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. TELECOMMUNICATIONS FUND
ANNUAL
NET ASSETS RATE
---------- ----
Average Daily Net Assets ............................................. 1.00%
|
AIM V.I. GOVERNMENT SECURITIES FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million ................................................... .50%
Over $250 million .................................................... .45%
|
AIM V.I. HIGH YIELD FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $200 million ................................................... 0.625%
Next $300 million .................................................... 0.55%
Next $500 million .................................................... 0.50%
Amount over $1 billion ............................................... 0.45%
|
AIM V.I. INTERNATIONAL EQUITY FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million ................................................... 0.75%
Over $250 million .................................................... 0.70%
|
AIM V.I. MONEY MARKET FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million ................................................... 0.40%
Over $250 million .................................................... 0.35%
|
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: , 1998
-----------------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
-------------------------- ------------------------------
Assistant Secretary President
|
(SEAL)
A I M ADVISORS, INC.
Attest: By:
-------------------------- ------------------------------
Assistant Secretary President
|
(SEAL)
EXHIBIT 5(b)
AMENDMENT NO. 1
TO
MASTER INVESTMENT ADVISORY AGREEMENT
This amendment dated as of April 15, 1998, amends the Master Investment Advisory Agreement (the "Agreement"), dated February 28, 1997, between AIM Variable Insurance Funds, Inc., a Maryland corporation, and A I M Advisors, Inc., a Delaware corporation.
W I T N E S S E T H:
WHEREAS, the parties desire to amend the Agreement to add four new portfolios, AIM V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Capital Development Fund and AIM V.I. High Yield Fund;
NOW, THEREFORE, the parties agree as follows:
1. Appendix A to the Agreement is hereby deleted in its entirety and replaced with the following:
APPENDIX A
TO
MASTER INVESTMENT ADVISORY AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS, INC.
The Company shall pay the Advisor as full compensation for all services rendered and all facilities furnished hereunder, a management fee for each Fund by applying the following annual rates to the average daily net assets of each Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of each Fund.
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. GROWTH FUND
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. VALUE FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.65%
Over $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60%
|
AIM V.I. AGGRESSIVE GROWTH FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $150 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.80%
Over $150 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.625%
|
AIM V.I. BALANCED FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $150 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Over $150 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
|
AIM V.I. CAPITAL DEVELOPMENT FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $350 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Over $350 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.625%
|
AIM V.I. DIVERSIFIED INCOME FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.60%
Over $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55%
|
AIM V.I. GOVERNMENT SECURITIES FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50%
Over $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45%
|
AIM V.I. HIGH YIELD FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $200 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.625%
Next $300 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.55%
Next $500 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.50%
Amount over $1 billion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.45%
|
AIM V.I. INTERNATIONAL EQUITY FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.75%
Over $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.70%
|
AIM V.I. MONEY MARKET FUND
ANNUAL
NET ASSETS RATE
---------- ----
First $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.40%
Over $250 million . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.35%
|
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: April 15, 1998
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------ ----------------------------------
Assistant Secretary President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ NANCY. L. MARTIN By: /s/ ROBERT H. GRAHAM
----------------------------- --------------------------------
Assistant Secretary President
|
(SEAL)
EXHIBIT 5(g)
AIM VARIABLE INSURANCE FUNDS, INC.
(AIM V.I. GLOBAL GROWTH AND INCOME FUND)
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is made as of this _____ day of _________________, 1998, by and between A I M Advisors, Inc., a Delaware corporation (the "Advisor") and INVESCO Asset Management Limited (the "Sub-Advisor").
RECITALS
WHEREAS, AIM Variable Insurance Funds, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end, diversified management investment company;
WHEREAS, the Advisor is registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as an investment advisor and engages in the business of acting as an investment advisor;
WHEREAS, the Sub-Advisor is registered under the Advisers Act, as amended, as an investment advisor and engages in the business of acting as an investment advisor;
WHEREAS, the Company's charter authorizes the Board of Directors of the
Company to classify or reclassify authorized but unissued shares of the Company,
and as of the date of this Agreement, the Company's Board of Directors has
authorized the issuance of fifteen series of shares representing interests in
fifteen investment portfolios: AIM V.I. Aggressive Growth Fund, AIM V.I.
Balanced Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. Capital Development
Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Utilities Fund, AIM V.I.
Global Growth and Income Fund, AIM V.I. Government Securities Fund, AIM V.I.
Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. High Yield Fund, AIM V.I.
International Equity Fund, AIM V.I. Money Market Fund, AIM V.I.
Telecommunications Fund and AIM V.I. Value Fund (such series, together with any
future series, are collectively referred to herein as the "Portfolios");
WHEREAS, the Advisor has entered into a Master Investment Advisory Agreement dated February 28, 1997, as amended, with the Company (the "Investment Advisory Agreement"), pursuant to which the Advisor shall act as investment advisor with respect to the Portfolios; and
WHEREAS, pursuant to Section 3 ("Delegation of Responsibilities") of the Investment Advisory Agreement, the Advisor wishes to retain the Sub-Advisor for purposes of rendering investment research and advisory services to the Advisor in connection with the AIM V.I. Global Growth and Income Fund (the "Fund"), upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto agree as follows:
1. Appointment of Sub-Advisor. The Advisor hereby appoints the Sub-Advisor to render investment research and advisory services to the Advisor with respect to the Fund, under the supervision of the Advisor and subject to the approval and direction of the Company's Board of Directors, and the Sub-Advisor hereby accepts such appointment, all subject to the terms and conditions contained herein.
2. Investment Analysis. The duties of the Sub-Advisor shall include:
(a) obtaining and evaluating pertinent information about significant developments and economic, statistical and financial data, domestic, foreign or otherwise, whether affecting the economy generally or the Fund, and whether concerning the individual issuers whose securities are included in the Fund or the activities in which such issuers engage, or with respect to securities which the Sub-Advisor considers desirable for inclusion in the Fund's investment portfolio;
(b) determining which issuers and securities shall be represented in the Fund's investment portfolio and regularly reporting thereon to the Advisor and, at the request of the Advisor, to the Company's Board of Directors; and
(c) formulating and implementing continuing programs for the purchases and sales of the securities of such issuers and regularly reporting thereon to the Advisor and, at the request of the Advisor, to the Company's Board of Directors.
3. Control by Board of Directors. Any investment program undertaken by the Sub-Advisor pursuant to this Agreement, as well as any other activities undertaken by the Sub-Advisor with respect to the Fund, shall at all times be subject to any directives of the Board of Directors of the Company.
4. Compliance with Applicable Requirements. In carrying out its obligations under this Agreement, the Sub-Advisor shall at all times conform to:
(a) all applicable provisions of the 1940 Act and the Advisers Act and any rules and regulations adopted thereunder;
(b) the provisions of the registration statement of the Company, as the same may be amended from time to time, under the Securities Act of 1933, as amended, and the 1940 Act;
(c) the provisions of the corporate charter of the Company, as the same may be amended from time to time;
(d) the provisions of the by-laws of the Company, as the same may be amended from time to time; and
(e) any other applicable provisions of state, federal or foreign law.
5. Compensation. The Advisor shall pay to the Sub-Advisor, as compensation for services rendered hereunder to a Fund, an annual fee, payable monthly, equal to 0.40% of the average net assets of the Fund.
6. Sub-Advisor's Expenses. The Sub-Advisor shall furnish at its own expense all administrative services, office space, equipment and facilities, investment advisory, statistical and research services, and executive, supervisory and clerical personnel necessary to perform its duties and obligations hereunder.
7. Fee Waivers and Expense Limitation. If, for any fiscal year of the Company, the amount of the advisory fee which the Fund would otherwise be obligated to pay to the Advisor is reduced because of voluntary fee waivers by the Advisor or pursuant to expense limitation provisions of the Advisory Agreement, the fee payable hereunder to the Sub-Advisor shall be reduced proportionately; and to the extent that the Advisor reimburses the Fund as a result of such expense limitations, the Sub-Advisor shall reimburse the Advisor that proportion of such reimbursement payments which the sub-advisory fee hereunder bears to the advisory fee under the Agreement.
8. Non-Exclusivity. The services of the Sub-Advisor to the Advisor with respect to the Company and the Fund are not deemed to be exclusive, and the Sub-Advisor shall be free to render investment advisory and administrative or other services to others (including other investment companies) and to engage in other activities. It is understood and agreed that officers and directors of the Sub-Advisor may serve as officers or directors of the Advisor or of the Company, and that officers or directors of the Advisor or of the Company may serve as officers or directors of the Sub-Advisor to the extent permitted by law; and that the officers and directors of the Sub-Advisor are not prohibited from engaging in any other business activity or from rendering services to any other person, or from serving as partners, officers, directors or trustees of any other firm or trust, including other investment advisory companies.
9. Term and Approval. This Agreement shall become effective with respect to the Fund if approved by the shareholders of the Fund, and if so approved, this Agreement shall thereafter continue in force and effect until June 30, 2000, 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 Company's Board of Directors, or (ii) by the vote of
"a majority of the outstanding voting securities" of the Fund (as defined under
Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the directors who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of a party to this Agreement (other than as Company directors), by votes cast in person at a meeting specifically called for such purpose.
10. Termination. This Agreement may be terminated as to the Fund at any time, without the payment of any penalty, by vote of the Company's Board of Directors or by vote of a majority of the Fund's outstanding voting securities, or by the Advisor, or by the Sub-Advisor on sixty (60) days' written notice to the other party and to the Company. The notice provided for herein may be waived by either party. This Agreement shall automatically terminate in the event of its assignment, the term "assignment" for purposes of this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act.
12. Liability of Sub-Advisor. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Sub-Advisor or any of its officers, directors or employees, the Sub-Advisor shall not be subject to liability to the
Advisor 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.
13. Notices. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to such address as may be designated for the receipt of such notice, with a copy to the Company. Until further notice, it is agreed that the address of the Company and that of the Advisor shall be as follows:
11 Greenway Plaza, Suite 100 Houston, Texas 77046
Attn: Mr. Robert H. Graham
Until further notice, it is agreed that the address of the Sub-Advisor shall be as follows:
11 Devonshire Square
London, England EC2M4YR
Attn: [Name]
14. Questions of Interpretation. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act or the Advisers Act shall be resolved by reference to such term or provision of the 1940 Act or the Advisers Act and to interpretations thereof, if any, by the United States Courts or in the absence of any controlling decision of any such court, by rules, regulations or orders of the Securities and Exchange Commission 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 this Agreement is revised by rule, regulation or order of the Securities and Exchange Commission, such provision shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their respective duly authorized officers as of the day and year first written above.
A I M ADVISORS, INC.
Attest:
By:
---------------------------------- ---------------------------------
Assistant Secretary President
|
(SEAL)
INVESCO ASSET MANAGEMENT LIMITED
Attest:
By:
---------------------------------- ---------------------------------
Title: Title:
---------------------------- ------------------------------
|
(SEAL)
EXHIBIT 5(h)
AMENDMENT NO. 2
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 2, dated as of ____________, 1998, amends the Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation Agreement (the "Agreement"), dated September 9, 1998, between A I M Advisors, Inc., a Delaware corporation and each registered investment company (the "Investment Companies") and its respective portfolios (the "Funds") listed on the signature page thereof.
W I T N E S S E T H:
WHEREAS, the parties to the Agreement desire to amend the Agreement to add AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund of AIM Variable Insurance Funds, Inc. as a party to the agreement;
NOW, THEREFORE, the parties agree as follows;
1. The list of Investment Companies and Funds covered by the Agreement is hereby amended to include the following:
"AIM V.I. Global Growth and Income Fund AIM V.I. Telecommunications 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 Amendment No. 2 to be executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: By:
--------------------------- ---------------------------
Assistant Secretary President
(SEAL)
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund AIM SUMMIT FUND, INC.
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund AIM INTERNATIONAL FUNDS, INC.
AIM Asian Growth Fund
AIM EQUITY FUNDS, INC. AIM European Development Fund
AIM Aggressive Growth Fund AIM International Equity Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund
AIM Capital Development Fund AIM Global Growth Fund
AIM Charter Fund AIM Global Income Fund
AIM Constellation Fund
AIM Weingarten Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Aggressive Growth Fund
AIM FUNDS GROUP AIM V.I. Balanced Fund
AIM Balanced Fund AIM V.I. Capital Appreciation Fund
AIM Global Utilities Fund AIM V.I. Capital Development Fund
AIM High Yield Fund AIM V.I. Diversified Income Fund
AIM Income Fund AIM V.I. Global Growth and Income Fund
AIM Money Market Fund AIM V.I. Global Utilities Fund
AIM Select Growth Fund AIM V.I. Government Securities Fund
AIM Value Fund AIM V.I. Growth Fund
AIM V.I. Growth & Income Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. High Yield Fund
AIM High Yield Fund II AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
Attest: By:
--------------------------- ---------------------------
Assistant Secretary President
|
(SEAL)
EXHIBIT 5(i)
AMENDMENT NO. 1
TO
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This Amendment No. 1 dated as of September 28, 1998, amends the Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation Agreement (the "Agreement"), dated September 9, 1998, between A I M Advisors, Inc., a Delaware corporation and each registered investment company (the "Investment Companies") and its respective portfolios (the "Funds") listed on the signature page thereof.
W I T N E S S E T H:
WHEREAS, the parties to the Agreement desire to amend the Agreement to add AIM Investment Securities Funds on behalf of its AIM High Yield Fund II portfolio as a party to the agreement;
NOW, THEREFORE, the parties agree as follows;
1. The list of Investment Companies and Funds covered by the Agreement is hereby amended to include the following:
"AIM INVESTMENT SECURITIES FUNDS
AIM High Yield Fund II"
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 No. 1 to be executed by their respective officers on the date first written above.
A I M ADVISORS, INC.
Attest: By:
-------------------------- --------------------------
Assistant Secretary President
(SEAL)
AIM ADVISOR FUNDS, INC. AIM SPECIAL OPPORTUNITIES FUNDS
AIM Advisor Flex Fund AIM Small Cap Opportunities Fund
AIM Advisor International Value Fund
AIM Advisor Large Cap Value Fund AIM SUMMIT FUND, INC.
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund AIM INTERNATIONAL FUNDS, INC.
AIM Asian Growth Fund
AIM EQUITY FUNDS, INC. AIM European Development Fund
AIM Aggressive Growth Fund AIM International Equity Fund
AIM Blue Chip Fund AIM Global Aggressive Growth Fund
AIM Capital Development Fund AIM Global Growth Fund
AIM Charter Fund AIM Global Income Fund
AIM Constellation Fund
AIM Weingarten Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Aggressive Growth Fund
AIM FUNDS GROUP AIM V.I. Balanced Fund
AIM Balanced Fund AIM V.I. Capital Appreciation Fund
AIM Global Utilities Fund AIM V.I. Capital Development Fund
AIM High Yield Fund AIM V.I. Diversified Income Fund
AIM Income Fund AIM V.I. Global Utilities Fund
AIM Money Market Fund AIM V.I. Government Securities Fund
AIM Select Growth Fund AIM V.I. Growth Fund
AIM Value Fund AIM V.I. Growth & Income Fund
AIM V.I. High Yield Fund
AIM INVESTMENT SECURITIES FUNDS AIM V.I. International Equity Fund
AIM High Yield Fund II AIM V.I. Money Market Fund
AIM V.I. Value Fund
Attest: By:
-------------------------- --------------------------
Assistant Secretary President
|
(SEAL)
EXHIBIT 5(j)
FOREIGN COUNTRY SELECTION
AND MANDATORY SECURITIES DEPOSITORY RESPONSIBILITIES
DELEGATION AGREEMENT
This FOREIGN COUNTRY SELECTION AND MANDATORY SECURITIES DEPOSITORY
RESPONSIBILITIES DELEGATION AGREEMENT (the "Agreement") is made this 9th day of
September, 1998 by and between A I M ADVISORS, INC., a Delaware corporation
("AIM") and each registered investment company (the "Investment Companies") and
its respective portfolios (the "Funds") listed on the signature page hereof.
W I T N E S S E T H:
WHEREAS, AIM has agreed to accept responsibility for selecting and monitoring relationships with compulsory depositories; and
WHEREAS, AIM has agreed to accept responsibility for the selection of foreign countries in which the Funds may invest;
NOW, THEREFORE, AIM hereby agrees to exercise reasonable care, prudence and diligence such as a person having safekeeping of fund assets would exercise in performing the following responsibilities:
1. DEFINITIONS.
A. "FOREIGN ASSETS" means any of a Fund's investments (including foreign currencies) for which the primary market is outside the United States, currency contracts that are settled outside the United States, and such cash and cash equivalents as are reasonably necessary to effect the Fund's transactions in such investments.
B. "FOREIGN CUSTODY MANAGER" means State Street Bank and Trust Company.
C. "MANDATORY SECURITIES DEPOSITORY" means a foreign securities depository or clearing agency that, either as a legal or practical matter, must be used if a Fund determines to place Foreign Assets in a country outside the United States (i) because required by law or regulation; (ii) because securities cannot be withdrawn from such foreign securities depository or clearing agency; or (iii) because maintaining or effecting trades in securities outside the foreign securities depository or clearing agency is not consistent with prevailing or developing custodial or market practices.
D. "PREVAILING COUNTRY RISKS" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country, including but not limited to, such country's political environment; economic and financial infrastructure (including any Mandatory Securities Depositories operating in the country); prevailing or developing custody and settlement practices; laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country; and factors comprising "prevailing country risk", including the effects of foreign law on the safekeeping of Fund assets, the likelihood of expropriation, nationalization, freezing or confiscation of the Fund's assets and any reasonably foreseeable difficulties in repatriating the Fund's assets.
E. "SECURITIES DEPOSITORY" means a system for the central handling of securities where all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the securities. A Securities Depository includes a Mandatory Securities Depository.
2. FOREIGN COUNTRY SELECTION. Selection of foreign countries in which
a Fund invests. AIM may determine that an issuer is located in a
particular country based on various factors, including the following:
(i) the issuer is organized under the laws of and maintains a principal
office in that country; (ii) the issuer derives 50% or more of its
total revenues from business in that country; or (iii) the primary
market for the issuer's securities is in that country. In addition, in
determining whether to maintain assets of a Fund in a foreign country,
AIM shall consider Prevailing Country Risks. AIM may rely on
information provided by computerized information services, such as
Bloomberg terminals, in making the foregoing determinations. AIM may
also rely on information and opinions provided by the Foreign Custody
Manager in making such determinations. AIM may add or delete foreign
countries to or from the list of approved foreign countries from time
to time, as determined by the AIM employees who are portfolio managers
of the Funds.
3. MANDATORY SECURITIES DEPOSITORIES SELECTION. Selection of Mandatory Securities Depositories for the placement and maintenance of Foreign Assets. AIM shall not make any such selection unless and until it has complied with the terms of paragraphs 4 through 6 of this Agreement.
4. DETERMINATION OF REASONABLE CARE. Determinations by AIM that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the relevant market, if such Assets are held with a Mandatory Securities Depository. In making such determinations, AIM shall consider all factors relevant to the safekeeping of such Foreign Assets, including without limitation:
A. The practices, procedures, and internal controls of the Mandatory Securities Depository, including, but not limited to, the physical protections available for certificated securities (if applicable), the method of keeping custodial records, and the security and data protection practices;
B. Whether the Mandatory Securities Depository has the requisite financial strength to provide reasonable care for the Foreign Assets;
C. The general reputation and standing of the Mandatory Securities Depository and its operating history and number of participants; and
D. Whether the Fund will have jurisdiction over and be able to enforce judgments against the Mandatory Securities Depository, such as by virtue of the existence of any offices of the Mandatory Securities Depository in the United States or the consent by the Mandatory Securities Depository to service of process in the United States.
5. FOREIGN CUSTODY ARRANGEMENTS. Implementation of the Funds' foreign custody arrangements pursuant to written contracts, by the rules or established practices or procedures of the Mandatory Securities Depository, or by any combination of the foregoing that AIM determines will provide reasonable care for the Funds' Foreign Assets based on the standards specified in paragraph A.2. above. Any such contracts shall include provisions that provide:
A. For indemnification or insurance arrangements (or any combination of the foregoing) such that the Funds will be adequately protected against the risk of loss of Foreign Assets held in accordance with such contracts;
B. That the Funds' Foreign Assets will not be subject to any right, charge, security interest, lien or claim of any kind in favor of the custodian or its creditors except a claim of payment for their safe custody or administration or, in the case of cash deposits, liens or rights in favor of creditors of the custodian arising under bankruptcy, insolvency, or similar laws;
C. That beneficial ownership for the Funds' Foreign Assets will be freely transferable without the payment of money or value other than for safe custody or administration;
D. That adequate records will be maintained identifying the Foreign Assets as belonging to a Fund or as being held by a third party for the benefit of the Fund;
E. That each Fund's independent public accountants will be given access to those records or confirmation of the content of those records; and
F. That a Fund will receive periodic reports with respect to the safekeeping of the Fund's Foreign Assets, including, but not limited to, notification of any transfer to or from the Fund's accounts or a third party account containing Foreign Assets held for the benefit of the Fund.
In lieu of any or all of the provisions specified in a. through f. above, such contracts may contain such other provisions that AIM determines will provide, in their entirety, the same or a greater level of care and protection for Fund Foreign Assets as the specified provisions, in their entirety.
6. MONITORING MANDATORY SECURITIES DEPOSITORIES. Establishment of a system
(a) to monitor the appropriateness of maintaining the Fund's Foreign
Assets with a particular Mandatory Securities Depository under Section
4 above, and the contracts governing the Funds' arrangements under
Section 5 above; and (b) to notify the Funds promptly if an arrangement
no longer meets the requirements of [this section B] and to withdraw
promptly the Funds' Foreign Assets from such Mandatory Securities
Depository in such event.
7. REPORTS AND OTHER INFORMATION.
A. ANNUAL REPORTS AND OTHER INFORMATION. AIM shall furnish annually to the Boards of Directors/Trustees information regarding the factors used in its system to monitor Mandatory Securities Depositories.
B. QUARTERLY REPORTS. AIM will submit to the Boards of Directors/Trustees a quarterly report listing all newly approved countries and all countries in which a Fund invested for the first time during the preceding quarter. Such report shall include a revised Appendix 1 to the Foreign Custody and Country Selection Procedures, if applicable, listing the approved countries. AIM will submit to the Boards of Directors/Trustees a quarterly report indicating changes to Mandatory Securities Depositories to the extent such report is not provided by the Foreign Custody Manager.
C. OTHER REPORTS. AIM will notify the Boards of Directors/Trustees in writing of any material change in the Mandatory Securities Depositories for a Fund that has not been reported by the Foreign Custody Manager promptly after the occurrence of the material change.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, as of the day and year first above written.
A I M ADVISORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
--------------------------- ---------------------------
Assistant Secretary Name:
Title:
(SEAL)
AIM ADVISOR FUNDS, INC. AIM SUMMIT FUND, INC.
AIM Advisor Flex Fund
AIM Advisor International Value Fund AIM INTERNATIONAL FUNDS, INC.
AIM Advisor Large Cap Value Fund AIM Asian Growth Fund
AIM Advisor MultiFlex Fund AIM European Development Fund
AIM Advisor Real Estate Fund AIM International Equity Fund
AIM Global Aggressive Growth Fund
AIM EQUITY FUNDS, INC. AIM Global Growth Fund
AIM Aggressive Growth Fund AIM Global Income Fund
AIM Blue Chip Fund
AIM Capital Development Fund AIM VARIABLE INSURANCE FUNDS, INC.
AIM Charter Fund AIM V.I. Aggressive Growth Fund
AIM Constellation Fund AIM V.I. Balanced Fund
AIM Weingarten Fund AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM FUNDS GROUP AIM V.I. Diversified Income Fund
AIM Balanced Fund AIM V.I. Global Utilities Fund
AIM Global Utilities Fund AIM V.I. Government Securities Fund
AIM High Yield Fund AIM V.I. Growth Fund
AIM Income Fund AIM V.I. Growth & Income Fund
AIM Money Market Fund AIM V.I. High Yield Fund
AIM Select Growth Fund AIM V.I. International Equity Fund
AIM Value Fund AIM V.I. Money Market Fund
AIM V.I. Value Fund
AIM SPECIAL OPPORTUNITIES FUNDS
AIM Small Cap Opportunities Fund
Attest: /s/ P. MICHELLE GRACE By: /s/ JOHN J. ARTHUR
--------------------------- ---------------------------
Assistant Secretary Name: John J. Arthur
Title: Senior Vice President
(SEAL)
|
EXHIBIT 6(a)
AMENDMENT NO. 2
TO
MASTER DISTRIBUTION AGREEMENT
The Master Distribution Agreement (the "Agreement"), dated as of February 28, 1997 by and between AIM Variable Insurance Funds, Inc., a Maryland corporation and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS, INC.
o AIM V.I. Aggressive Growth Fund
o AIM V.I. Balanced Fund
o AIM V.I. Capital Appreciation Fund
o AIM V.I. Capital Development Fund
o AIM V.I. Diversification Income Fund
o AIM V.I. Global Growth and Income Fund
o AIM V.I. Global Utilities Fund
o AIM V.I. Government Securities Fund
o AIM V.I. Growth Fund
o AIM V.I. Growth and Income Fund
o AIM V.I. High Yield Fund
o AIM V.I. International Equity Fund
o AIM V.I. Money Market Fund
o AIM V.I. Telecommunications Fund
o AIM V.I. Value Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Dated: , 1998
---------------------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
--------------------------- ---------------------------------
Assistant Secretary President
A I M DISTRIBUTORS, INC.
Attest: By:
--------------------------- ---------------------------------
Assistant Secretary President
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EXHIBIT 6(b)
AMENDMENT NO. 1
TO
MASTER DISTRIBUTION AGREEMENT
The Master Distribution Agreement (the "Agreement"), dated as of February 28, 1997 by and between AIM Variable Insurance Funds, Inc., a Maryland corporation and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
"SCHEDULE A
TO
MASTER DISTRIBUTION AGREEMENT
OF
AIM VARIABLE INSURANCE FUNDS, INC.
o AIM V.I. Aggressive Growth Fund
o AIM V.I. Balanced Fund
o AIM V.I. Capital Appreciation Fund
o AIM V.I. Capital Development Fund
o AIM V.I. Diversification Income Fund
o AIM V.I. Global Utilities Fund
o AIM V.I. Government Securities Fund
o AIM V.I. Growth Fund
o AIM V.I. Growth and Income Fund
o AIM V.I. High Yield Fund
o AIM V.I. International Equity Fund
o AIM V.I. Money Market Fund
o AIM V.I. Value Fund"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
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Assistant Secretary President
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
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Assistant Secretary President
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EXHIBIT 8(a)
AMENDMENT TO CUSTODIAN CONTRACT
This Amendment to the Custodian Contract is made as of September 9, 1998 by and between AIM Variable Insurance Funds, Inc., (the "Fund") and State Street Bank and Trust Company (the "Custodian"). Capitalized terms used in this Amendment without definition shall have the respective meanings ascribed to such terms in the Custodian Contract referred to below.
WHEREAS, the Fund and the Custodian entered into a Custodian Contract dated as of March 31, 1993 (as amended and in effect from time to time, the "Contract"); and
WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, and the Fund has made AIM V.I. Aggressive Growth Fund; AIM V.I. Balanced Fund; AIM V.I. Capital Appreciation Fund; AIM V.I. Capital Development Fund; AIM V.I. Diversified Income Fund; AIM V.I. Global Utilities Fund; AIM V.I. Government Securities Fund; AIM V.I. Growth Fund; AIM V.I. Growth & Income Fund; AIM V.I. High Yield Fund; AIM V.I. International Equity Fund; AIM V.I. Money Market Fund; and AIM V.I. Value Fund subject to the Contract (each such series, together with all other series subsequently established by the Fund and made subject to the Contract in accordance with the terms thereof, shall be referred to as a "Portfolio", and, collectively, the "Portfolios"); and
WHEREAS, the Fund and the Custodian desire to amend certain provisions of the Contract to reflect revisions to Rule 17f-5 ("Rule 17f-5") promulgated under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund and the Custodian desire to amend and restate certain other provisions of the Contract relating to the terms and conditions of the custody of assets of each of the Portfolios held outside of the United States.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Contract, pursuant to the terms thereof, as follows:
I. Article 3 of the Contract is hereby deleted, and Articles 4 through 17 of the Contract are hereby amended, as of the effective date of this Amendment, by renumbering same as Articles 5 through 18, respectively.
II. New Articles 3 and 4 of the Contract are hereby added, as of the effective date of this Amendment, as set forth below.
3. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
3.1. DEFINITIONS.
Capitalized terms in this Article 3 of the Contract shall have the following meanings:
"Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment; economic and financial infrastructure (including any Mandatory Securities Depositories operating in the country); prevailing or developing custody and settlement practices; laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country; and factors comprising the "prevailing country risk", including the effects of foreign law on the safekeeping of Portfolio assets, the likelihood of expropriation, nationalization, freezing, or confiscation of a Portfolio's assets and any reasonably foreseeable difficulties in repatriating a Portfolio's assets.
"Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the SEC, or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act, except that the term does not include Mandatory Securities Depositories.
"Foreign Assets" means any of the Portfolio's investments (including foreign currencies) for which the primary market is outside the United States, currency contracts that are settled outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolio's transactions in such investments.
"Foreign Custody Manager" has the meaning set forth in section (a)(2) of Rule 17f-5.
"Mandatory Securities Depository" means a foreign securities depository or
clearing agency that, either as a legal or practical matter, must be used if the
Fund determines to place Foreign Assets in a country outside the United States
(i) because required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing agency; or (iii)
because maintaining or effecting trades in securities outside the foreign
securities depository or clearing agency is not consistent with prevailing or
developing custodial or market practices.
3.2. DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Fund, by resolution adopted by its Board of Directors (the "Board"), hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Article 3 with respect to Foreign Assets held outside the United States, and the Custodian hereby accepts such delegation, as Foreign Custody Manager of each Portfolio.
3.3. COUNTRIES COVERED.
The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to (a) the countries listed on Schedule A hereto as approved by the Board, which list of Board-approved countries may be amended from time to time by the Fund with the agreement of the Foreign Custody Manager, and (b) the custody arrangements set forth on such Schedule A. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of each Portfolio, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. Mandatory Securities Depositories are listed on Schedule B to this Contract, which Schedule B may be amended from time to time by the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedules A and B in accordance with Section 3.7 of this Article 3.
Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account, or to place or maintain Foreign Assets, in a country listed on Schedule A, and the fulfillment by the Fund of the account opening requirements for such country (if any), the Foreign Custody Manager shall be deemed to have been appointed by the Board as Foreign Custody Manager with respect to that country and to have accepted the delegation. Execution of this Amendment by the Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each Board-approved country listed on Schedule A in which the Custodian has previously placed or currently maintains Foreign Assets pursuant to the terms of the Contract. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Portfolio with respect to that country.
The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period as to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility as Foreign Custody Manager to a Portfolio with respect to the country as to which the Custodian's acceptance of delegation is withdrawn.
3.4. SCOPE OF DELEGATED RESPONSIBILITIES.
3.4.1. SELECTION OF ELIGIBLE FOREIGN CUSTODIANS.
Subject to the provisions of this Article 3, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodians selected by the Foreign Custody Manager in each country listed as "approved" on Schedule A, as such Schedule is amended from time to time.
In performing its delegated responsibilities as Foreign Custody Manager to place or maintain the Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody
Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation, the factors specified in Rule 17f-5(c)(1).
3.4.2. CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS.
The Foreign Custody Manager shall determine that the contract (or the rules or established practices or procedures in the case of an Eligible Foreign Custodian that is a foreign securities depository or clearing agency) governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2).
3.4.3. MONITORING
In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian, selected by the Foreign Custody Manager, the Foreign Custody Manager shall maintain a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian, and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian (or the rules or established practices and procedures in the case of an Eligible Foreign Custodian selected by the Foreign Custody Manager which is a foreign securities depository or clearing agency that is not a Mandatory Securities Depository). The Foreign Custody Manager shall provide the Board with information at least annually as to the factors used in such monitoring system. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian that it has selected are no longer appropriate, the Foreign Custody Manager shall promptly transfer the Fund's Foreign Assets to another Eligible Foreign Custodian in the market and shall notify the Board in accordance with Section 3.7 hereunder.
3.5. GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY.
For purposes of this Article 3, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of a Portfolio, and the Board shall be deemed to be monitoring on a continuing basis such Country Risk to the extent that the Board considers necessary or appropriate.
Notwithstanding any provision of this Contract to the contrary, the Fund on behalf of the Portfolios and the Custodian expressly acknowledge and agree that the Foreign Custody Manager shall not be delegated any responsibilities under this Article 3 with respect to Mandatory Securities Depositories, and that the determination by or on behalf of the Board to place the Foreign Assets in a particular country shall be deemed to include the determination to place such Foreign Assets eligible for any Mandatory Securities Depository with such Mandatory Securities Depository, whether the Mandatory
Securities Depository exists at the time the Foreign Assets are acquired, or after the acquisition thereof.
3.6. STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO.
In performing the responsibilities delegated to it, the Foreign Custody Manager shall exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise.
3.7. REPORTING REQUIREMENTS.
The Foreign Custody Manager shall report at least quarterly on the Foreign Assets held with each Eligible Foreign Custodian and in connection therewith if applicable, provide to the Board amended Schedules A or B at the end of the calendar quarter in which an amendment to either Schedule has occurred. The Foreign Custody Manager will make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Article 3 promptly after the occurrence of the material change.
3.8. REPRESENTATIONS WITH RESPECT TO RULE 17f-5.
The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5.
The Fund represents to the Custodian that the Board has determined that it is reasonable for the Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Contract to the Custodian as the Foreign Custody Manager of each Portfolio.
3.9. EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER.
The Board's delegation to the Custodian as Foreign Custody Manager of a Portfolio shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty days after receipt by the non-terminating party of such notice. The provisions of Section 3.3 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Fund with respect to designated countries.
3.10 FUTURE NEGOTIATIONS.
If at any time prior to termination of this Amendment the Custodian as a matter of standard business practice, accepts delegation as Foreign Custody Manager for its U.S. mutual fund clients on terms materially different than set forth in this Amendment, the Custodian hereby agrees to negotiate with the fund in good faith with respect thereto.
4. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD OUTSIDE THE UNITED STATES.
4.1. DEFINITIONS.
Terms used in this Article 4 and not defined below shall have the meanings ascribed them in the Contract or in this Amendment:
"Foreign Securities System" means either a clearing agency or a securities depository which is listed on Schedule A hereto or a Mandatory Securities Depository.
"Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian.
4.2. HOLDING SECURITIES.
The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian.
4.3. FOREIGN SECURITIES SYSTEMS.
Foreign securities shall be maintained in a Foreign Securities System in a designated country only through arrangements implemented by the Foreign Sub-Custodian in such country pursuant to the terms of this Contract.
4.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
4.4.1. DELIVERY OF FOREIGN ASSETS.
The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of a Portfolio held by such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases:
(i) upon sale of such foreign securities for the Portfolio in accordance with reasonable market practice in the country where such Foreign Assets are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B), in the case of a sale
effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System;
(ii) in connection with any repurchase agreement related to foreign securities;
(iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Portfolio;
(iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable;
(v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian (or such Foreign Sub-Custodian)) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units;
(vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with reasonable market practices in the country where such securities are held or traded; provided that in any such case the Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Sub-Custodian's own negligence or willful misconduct;
(vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement;
(viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities;
(ix) for delivery as security in connection with any borrowing by the Fund requiring a pledge of assets by the Portfolio;
(x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(xi) in connection with the lending of foreign securities; and
(xii) for any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions, a copy of a resolution of the Board or of an Executive Committee of the Board so authorized by the Board, signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary that the resolution was duly adopted and is in full force and effect (a "Certified Resolution"), specifying the Foreign Assets to, be
delivered, setting forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such Foreign Assets shall be made.
4.4.2. PAYMENT OF PORTFOLIO MONIES.
Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, moneys of a Portfolio in the following cases only:
(i) upon the purchase of foreign securities for the Portfolio, unless
otherwise directed by Proper Instructions, in accordance with
reasonable market settlement practice in the country where such
foreign securities are held or traded, including, without limitation:
(A) delivering money to the seller thereof or to a dealer therefor (or
an agent for such seller or dealer) against expectation of receiving
later delivery of such foreign securities; or (B) in the case of a
purchase effected through a Foreign Securities System, in accordance
with the rules governing the operation of such Foreign Securities
System;
(ii) in connection with the conversion, exchange or surrender of foreign securities of the Portfolio;
(iii) for the payment of any expense or liability of the Portfolio including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Contract, legal fees, accounting fees, and other operating expenses;
(iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians;
(v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin;
(vii) in connection with the borrowing or lending of foreign securities; and
(viii) for any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a Certified Resolution specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made.
4.4.3. MARKET CONDITIONS; MARKET INFORMATION.
Notwithstanding any provision of this Contract to the contrary, settlement and payment for Foreign Assets received for the account of a Portfolio and delivery of Foreign Assets maintained for the account of a Portfolio may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs generally accepted by Institutional Clients, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer. For purposes of this Contract, "Institutional Clients" means U.S. registered investment companies or major U.S. based commercial banks, insurance companies, pension funds or substantially similar institutions which, as a part of their ordinary business operations, purchase or sell securities and make use of global custody services.
The Custodian shall provide to the Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian, including without limitation information relating to Foreign Securities Systems, described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board being provided with substantively less information than had been previously provided hereunder and, provided further, that the Custodian shall in any event provide to the Board and to A I M Advisors, Inc. annually the following information and opinions with respect to the Board-approved countries listed on Schedule A:
(i) legal opinions relating to whether local law restricts with respect to U.S. registered mutual funds (a) access of a fund's independent public accountants to books and records of a Foreign Sub-Custodian or Foreign Securities System, (b) a fund's ability to recover in the event of bankruptcy or insolvency of a Foreign Sub-Custodian or Foreign Securities System, (c) a fund's ability to recover in the event of a loss by a Foreign Sub-Custodian or Foreign Securities System, and (d) the ability of a foreign investor to convert cash and cash equivalents to U.S. dollars;
(ii) summary of information regarding Foreign Securities Systems; and
(iii) country profile information containing market practice for (a) delivery versus payment, (b) settlement method, (c) currency restrictions, (d) buy-in practices, (e) foreign ownership limits, and (f) unique market arrangements.
4.5. REGISTRATION OF FOREIGN SECURITIES.
The foreign securities maintained in the custody of a Foreign Custodian (other than bearer securities) shall be registered in the name of the Fund (on behalf of the applicable Portfolio) or in the name of the Custodian or in the name of any Foreign Sub-Custodian
or in the name of any nominee of the foregoing, and the Fund agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities, except to the extent that the Fund incurs loss or damage due to failure of such nominee to meet its standard of care as set forth in the Contract. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of the Fund (on behalf of the applicable Portfolio) under the terms of this Contract unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice.
4.6. BANK ACCOUNTS.
The Custodian shall identify on its books as belonging to a Portfolio cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian shall be subject only to draft or order by the Custodian or such Foreign Sub-Custodian, acting pursuant to the terms of this Contract to hold cash received by or from or for the account of the Portfolio.
4.7. COLLECTION OF INCOME.
The Custodian shall use reasonable commercial efforts to collect all dividends, income and other payments with respect to the Foreign Assets held hereunder to which a Portfolio shall be entitled and shall credit such income, as collected, to the Portfolio. In the event the Custodian or a Foreign Sub-Custodian must use measures beyond those which are customary in a particular country to collect such payments, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian attendant thereto.
4.8. SHAREHOLDER RIGHTS.
With respect to the foreign securities held under this Article 4, the Custodian will use commercially reasonable efforts to facilitate the exercise by the Fund on behalf of the Portfolios of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may obtain in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights.
4.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES.
The Custodian shall transmit promptly to the Fund written information (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith) received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of a Portfolio. With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the
tender or exchange offer. Subject to the standard of care to which the Custodian is held under this Contract, the Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolio at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least two New York business days prior to the date on which the Custodian is to take action to exercise such right or power.
4.10. LIABILITY OF FOREIGN SUB-CUSTODIANS AND FOREIGN SECURITIES SYSTEMS.
Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible consistent with prevailing market practice, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with such Foreign Sub-Custodian's performance of such obligations. At the election of the Fund, the Fund shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Fund and any applicable Portfolio has not been made whole for any such loss, damage, cost, expense, liability or claim.
4.11. TAX LAW.
The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. With respect to jurisdictions other than the United States, the sole responsibility of the Custodian with regard to the tax law of any such jurisdiction shall be to use reasonable efforts to (a) notify the Fund of the obligations imposed on the Fund with respect to the Portfolios or the Custodian as custodian of such Portfolios by the tax law of such jurisdictions, including responsibility for withholding and other taxes, assessment or other governmental charges, certifications and government reporting and (b) perform such ministerial steps as are required to collect any tax refund, to ascertain the appropriate rate of tax withholding and to provide such documents as may be required to enable each Fund to receive appropriate tax treatment under applicable tax laws and any applicable treaty provisions. The Custodian, in performance of its duties under this Section, shall be entitled to treat each Fund as a Maryland corporation which is a "registered investment company" under the laws of the United States, and it shall be the duty of each Fund to inform the Custodian of any change in the organization, domicile or, to the extent within the knowledge of the Fund, other relevant facts concerning tax treatment of the Fund and further to inform the Custodian if the Fund is or becomes the beneficiary of any special ruling or treatment not applicable to the general nationality and category of entity of which the Fund is a part under general laws and treaty provisions. The Custodian shall be entitled to rely on any information supplied by the Fund. The Custodian may engage reasonable professional advisors disclosed to the Fund by the Custodian, which may include attorneys, accountants or financial institutions in the regular business of investment administration and may rely upon advice received therefrom.
4.12. LIABILITY OF CUSTODIAN.
Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by Country Risk (as such term is defined in Article 3 hereof), regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities Depository, the Custodian shall be without liability for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other similar loss beyond the reasonable control of the Custodian or the Sub-Custodian.
The Custodian shall be liable to the Fund on account of any actions or omissions of any Foreign Sub-Custodian to the same extent as such Foreign Sub-Custodian shall be liable to the Custodian.
4.13 USE OF TERM "FUND"; ASSETS AND LIABILITIES
All references in this Article 4 or in Article 3 of this Agreement to "Fund" shall mean the Fund, or a Portfolio of the Fund, as the context requires or as applicable.
The Custodian shall maintain separate and distinct records for each Portfolio and the assets allocated solely with such Portfolio shall be held and accounted for separately from the assets of the Fund associated solely with any other Portfolio. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Portfolio shall be enforceable against the assets of such Portfolio only, and not against the assets of the Fund generally or the assets of any other Portfolio.
III. 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. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of Article 3 hereof, in the event of any conflict between the provisions of Articles 3 and 4 hereof, the provisions of Article 3 shall prevail.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written.
WITNESSED BY: STATE STREET BANK AND TRUST COMPANY
/s/ MARC L. PARSONS
-------------------------------- By: /s/ RONALD E. LOGUE
Marc L. Parsons ------------------------------------
Associate Counsel Name: Ronald E. Logue
Title: Executive Vice President
WITNESSED BY: AIM VARIABLE INSURANCE FUNDS, INC.
/s/ P. MICHELLE GRACE By: /s/ JOHN J. ARTHUR
-------------------------------- ------------------------------------
Name: P. Michelle Grace Name: John J. Arthur
Title: Assistant Secretary Title: Senior Vice President
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SCHEDULE A
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STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Argentina Citibank, N.A. --
Australia Westpac Banking Corporation --
Austria Erste Bank der Oesterreichischen
Sparkassen AG --
Bahrain British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited) --
Bangladesh Standard Chartered Bank --
Belgium Generale de Banque --
Bermuda The Bank of Bermuda Limited --
Bolivia Banco Boliviano Americano S.A. --
Botswana Barclays Bank of Botswana Limited --
Brazil Citibank, N.A. --
Bulgaria ING Bank N.V. --
Canada Canada Trustco Mortgage Company --
Chile Citibank, N.A. --
People's Republic The Hongkong and Shanghai
of China Banking Corporation Limited,
Shanghai and Shenzhen branches --
Colombia Cititrust Colombia S.A.
Sociedad Fiduciaria --
|
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Croatia Privredna Banka Zagreb d.d --
Cyprus Barclays Bank Plc.
Cyprus Offshore Banking Unit --
Czech Republic Ceskoslovenska Obchodni
Banka, A.S. --
Denmark Den Danske Bank --
Ecuador Citibank, N.A. --
Egypt National Bank of Egypt --
Estonia Hansabank --
Finland Merita Bank Limited --
France Banque Paribas --
Germany Dresdner Bank AG --
Ghana Barclays Bank of Ghana Limited --
Greece National Bank of Greece S.A. The Bank of Greece,
System for Monitoring Transactions in
Securities in Book-Entry Form
Hong Kong Standard Chartered Bank --
Hungary Citibank Budapest Rt. --
Iceland Icebank Ltd. --
|
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
India Deutsche Bank AG --
The Hongkong and Shanghai
Banking Corporation Limited
Indonesia Standard Chartered Bank --
Ireland Bank of Ireland --
Israel Bank Hapoalim, B.M. --
Italy Banquc Paribas --
Ivory Coast Societe Generale de Banques
en Cote d'Ivoire --
Jamaica Scotiabank Jamaica Trust and Merchant
Bank Ltd. --
Japan The Daiwa Bank, Limited Japan Securities Depository
Center
The Fuji Bank, Limited
Jordan British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited) --
Kenya Barclays Bank of Kenya Limited --
Republic of Korea The Hongkong and Shanghai Banking
Corporation Limited --
Latvia JSC Hansabank-Latvija --
Lebanon British Bank of the Middle East
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited) --
|
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Lithuania Vilniaus Bankas AB --
Malaysia Standard Chartered Bank --
Malaysia Berhad
Mauritius The Hongkong and Shanghai --
Banking Corporation Limited
Mexico Citibank Mexico, S.A. --
Morocco Banque Commerciale du Maroc --
Namibia (via) Standard Bank of South Africa --
The Netherlands MeesPierson N.V. --
New Zealand ANZ Banking Group --
(New Zealand) Limited
Norway Christiania Bank og --
Kreditkasse
Oman British Bank of the Middle East --
(as delegate of The Hongkong and
Shanghai Banking Corporation Limited)
Pakistan Deutsche Bank AG --
Peru Citibank, N.A. --
Philippines Standard Chartered Bank --
Poland Citibank (Poland) S.A. --
Bank Polska Kasa Opieki S.A.
Portugal Banco Comercial Portugues --
|
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Romania ING Bank N.V. --
Russia Credit Suisse First Boston AO, Moscow --
(as delegate of Credit Suisse
First Boston, Zurich)
Singapore The Development Bank --
of Singapore Limited
Slovak Republic Ceskoslovenska Obchodna --
Banka, A.S.
Slovenia Banka Creditanstalt d.d. --
South Africa Standard Bank of South Africa Limited --
Spain Banco Santander, S.A. --
Sri Lanka The Hongkong and Shanghai --
Banking Corporation Limited
Swaziland Standard Bank Swaziland Limited --
Sweden Skandinaviska Enskilda Banken --
Switzerland UBS AG --
Taiwan - R.O.C. Central Trust of China --
Thailand Standard Chartered Bank --
Trinidad & Tobago Republic Bank Limited --
Tunisia Banque Internationale Arabe de Tunisie --
|
SCHEDULE A
STATE STREET
GLOBAL CUSTODY NETWORK
SUBCUSTODIANS AND NON-MANDATORY DEPOSITORIES
COUNTRY SUBCUSTODIAN NON-MANDATORY DEPOSITORIES
Turkey Citibank, N.A. -
Ottoman Bank
Ukraine ING Bank, Ukraine -
United Kingdom State Street Bank and Trust Company, -
London Branch
Uruguay Citibank, N.A. -
Venezuela Citibank, N.A. -
Zambia Barclays Bank of Zambia Limited -
Zimbabwe Barclays Bank of Zimbabwe Limited -
|
Euroclear (The Euroclear System)/State Street London Limited
Cedel, S.A. (Cedel Bank, societe anonyme)/State Street London Limited
INTERSETTLE (for EASDAQ Securities)
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Argentina Caja de Valores S.A.
Australia Austraclear Limited
Reserve Bank Information and
Transfer System
Austria Oesterreichische Kontrollbank AG
(Wertpapiersammelbank Division)
Belgium Caisse Interprofessionelle de Depot et
de Virement de Titres S.A.
Banque Nationale de Belgique
Brazil Companhia Brasileira de Liquidacao e
Custodia (CBLC)
Bolsa de Valores de Rio de Janeiro
All SSB clients presently use CBLC
Central de Custodia e de Liquidacao Financeira
de Titulos
Banco Central do Brasil,
Sistema Especial de Liquidacao de
Custodia
Bulgaria Central Depository AD
Bulgarian National Bank
Canada The Canadian Depository
for Securities Limited
People's Republic Shanghai Securities Central Clearing and
of China Registration Corporation
Shenzhen Securities Central Clearing
Co., Ltd.
|
* Mandatory depositories include entities for which use is mandatory as a matter of law or effectively mandatory as a matter of market practice.
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Croatia Ministry of Finance
National Bank of Croatia
Czech Republic Stredisko cennych papiru
Czech National Bank
Denmark Vaerdipapircentralen (the Danish
Securities Center)
Egypt Misr Company for Clearing, Settlement,
and Central Depository
Estonia Eesti Vaartpaberite Keskdepositoorium
Finland The Finnish Central Securities
Depository
France Societe Interprofessionnelle
pour la Compensation des
Valeurs Mobilieres (SICOVAM)
Germany Deutsche Borse Clearing AG
Greece The Central Securities Depository
(Apothetirion Titlon AE)
Hong Kong The Central Clearing and
Settlement System
Central Money Markets Unit
Hungary The Central Depository and Clearing
House (Budapest) Ltd. (KELER)
[Mandatory for Gov't Bonds only;
SSB does not use for other securities]
|
* Mandatory depositories include entities for which use is mandatory 2 as a matter of law or effectively mandatory as a matter of market practice.
STATE STREET SCHEDULE B
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
India The National Securities Depository Limited
Indonesia Bank Indonesia
Ireland Central Bank of Ireland
Securities Settlement Office
Israel The Tel Aviv Stock Exchange Clearing
House Ltd.
Bank of Israel
Italy Monte Titoli S.p.A.
Banca d'Italia
Jamaica The Jamaican Central Securities Depository
Japan Bank of Japan Net System
Kenya Central Bank of Kenya
Republic of Korea Korea Securities Depository Corporation
Latvia The Latvian Central Depository
Lebanon The Custodian and Clearing Center of
Financial Instruments for Lebanon
and the Middle East (MIDCLEAR) S.A.L.
The Central Bank of Lebanon
Lithuania The Central Securities Depository of Lithuania
Malaysia The Malaysian Central Depository Sdn. Bhd.
|
* Mandatory depositories include entities for which use is mandatory 3 as a matter of law or effectively mandatory as a matter of market practice.
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Bank Negara Malaysia,
Scripless Securities Trading and Safekeeping
System
Mauritius The Central Depository & Settlement
Co. Ltd.
Mexico S.D. INDEVAL, S.A. de C.V.
(Instituto para el Deposito de
Valores)
Morocco Maroclear
(pending publication of enabling legislation
in the Moroccan government Gazette)
The Netherlands Nederlands Centraal Instituut voor
Giraal Effectenverkeer B.V. (NECIGEF)
De Nederlandsche Bank N.V.
New Zealand New Zealand Central Securities
Depository Limited
Norway Verdipapirsentralen (the Norwegian
Registry of Securities)
Oman Muscat Securities Market
Pakistan Central Depository Company of Pakistan Limited
Peru Caja de Valores y Liquidaciones S.A.
(CAVALI)
|
* Mandatory depositories include entities for which use is mandatory as a 4 matter of law or effectively mandatory as a matter of market practice.
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Philippines The Philippines Central Depository, Inc.
The Registry of Scripless Securities
(ROSS) of the Bureau of the Treasury
Poland The National Depository of Securities
(Krajowy Depozyt Papierow Wartosciowych)
Central Treasury Bills Registrar
Portugal Central de Valores Mobiliarios (Central)
Romania National Securities Clearing, Settlement and
Depository Co.
Bucharest Stock Exchange Registry Division
Singapore The Central Depository (Pte)
Limited
Monetary Authority of Singapore
Slovak Republic Stredisko Cennych Papierov
National Bank of Slovakia
Slovenia Klirinsko Depotna Druzba d.d.
South Africa The Central Depository Limited
Spain Servicio de Compensacion y
Liquidacion de Valores, S.A.
Banco de Espana
Central de Anotaciones en Cuenta
Sri Lanka Central Depository System
|
* Mandatory depositories include entities for which use is mandatory as a 5 matter of law or effectively mandatory as a matter of market practice.
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
(Pvt) Limited
Sweden Vardepapperscentralen AB
(the Swedish Central Securities Depository)
Switzerland Schweizerische Effekten - Giro AG
INTERSETTLE
Taiwan - R.O.C. The Taiwan Securities Central
Depository Co., Ltd.
Thailand Thailand Securities Depository
Company Limited
Tunisia Societe Tunisienne Interprofessionelle de
Compensation et de Depot de
Valeurs Mobilieres
Central Bank of Tunisia
Tunisian Treasury
Turkey Takas ve Saklama Bankasi A.S.
(TAKASBANK)
Central Bank of Turkey
Ukraine The National Bank of Ukraine
United Kingdom The Bank of England,
The Central Gilts Office and
The Central Moneymarkets Office
Uruguay Central Bank of Uruguay
|
* Mandatory depositories include entities for which use is mandatory as a 6 matter of law or effectively mandatory as a matter of market practice.
SCHEDULE B
STATE STREET
GLOBAL CUSTODY NETWORK
MANDATORY* DEPOSITORIES
COUNTRY MANDATORY DEPOSITORIES
Venezuela Central Bank of Venezuela
Zambia Lusaka Central Depository Limited
Bank of Zambia
|
* Mandatory depositories include entities for which use is mandatory as a 7 matter of law or effectively mandatory as a matter of market practice.
SCHEDULE C
MARKET INFORMATION
PUBLICATION/TYPE OF INFORMATION BRIEF DESCRIPTION
------------------------------- -----------------
(FREQUENCY)
The Guide to Custody in World Markets An overview of safekeeping and
------------------------------------- settlement practices and procedures
(annually) in each market in which State
Street Bank and Trust Company
offers custodial services.
Global Custody Network Review Information relating to the
----------------------------- operating history and structure
(annually) of depositories and subcustodians
located in the markets in which State
Street Bank and Trust Company offers
custodial services, including
transnational depositories.
Global Legal Survey With respect to each market in which
------------------- State Street Bank and Trust Company
(annually) offers custodial services, opinions
relating to whether local law
restricts (i) access of a fund's
independent public accountants to
books and records of a Foreign
Sub-Custodian or Foreign Securities
System, (ii) the Fund's ability to
recover in the event of bankruptcy or
insolvency of a Foreign Sub-Custodian
or Foreign Securities System, (iii)
the Fund's ability to recover in the
event of a loss by a Foreign
Sub-Custodian or Foreign Securities
System, and (iv) the ability of a
foreign investor to convert cash and
cash equivalents to U.S. dollars.
Subcustodian Agreements Copies of the subcustodian contracts
----------------------- State Street Bank and Trust Company
(annually) has entered into with each
subcustodian in the markets in which
State Street Bank and Trust Company
offers subcustody services to its US
mutual fund clients.
Network Bulletins (weekly): Developments of interest to investors
in the markets in which State Street
Bank and Trust Company offers
custodial services.
Foreign Custody Advisories (as
necessary): With respect to markets in which
State Street Bank and Trust Company
offers custodial services which
exhibit special custody risks,
developments which may impact State
Street's ability to deliver expected
levels of service.
|
EXHIBIT 9(c)
AMENDMENT NO. 1
TO
MASTER ADMINISTRATIVE SERVICES AGREEMENT
This Amendment, dated as of _____________, 1998, is made to the Master Administrative Services Agreement, (the "Agreement"), as amended, dated May 1, 1998, by and between A I M Advisors, Inc. (the "Administrator") and AIM Variable Insurance Funds, Inc. (the "Company") add the following Funds to the provisions of the agreement:
AIM V. I. Global Growth and Income Fund AIM V. I. Telecommunications Fund
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be executed by their officers designated below, as of the day and year first above written.
A I M ADVISORS, INC.
Attest: By:
---------------------------- -----------------------------
Assistant Secretary President
|
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
---------------------------- -----------------------------
Assistant Secretary President
|
EXHIBIT 9(d)
MASTER ADMINISTRATIVE SERVICES AGREEMENT, AS AMENDED
This MASTER ADMINISTRATIVE SERVICES AGREEMENT, as amended (the "Agreement") is made this 1st day of May, 1998 by and between A I M ADVISORS, INC., a Delaware corporation (the "Administrator"), and AIM VARIABLE INSURANCE FUNDS, INC., a Maryland corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is an open-end investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Board of Directors of the Company has authorized the issuance of separate series of shares representing interests in thirteen investment portfolios: the AIM V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. Capital Development Fund, AIM V.I. Diversified Income Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. High Yield Fund, AIM V. I. International Equity Fund, AIM V.I. Money Market Fund, AIM V.I. Global Utilities Fund and AIM V.I. Value Fund (the "Funds"); and
WHEREAS, the Company, on behalf of the Funds, has retained the Administrator to provide investment advisory services pursuant to a Master Investment Advisory Agreement which provides that the Administrator may perform (or arrange for the performance of) accounting, shareholder servicing and other administrative services as well as investment advisory services to the Funds, 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 Directors and upon a finding by the Board of Directors that the provision of such services is in the best interest of the Company and its shareholders; and
WHEREAS, the Board of Directors has found that the provision of such administrative services is in the best interest of the Funds 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 Company (including related office space, facilities and equipment) whose normal duties consist of maintaining the financial accounts and books and records of the Company and the Funds, 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; and
(b) such other administrative services as may be furnished from time to time by the Administrator to the Company or the Funds at the request of the Company's Board of Directors.
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 Company) will provide the following administrative services:
(a) Establish procedures to ensure compliance with the conditions of the Company's Mixed and Shared Funding Order.
(b) Provide assistance (clerical, administrative and other) in the negotiation of participation agreements between the Company, on behalf of the various Funds and Insurance Companies or Qualified Plans.
(c) Prepare the various forms of prospectus, financial reports and proxy statements as the Company has agreed to provide in the participation agreements to which it is a party.
(d) Maintain master accounts with the Fund 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 Fund shares based on Contractowners' redemption requests. Disburse or credit to the Accounts all proceeds of redemptions of shares of the Fund. Notify the Fund of the cash required to meet payments.
(f) Determine the net amount to be transmitted to the Fund as a result of purchases of Fund shares based on Contractowners' purchase payments and transfers allocated to the Accounts investing in the Fund. Transmit net purchase payment receipts to the Fund's custodian.
(g) Distribute (or arrange for the distribution) to Contractowners copies of the Fund's prospectus, proxy materials, periodic fund reports to Contractowners and other materials that the Fund 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 Fund 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 Fund (not including information about performance or related to sales) and communicating with Contractowners about Fund (and Separate Account) performance.
3. The services provided hereunder shall at all times be subject to the direction and supervision of the Company's Board of Directors.
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 Funds shall reimburse the Administrator for expenses incurred by them or their affiliates in accordance with the methodologies established from time to time by the Company's Board of Directors. Such amounts shall be paid to the Administrator on a quarterly basis.
5. As full compensation for the services performed under Item 2, above, the Funds shall pay AIM an amount up to 0.25% of the average net asset value of each Fund in excess of the net asset value of each such Fund on April 30, 1998, provided that the fee will not 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 Company or the Funds 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 Company 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 director, officer or employee of the Company 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 continue in effect until May 1, 2000 and shall continue in effect from year to year thereafter; provided that such continuance is specifically approved at least annually:
(a) (i) by the Company's Board of Directors or (ii) by the vote of a majority of the outstanding voting securities of each of the Funds (as defined in Section 2(a)(42) of the 1940 Act); and
(b) by the affirmative vote of a majority of the Company's directors who are not parties to this Agreement or interested persons of a party to this Agreement, 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) or in the event of termination of the Master Investment Advisory Agreement relating to the Funds between the Company and the Administrator.
10. This Agreement may be amended or modified, but only by a written instrument signed by both the Company and the Administrator.
11. 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, Attention: President, with a copy to the General Counsel, or (b) to the Company at Eleven Greenway Plaza, Suite 100, Houston, Texas 77046, Attention: President, with a copy to the General Counsel.
12. 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.
13. This Agreement shall be governed by and construed in accordance with the laws 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/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
--------------------------------- ------------------------------
Assistant Secretary President
|
(SEAL)
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
--------------------------------- ------------------------------
Assistant Secretary President
|
(SEAL)
EXHIBIT 9(j)
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated November 4, 1997, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware corporation, A I M Advisors, Inc., a Delaware Corporation, Nationwide Life Insurance Company, an Ohio life insurance company, Nationwide Life and Annuity Insurance Company, an Ohio corporation and Nationwide Advisory Services, Inc., an Ohio corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
-------------------------------------------------------------------------------
SEPARATE ACCOUNTS FUNDS AVAILABLE UNDER
UTILIZING THE FUNDS THE ACCOUNTS
-------------------------------------------------------------------------------
NEA Valuebuilder AIM V.I. CAPITAL APPRECIATION FUND
o MultiFlex Separate Account AIM V.I. HIGH YIELD FUND
AIM V.I. INTERNATIONAL EQUITY FUND
AIM V.I. VALUE FUND
---------------------------------------------
|
ALL OTHER TERMS AND PROVISIONS OF THE AGREEMENT NOT AMENDED HEREIN SHALL
REMAIN IN FULL FORCE AND EFFECT.
EFFECTIVE DATE: JUNE 15, 1998
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
----------------------- -----------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
----------------------- -----------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
|
(SEAL)
A I M ADVISORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
-------------------------- ---------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
NATIONWIDE LIFE INSURANCE COMPANY
Attest: /s/ HEATHER C. HARKER NYE By: /s/ JOSEPH P. RATH
-------------------------- ---------------------------
Name: Heather C. Harker Nye, Name: Joseph P. Rath
Title: Attorney at Law Title: Vice President
Notary Public, State of Product and Market Compliance
Ohio My commission has
no expiration date.
Section 147.03 R.C.
|
(SEAL)
NATIONWIDE LIFE AND ANNUITY INSURANCE
COMPANY
Attest: /s/ HEATHER C. HARKER NYE By: /s/ JOSEPH P. RATH
-------------------------- ---------------------------
Name: Heather C. Harker Nye, Name: Joseph P. Rath
Title: Attorney at Law Title: Vice President
Notary Public, State of Product and Market Compliance
Ohio My commission has
no expiration date.
Section 147.03 R.C.
|
(SEAL)
NATIONWIDE ADVISORY SERVICES, INC.
Attest: /s/ HEATHER C. HARKER NYE By: /s/ JAMES F. LAIRD, JR.
-------------------------- ---------------------------
Name: Heather C. Harker Nye, Name: James F. Laird, Jr.
Title: Attorney at Law Title: Vice President and General Manager
Notary Public, State of Nationwide Advisory Services, Inc.
Ohio My commission has
no expiration date.
Section 147.03 R.C.
|
(SEAL)
EXHIBIT 9(s)
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated December 30, 1997, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, Security Life of Denver Insurance Company, a Colorado life insurance company and ING America Equities, Inc., a Colorado 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 SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE
POLICIES UTILIZING THE FUNDS ACCOUNTS
--------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities Fund Separate Account A1 o Group Variable Universal Life Insurance
Contracts
--------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund Separate Account L1 o FIRST LINE VARIABLE UNIVERSAL LIFE
AIM V.I. Government Securities Fund o FIRSTLINE II VARIABLE UNIVERSAL LIFE
o STRATEGIC ADVANTAGE VARIABLE
UNIVERSAL LIFE
o STRATEGIC ADVANTAGE II VARIABLE
UNIVERSAL LIFE
--------------------------------------------------------------------------------------------------------------------------
|
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
-------------------------- --------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
|
(SEAL)
SECURITY LIFE OF DENVER INSURANCE
COMPANY
Attest: /s/ ERIC G. BANTA By: /s/ GARY W. WAGGONER
-------------------------- --------------------------------
Name: Eric G. Banta Name: Gary W. Waggoner
-------------------------- --------------------------------
Title: Assistant Secretary Title: Vice President
-------------------------- --------------------------------
|
(SEAL)
ING AMERICA EQUITIES, INC.
Attest: /s/ SHIRLEY A. KNARR By: /s/ CAROL D. HARD
-------------------------- --------------------------------
Name: Shirley Knarr Name: Carol D. Hard
-------------------------- --------------------------------
Title: Actuarial Officer Title: President
-------------------------- --------------------------------
|
(SEAL)
EXHIBIT 9(ee)
[ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK LETTERHEAD]
October 1, 1996
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Attn: Board of Directors
RE: PARTICIPATION AGREEMENT AMONG AIM VARIABLE
INSURANCE FUNDS, INC., A I M DISTRIBUTORS, INC.,
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK AND
ALLSTATE LIFE FINANCIAL SERVICES, INC.
Gentlemen:
The purpose of this letter is to set forth our understanding of certain provisions of the Participation Agreement referenced above (the "Agreement") that relate to compliance with the conditions of the order issued by the Securities and Exchange Commission permitting AVIF to be used for "mixed and shared funding," as described further in the Agreement. All capitalized terms used herein shall have the meaning ascribed to them in the Agreement.
By way of background, we understand that the provisions referred to above derive from the conditions that the SEC has traditionally imposed in granting such orders. The SEC has articulated its conditions in general language, without specifying the methodology that the Commission would find sufficient for the parties to a participation agreement to follow in order to be deemed to meet the conditions. We further understand that during the application process for the Mixed and Shared Funding exemptive order, neither the SEC nor its staff expressed a view regarding the specific manner by which Participating Insurance Companies could satisfy these conditions.
In particular, it is difficult to discern, from the general language of the SEC's conditions, the extent to which, and the specific manner by which, the SEC would expect a Participating Insurance Company, such as Allstate Life of New York ("ALNY"), to monitor other participating insurance companies with respect to the actions and developments described in Sections 5.3 and 10 of the Agreement. Similarly, it is difficult to discern the specific manner by which the SEC would expect an underlying mutual fund, such as AVIF, to discharge its obligations regarding individual Participating Insurance Companies with respect to such actions and developments.
October 1, 1996
Given this background, we believe that it is advisable to set forth our understanding concerning Sections 5.3 and 10 of the Agreement, which are intended to reflect conditions imposed by the SEC.
With reference to Section 5.3 of the Agreement, it is understood and agreed that such provision is intended to require ALNY to monitor only itself, and not any other Participating Insurance Companies, with respect to the actions and developments described in Section 5.3
Pursuant to Section 10 of the Agreement, which requires ALNY to 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 any Mixed and Shared Funding exemptive order that AVIF may obtain in the future, we agree to follow the procedures for calculating voting privileges previously provided on behalf of our affiliate, Glenbrook Life and Annuity Company. You agree to cause AIM to review our procedures and to notify us whether our procedures are consistent with procedures being used by other Participating Insurance Companies investing in AVIF. Until we are notified in writing by you or by AIM of an inconsistency between our procedures and the procedures being used by other Participating Insurance Companies, we shall assume that our procedures are consistent with procedures used by Participating Insurance Companies, and we shall have no affirmative obligation to contact any such Participating Insurance Companies and verify directly with them their procedures for calculating voting privileges.
If this letter agreement is consistent with your understanding of these matters, kindly sign below and return a signed copy to us. This letter agreement may be executed in two or more counterparts, each of which taken together shall constitute one and the same instrument.
Very truly yours,
Allstate Life Insurance Company Allstate Life Financial Services, Inc.
of New York
By: /s/ JOHN HUNTER By: /s/ JOHN R. HEDRICK
--------------------- -------------------
Name: JOHN HUNTER Name: John R. Hedrick
--------------------- -------------------
Title: AVP Title: General Counsel
--------------------- -------------------
Acknowledged and Agreed:
AIM Variable Insurance Funds, Inc.
By: /s/ ROBERT H. GRAHAM
--------------------
Name: Robert H. Graham
--------------------
Title: President
--------------------
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EXHIBIT 9(gg)
AMENDMENT NO. 2
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated September 21, 1996, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware corporation, Pruco Life Insurance Company, an Arizona life insurance company and Pruco Securities Corporation, a New Jersey 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 SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
--------------------- ---------------------------- ------------------------
AIM V.I. Growth and Pruco Life Flexible Premium Discovery Select Annuity
Income Fund Variable Annuity Account, Contract
AIM V.I. Value Fund established June 16, 1995
AIM V.I. Value Fund Pruco Life Variable Variable Universal Life
Appreciable Account, Insurance Policy
established January 13, 1984
AIM V.I. Value Fund Pruco Life Variable PruSelect I Variable
Universal Account, Universal Life Policy
established April 17, 1989
AIM V.I. Value Fund Pruco Life Variable PruSelect II Variable
Universal Account, Universal Life Policy"
established April 17, 1989
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All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
---------------------- ----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
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(SEAL)
1of 2
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
---------------------- ----------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
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(SEAL)
PRUCO LIFE INSURANCE COMPANY
Attest: /s/ THOMAS C. CASTANO By: /s/ ESTHER H. MILNES
---------------------- ----------------------------
Name: Thomas C. Castano Name: Esther H. Milnes
Title: Assistant Secretary Title: President
|
(SEAL)
PRUCO SECURITIES CORPORATION
Attest: /s/ THOMAS C. CASTANO By: /s/ RICHARD A . TOPP
---------------------- ----------------------------
Name: Thomas C. Castano Name: Richard A. Topp
Title: Assistant Secretary Title: President
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(SEAL)
EXHIBIT 9(jj)
AMENDMENT TO PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
GLENBROOK LIFE AND ANNUITY COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
AND
ALLSTATE LIFE FINANCIAL SERVICES, INC.
Section 5.3 is hereby amended to add, at the end of the last sentence, the following:
Glenbrook's responsibilities in connection with the foregoing shall be carried out with a view only to the interests of Participants.
IN WITNESS WHEREOF, the Parties have caused this Amendment to the Agreement to be executed in their names and on their behalf by and through their duly authorized officers signing below on the 7th of November, 1997.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------ --------------------------------
Nancy L. Martin Robert H. Graham
Assistant Secretary President
A I M DISTRIBUTORS, INC.
Attest: NANCY L. MARTIN By: /s/ W. G. LITTLEPAGE
------------------------------ --------------------------------
Nancy L. Martin W.G. Littlepage
Assistant Secretary Sr. Vice President
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GLENBROOK LIFE AND ANNUITY
COMPANY, on behalf of itself and its
separate accounts
Attest: /s/ BRENDA D. SNEED By: /s/ MICHAEL J. VELOTTA
------------------------------ --------------------------------
Name: Brenda D. Sneed Name: Michael J. Velotta
-------------------------------- --------------------------------
Title: Asst. Vice President Title: VP, Sec'y & General Counsel
------------------------------- -----------------------------
ALLSTATE LIFE FINANCIAL SERVICES,
INC.
Attest: /s/ LISA A. BURNELL By: /s/ JOHN R. HEDRICK
------------------------------ --------------------------------
Name: Lisa A. Burnell Name: John R. Hedrick
-------------------------------- ------------------------------
Title: Asst. Vice President Title: General Counsel & Asst.
------------------------------- Secretary
-----------------------------
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EXHIBIT 9(ll)
AMENDMENT NO. 3
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated December 19, 1995, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware corporation, Glenbrook Life and Annuity Company, an Illinois life insurance company and Allstate Life Financial Services, Inc., a Delaware 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 SEPARATE
SEPARATE ACCOUNTS UTILIZING THE FUNDS ACCOUNTS
------------------------------------- ------------------------------------
Glenbrook Life and Annuity Company AIM V.I. Capital Appreciation Fund
Separate Account A* AIM V.I. Diversified Income Fund
AIM V.I. Global Utilities Fund
AIM V.I. Government Securities Fund
Glenbrook Life A I M Variable Life AIM V.I. Growth Fund
Separate Account A** AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
Glenbrook Life Multi-Manager AIM V.I. Value Fund
Variable Account***
|
* The Policy funded by the Separate Account is Individual and Group Flexible Premium Deferred Variable Annuity Contracts
** The Contract funded by the Separate Account is "AIM Lifetime Plus(SM) Variable Life"
***The Contract funded by the Separate Account is "Glenbrook Provider Variable Annuity"
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------ ----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
|
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
------------------------ ----------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
|
(SEAL)
GLENBROOK LIFE AND ANNUITY COMPANY
Attest: /s/ MICHAEL J. VELOTTA By: /s/ JOHN HUNTER
------------------------ ----------------------------
Name: Michael J. Velotta Name: John Hunter
------------------------ ----------------------------
Title: Secretary Title: SVP
----------------------------
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(SEAL)
ALLSTATE LIFE FINANCIAL SERVICES, INC.
Attest: /s/ JOHN R. HEDRICK By: /s/ LISA A. BURNELL
------------------------ ----------------------------
Name: John R. Hedrick Name: Lisa A. Burnell
------------------------ ----------------------------
Title: Assistant Secretary Title: AVP & Compliance Officer
----------------------------
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(SEAL)
EXHIBIT 9(mm)
AMENDMENT NO. 4
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated December 19, 1995, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware corporation, Glenbrook Life and Annuity Company, an Illinois life insurance company and Allstate Life Financial Services, Inc., a Delaware corporation, is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following:
SCHEDULE A
--------------------------------------------------------------------------------
SEPARATE ACCOUNTS UTILIZING THE FUNDS FUNDS AVAILABLE UNDER THE SEPARATE
ACCOUNTS
--------------------------------------------------------------------------------
Glenbrook Life and Annuity Company AIM V.I. Aggressive Growth Fund
Separate Account A * AIM V.I. Balanced Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Utilities Fund
------------------------------------------ AIM V.I. Government Securities Fund
Glenbrook Life A I M Variable Life AIM V.I. Growth Fund
Separate Account A ** AIM V.I. Growth and Income Fund
AIM V.I. High Yield Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Value Fund
--------------------------------------------------------------------------------
Glenbrook Life Multi-Manager AIM V.I. Capital Appreciation Fund
Variable Account *** AIM V.I. Diversified Income Fund
------------------------------------------ AIM V.I. Global Utilities Fund
Glenbrook Life Variable Life AIM V.I. Government Securities Fund
Separate Account A **** AIM V.I. Growth Fund
------------------------------------------ AIM V.I. Growth and Income Fund
Glenbrook Life Variable Life AIM V.I. International Equity Fund
Separate Account B ***** AIM V.I. Value Fund Individual
--------------------------------------------------------------------------------
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*The Contracts funded by the separate account are individual and group flexible premium deferred variable annuity contracts, know as the "AIM Lifetime Plus(SM) Variable Annuity" and the "AIM Lifetime Plus(SM) II Variable Annuity".
** The Contract funded by the separate account is a modified single premium variable life insurance contract known as the "AIM Lifetime Plus(SM) Variable Life" contract.
*** The Contract funded by the separate account is a flexible premium deferred variable annuity contract, know as the "Glenbrook Provider Variable Annuity".
**** The Contract funded by the separate account is a modified single premium variable life insurance contract know as the "Glenbrook Provider Variable Life" contract.
***** The Contract funded by the separate account is a flexible premium variable universal life insurance contract know as the "Glenbrook Contour".
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
----------------------- -----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title:President
|
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
----------------------- ------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title:President
|
(SEAL)
GLENBROOK LIFE AND ANNUITY COMPANY
Attest: /s/ MICHAEL J. VELOTTA By: /s/ PETER H. HECKMAN
----------------------- ------------------------------
Name: Michael J. Velotta Name: Peter H. Heckman
Title: Vice President, Secretary Title: President & COO
& General Counsel
|
(SEAL)
ALLSTATE LIFE FINANCIAL SERVICES, INC.
Attest: /s/ MICHAEL J. VELOTTA By: /s/ JOHN HUNTER
----------------------- ------------------------------
Name: Michael J. Velotta Name: John Hunter
Title: Secretary Title: President
|
(SEAL)
EXHIBIT 9(vv)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
AETNA LIFE INSURANCE, AND ANNUITY COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AETNA LIFE INSURANCE AND ANNUITY COMPANY,
AS PRINCIPAL UNDERWRITER
DESCRIPTION
Section 1. Available Funds........................................................................2
1.1 Availability.............................................................................2
1.2 Addition, Deletion or Modification of Funds..............................................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.....................................................................4
3.1 General..................................................................................4
3.2 Registration.............................................................................4
3.3 Other (Non-Sales-Related)................................................................5
3.4 Other (Sales-Related)....................................................................5
3.5 Parties To Cooperate.....................................................................5
Section 4. Legal Compliance.......................................................................5
4.1 Tax Laws.................................................................................5
4.2 Insurance and Certain Other Laws.........................................................8
4.3 Securities Laws..........................................................................8
4.4 Notice of Certain Proceedings and Other Circumstances....................................9
4.5 LIFE COMPANY To Provide Documents; Information About AVIF...............................10
4.6 AVIF To Provide Documents; Information About LIFE COMPANY...............................11
Section 5. Mixed and Shared Funding..............................................................12
5.1 General.................................................................................12
5.2 Disinterested Directors.................................................................13
5.3 Monitoring for Material Irreconcilable Conflicts........................................13
5.4 Conflict Remedies.......................................................................14
5.5 Notice to LIFE COMPANY..................................................................15
5.6 Information Requested by Board of Directors.............................................15
5.7 Compliance with SEC Rules...............................................................15
5.8 Other Requirements......................................................................16
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Section 6. Termination..........................................................................16
6.1 Events of Termination..................................................................16
6.2 Notice Requirement for Termination.....................................................17
6.3 Funds To Remain Available..............................................................17
6.4 Survival of Warranties and Indemnifications............................................18
Section 7. Parties To Cooperate Respecting Termination..........................................18
Section 8. Assignment...........................................................................18
Section 9. Notices..............................................................................18
Section 10. Voting Procedures...................................................................19
Section 11. Foreign Tax Credits.................................................................20
Section 12. Indemnification.....................................................................20
12.1 General...............................................................................20
12.2 Effect of Notice......................................................................25
12.3 Successors............................................................................25
Section 13. Applicable Law......................................................................25
Section 14. Execution in Counterparts...........................................................25
Section 15. Severability........................................................................25
Section 16. Rights Cumulative...................................................................25
Section 17. Headings............................................................................25
Section 18. Confidentiality.....................................................................26
Section 19. Parties to Cooperate ...............................................................28
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th day of June, 1998 ("Agreement"), by and among A I M Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("A I M"), Aetna Life Insurance and Annuity Company, a Connecticut life insurance company ("LIFE 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 Aetna Life Insurance and Annuity Company, a registered broker-dealer, 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 nine separate series ("Series"), shares ("Shares") of 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 A I M is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934 as amended (the "1934 Act") and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and;
WHEREAS, LIFE COMPANY represents that it has established Variable Annuity Accounts B, C and D and may establish such other accounts as may be set forth in Schedule A attached hereto and as may be amended from time to time with the mutual consent of the parties hereto (the "Accounts"), each of which is a separate account under Connecticut Insurance law, and has registered or will registered each of the Accounts (except for such Accounts for which no such registration is required) as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"), to serve as an investment vehicle for the Contracts. Each Contract provides for the allocation of net amounts received by LIFE COMPANY to an Account for investment in the shares of one or more specified open-end management investment companies available through that
Account as underlying investment media. Selection of a particular investment management company and changes therein from time to time are made by the participant or Contract owner, as applicable under a particular Contract.
WHEREAS, LIFE COMPANY will be the issuer of certain group and individual variable annuity contracts and variable life insurance contracts and Certificates issued to individuals under a group contract (collectively referred to as "Contracts") which Contracts, if required by applicable law, will be registered under the 1933 Act; 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");
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
(a) 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 Directors of AVIF 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 Directors 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.
(b) AVIF represents and warrants that it will give LIFE COMPANY at least 30 days written notice prior to closing any Fund or Series or to limit sales of Shares of any Fund or Series in any way. In addition, AVIF will use its best efforts to send any agendas or proposed agendas concerning a closing or restriction with respect to a Fund to LIFE COMPANY within 24 hours of the creation of such agenda or proposed agenda.
(c) Notwithstanding the above, if severe market conditions exist which require immediate action in order to comply with all applicable laws and regulations or if the continued offering is disadvantageous to the best interest of the shareholders of the Fund being closed or restricted and it is disadvantageous to the best interest of the
shareholders of the Fund to give 30 days notice, AVIF warrants and represents that it will give notice within 24 hours of a decision to close or restrict the offering of a 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.
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, dividend and capital gain information for each Fund by 6:30 p.m. Eastern Time on each Business Day. In the event such information will not be provided by 6:30 p.m. Eastern Time, AVIF will notify LIFE COMPANY no later than 7:00 p.m. Eastern Time as to when such information is forthcoming and will grant LIFE COMPANY any additional time it needs under (b) below. 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 10:00 a.m. Eastern 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 7:00 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 for all Funds 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.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial account designated by AVIF by 4:00 p.m. Eastern 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 2:00 p.m. Eastern Time on the same day as the Order is placed, to the extent practicable.
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 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 on each Business Day and receipt by such designated agent shall constitute receipt by AVIF; provided that AVIF receives notice of such orders by 10:00 a.m. Eastern 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 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.
2.4 DIVIDENDS AND DISTRIBUTIONS.
LIFE COMPANY hereby elects to reinvest all dividends and capital gains distributions in additional Shares of the corresponding Fund at the 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 EXPENSES.
(a) Except as otherwise provided in this Agreement, all expenses incident to the performance by the Fund under this Agreement shall be paid by AVIF, including the cost of registration of Fund shares with the Securities and Exchange Commission (the "SEC") and in states where required. AVIF and A I M shall pay no fee or other compensation to LIFE COMPANY under this Agreement, and LIFE COMPANY shall pay no fee or other compensation to AVIF or A I M except as provided herein and in Schedule B attached hereto and made a part of this Agreement as may be amended from time to time with the mutual consent of the parties hereto. All expenses incident to performance by each party of its respective duties under this Agreement shall be paid by that party, unless otherwise specified in this Agreement.
(b) AVIF or A I M shall provide to LIFE COMPANY Post Script files of periodic fund reports to shareholders and other materials that are required by law to be sent to Contract owners. In addition, AVIF or A I M shall provide LIFE COMPANY with a sufficient quantity of its prospectuses, statements of additional information and any supplements to any of these materials, to be used in connection with the offerings and transactions contemplated by this Agreement. In addition, AVIF shall provide LIFE COMPANY with a sufficient quantity of its proxy material that is required to be sent to Contract owners. A I M shall be permitted to review and approve the typeset form of such material prior to such printing provided such material has been provided by A I M to LIFE COMPANY within a reasonable period of time prior to typesetting.
(c) In lieu of AVIF's or A I M's providing printed copies of prospectuses, statements of additional information and any supplements to any of these materials, and periodic fund reports to shareholders, LIFE COMPANY shall have the right to request that AVIF transmit a copy of such materials (Post Script files), which LIFE COMPANY may use to have such materials printed together with similar materials of other Account funding media that LIFE COMPANY or any distributor will distribute to existing or prospective Contract owners or participants.
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 qualify and 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 and warrants that it will comply and 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 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) AVIF and A I M represent and warrant that at all times while this agreement is in effect, all beneficial interests will be owned by one or more insurance companies or by any other party permitted under Section 1.817-5(f)(3) of the Regulations promulgated under the Code or by the successor thereto, or by any other party permitted under a Revenue Ruling or private letter ruling granted by the Internal Revenue Service.
(d) 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 Participant, 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 minimum any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section
1.8175(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 advisers 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)), 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 seven (7) 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;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their accounting and legal advisers with such cooperation as AVIF shall reasonably request (including, without limitation, by permitting AVIF and its accounting and legal advisers to review the relevant books and records of LIFE COMPANY) in order to facilitate review by AVIF or its advisers 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 to appeal any adverse judicial decision unless (i) counsel, reasonably agreed to by all Parties, provide an opinion that there is a reasonable basis for making such an appeal and (ii) the appeal is limited to a determination as to whether a Fund is adequately diversified within the meaning of Section 817(h) of the Internal Revenue Code. In the event an appeal is made, AVIF and A I M agree to pay LIFE COMPANY for all costs and expenses incurred in its efforts to carry out the appeal;
(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 A I M 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.
(e) 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 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 near future.
(f) 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 near future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF and A I M represent and warrant that they will notify LIFE COMPANY of any material changes in the operation or diversification of the Funds that may impact the LIFE COMPANY's compliance with state insurance laws, regulation or pronouncements.
(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 Connecticut 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
Section 38a of the Connecticut 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 (i) it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement, (ii) it has provided to LIFE COMPANY the Shared Funding Exemptive Order issued by the SEC dated December 6, 1995 (File No. 812-9642), and (iii) the Funds comply in all material respects with all applicable federal and state laws and regulations.
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 Connecticut law, (iii) each Account is and will remain registered under the l940 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, with 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 will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder.
(b) AVIF and A I M represent and warrant 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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-(l) 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 and ADVISER 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 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 will immediately notify AVIF and ADVISER 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 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, upon reasonable request, 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, as soon as possible after the filing with the filing of such document with the SEC or other regulatory authorities.
(b) LIFE COMPANY will provide 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 (except "standardized material" as defined hereafter), at least two (2) business days, or such shorter period as the Parties hereto may, from time to time, agree upon, prior to its first use. For purposes of this paragraph, "standardized material" is sales literature or other promotional material that is not materially different, in format and/or content, from materials that have previously been reviewed and authorized for use under the terms of this paragraph. LIFE COMPANY agrees to bear all responsibility and liability for any error in any standardized material (e.g., transposition of numbers) to the extent any information contained therein does not conform to the information provided to LIFE COMPANY by A I M or AVIF. No such sales literature or other promotional material shall be used if AVIF or its designated agent reasonably objects to such use within two (2) business days, or such shorter period as the Parties hereto may, from time to time, agree upon, after receipt of such materials. AVIF hereby designates A I M as the entity to receive such literature, until such time as AVIF appoints another designated agent by giving notice to LIFE COMPANY in the manner required by Section 9 hereof. LIFE COMPANY will notify AVIF when it is sending material for review for purposes of confirmation of receipt. AVIF has the right to request subsequent review of standardized material and it proposed usage.
(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 (ie., 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 (ie., 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 Post Script files for 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors actions with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Plan of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in
the minutes of the Board of Directors or other appropriate records, and such minutes or other records will be made available to the SEC upon request.
5.7 COMPLIANCE WITH WC 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.l(b), 4.1(e), 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 6.3 below, this Agreement will terminate as to a Fund:
(a) at the option of either LIFE COMPANY, A I M or the Fund, upon sixty days advance written notice to the other parties;
(b) at the option of LIFE COMPANY, upon one week advance written notice to A I M and the Fund, if Fund shares are not available for any reason to meet the requirement of Contracts as determined by LIFE COMPANY.
(c) 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;
(d) 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;
(e) upon the determination of the Accounts to substitute for the Fund's shares the shares of another investment company in accordance with the terms of the applicable Contracts. LIFE COMPANY will give 60 days written notice to the Fund and A I M of any decision to replace the Fund's shares;
(f) upon assignment of this Agreement, unless made with the written consent of all other parties hereto;
(g) if Fund shares are not registered, issued or sold in conformance with Federal law or such law precludes the use of Fund shares as an underlying investment medium for Contracts issued or to be issued by LIFE COMPANY. Prompt notice shall be given by the appropriate party should such situation occur;
(h) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof;
(i) 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 state law;
(j) upon another Party's material breach of any provision of this Agreement, provided the breaching party is given five days notice of the breach and a reasonable opportunity to cure.
6.2 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, except for termination
because the Contracts ceased 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), 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"). 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 6.2 will not apply to any terminations under Section 5 and the effect of such terminations will be governed by Section 5 of this Agreement.
6.3 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this Agreement to the extent they apply to this Agreement.
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 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.
All notices and other communications hereunder shall be given or made in writing and shall be delivered personally, or sent by telex, telecopier or registered or certified mail, postage prepaid, return receipt requested, or recognized overnight courier service to the party or parties to whom they are directed at the following addresses, or at such other addresses as may be designated by notice from such party to all other parties.
AIM VARIABLE INSURANCE FUNDS, INC., AND A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
AETNA LIFE INSURANCE AND ANNUITY COMPANY (LIFE COMPANY
and UNDERWRITER)
151 Farmington Avenue
Hartford, Connecticut 06156
Facsimile:(860) 273-8340
Attn: Maria F. McKeon, Counsel
Any notice, demand or other communication given in a manner prescribed in this section shall be deemed to have been delivered on receipt.
SECTION 10. VOTING PROCEDURES
(a) LIFE COMPANY shall provide pass-through voting privileges on Fund shares held by registered separate accounts to all Contract owners and participants or Certificate Holders to the extent the SEC continues to interpret the 1940 Act as requiring such privileges. LIFE COMPANY shall ensure that each registered Separate Account calculates voting privileges in a manner consistent with other insurance companies whose registered separate accounts invest in the Fund Shares. LIFE COMPANY shall provide pass-through voting privileges on Fund shares held by unregistered separate accounts to all Contract owners.
(b) LIFE COMPANY will distribute to Contract owners and participants, or as appropriate, all proxy material furnished by the Fund and will vote Fund shares in accordance with instructions received from such Contract owners and participants. If and to the extent required by law, LIFE COMPANY, with respect to each group Contract and in each Account shall vote Fund shares for which no instructions have been received, as well as any shares it owns, in the same proportion as shares for which such instructions have been received. LIFE COMPANY and its agents shall not oppose or interfere with the solicitation of proxies for Fund shares held for such Contract owners and participants or Certificate Holders.
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 12.1 INDEMNIFICATION
12.1 GENERAL.
(a) LIFE COMPANY agrees to indemnify and hold harmless AVIF and A I M, and their directors, officers, employees, agents and each person, if any, who controls AVIF or A I M within the meaning of the Securities Act of 1933 (the "1933 Act") against
any losses, claims, damages or liabilities to which AVIF or A I M or any
director, officer, employee, agent, or controlling person of AVF or A I M may
become subject, under the 1933 Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon (1) any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, prospectus or sales literature of
LIFE COMPANY, or (ii) any 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, or (iii) conduct, statements or representations (other
than statements or representations contained in the prospectuses or sales
literature of AVIF) of LIFE COMPANY or its agents, with respect to the sale and
distribution of Contracts for which Fund shares are the underlying investment or
(iv) any breach of LIFE COMPANY's representations and warranties under this
Agreement. LIFE COMPANY will reimburse any legal or other expenses reasonably
incurred by AVIF or A I M or any director, officer, employee, agent, investment
adviser, or controlling person of AVIF or A I M in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that LIFE COMPANY will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
(i) an untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written materials
furnished to LIFE COMPANY by AVIF or A I M specifically -- for use therein or
(ii) the willful misfeasance, bad faith, or gross negligence by AVIF or A I M in
the performance of its duties or AVIF's or A I M's reckless disregard of
obligations or duties under this Agreement or to LIFE COMPANY, whichever is
applicable. This indemnity agreement will be in addition to any liability which
LIFE COMPANY may otherwise have.
(b) AVIF and A I M agree to indemnify and hold harmless LIFE COMPANY and its directors, officers, employees, agents and each person, if any, who controls LIFE COMPANY within the meaning of the 1933 Act against any losses, claims, damages or liabilities to which LIFE COMPANY or any such director, officer, employee, agent or controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, prospectuses or sales literature of AVIF, or (ii) any omission or the alleged omission to state therein a material fact required to be stated therein or material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any breach of the Fund's or A I M's representations and warranties under this Agreement. AVIF and A I M will reimburse any legal or other expenses reasonably incurred by LIFE COMPANY or any such director, officer, employee, agent, or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that AVIF and AIM will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon (i) an untrue statement or omission or alleged omission made in such Registration Statement or prospectuses which are in conformity with written materials furnished to AVIF or A I M by LIFE COMPANY specifically for use therein, or (ii) the willful misfeasance, bad faith, or gross negligence by LIFE
COMPANY in the performance of its duties or LIFE COMPANY's reckless disregard of obligations or duties under this Agreement or to A I M or AVIF, whichever is applicable. This indemnity agreement will be in addition to any liability which A I M or AVIF may otherwise have.
(c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying Party of the commencement thereof; but the failure so to notify indemnifying Party will not relieve it from any liability which it may have to any indemnified Party otherwise than under this Section 12. In case any such action is brought against any indemnified Party, and it notifies the indemnifying Party of the commencement thereof, the indemnifying Party will be entitled to participate therein and, to the extent that it may wish to, assume the defense thereof, with counsel satisfactory to such indemnified Party, and after notice from the indemnifying Party to such indemnified Party of its election to assume the defense thereof, the indemnifying Party will not be liable to such indemnified party under this Section 12 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation.
12.2 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.
12.3 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 Connecticut 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 (executed by an officer at a Vice President level or higher); 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 (executed by an officer at a Vice President level or higher); 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. 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
----------------------------- -------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
------------------------------- -----------------------------
Title: Assistant Secretary Title: President
------------------------------ ----------------------------
AETNA LIFE INSURANCE AND ANNUITY
COMPANY, on behalf of itself and
its separate accounts
Attest: /s/ ROSEMARIE DERENSIS By: /s/ LAURIE M. LEBLANC
----------------------------- -------------------------------
Name: RoseMarie Derensis Name: Laurie M. LeBlanc
------------------------------- -----------------------------
Title: Assistant Corporate Secretary Title: Vice President
------------------------------ ----------------------------
AETNA LIFE INSURANCE AND ANNUITY
COMPANY, as Principal Underwriter
Attest: /s/ ROSEMARIE DERENSIS By: /s/ LAURIE M. LEBLANC
----------------------------- -------------------------------
Name: RoseMarie Derensis Name: Laurie M. LeBlanc
------------------------------- -----------------------------
Title: Assistant Corporate Secretary Title: Vice President
------------------------------ ----------------------------
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
----------------------------- -------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
------------------------------- -----------------------------
Title: Assistant Secretary Title: Sr. Vice President
------------------------------ ----------------------------
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SCHEDULE A
1. SERIES
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. Government Securities Fund
AIM V.I. International Equity Fund
2. SEPARATE ACCOUNTS
Variable Annuity Account B
Variable Annuity Account C
Variable Annuity Account D
SCHEDULE B
The following costs, expenses and reimbursements will be paid by the party indicated:
1. For purposes of Sections 2, 3 and 4, AVIF or A I M shall be liable to LIFE COMPANY for systems and out of pocket costs incurred by the LIFE COMPANY in making a Contract owner's, a participant's or beneficiary's account whole, if such costs or expenses are a result of A I M's or AVIF's failure to provide timely or correct net asset values (determined in accordance with the pricing error policies established by AVIF's Board of Directors), dividend and capital gains or financial information and if such information is not corrected by 4 p.m. EST of the next business day after releasing such incorrect information provided the incorrect NAV as well as the correct NAV for each day that the error occurred is provided. If a mistake is caused in supplying such information or confirmations, which results in a determination by the Fund that a material error has occurred in the calculation of the net asset values of the Fund, the amount required to make a Contract owner's, Participant's or a beneficiary's account whole shall be borne by the Fund, regardless of when the error is corrected.
The following limits shall apply to the collective liabilities of A I M and/or AVIF, as appropriate to LIFE COMPANY for systems and out of pocket costs incurred by LIFE COMPANY if such costs or expenses are a result of the A I M or AVIF's failure to provide LIFE COMPANY with such correct or timely information: (i) $1,000 per day for each day that incorrect information provided by either A I M or AVIF is not corrected, if such period does not include a month-end or a fiscal quarter-end, (ii) $1,500 per day for each day that such incorrect information provided by either A I M or AVIF is not corrected, if such period does include a month-end or a fiscal quarter-end, and (iii) up to $50,000 per occurrence in the aggregate under (i) or (ii) above. Any incorrect information that has as a common nexus any single error shall be deemed to be one occurrence for these purposes provided all corrections are provided all corrections are provided at the same time.
2. For purposes of this Agreement, AVIF or A I M shall pay for the cost of typesetting and printing periodic fund reports to shareholders, prospectuses, prospectus supplements, statements of additional information and other materials that are required by law to be sent to Contract owners or participants, as well as the cost of distributing such materials. LIFE COMPANY shall pay for the cost of prospectuses and statements of additional information and the distribution thereof for prospective Contract owners or participants. Each party shall be provided with such supporting data as may reasonably be requested for determining expenses under this Agreement.
3. AVIF shall pay all expenses in connection with the provision to LIFE COMPANY of a sufficient quantity of its proxy material under this Agreement. The cost associated with proxy preparation, group authorization letters, programming for tabulation and necessary materials (including postage) will be paid by AVIF.
Dated this 30th day of June, 1998.
AETNA LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ LAURIE M. LEBLANC
-------------------------------
Name: Laurie M. LeBlanc
-----------------------------
Title: Vice President
----------------------------
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AIM VARIABLE INSURANCE FUNDS, INC.
By: /s/ ROBERT H. GRAHAM
-------------------------------
Name: Robert H. Graham
-----------------------------
Title: President
----------------------------
|
A I M DISTRIBUTORS, INC.
By: /s/ ROBERT H. GRAHAM
-------------------------------
Name: Robert H. Graham
-----------------------------
Title: Sr. Vice President
----------------------------
|
EXHIBIT 9(ww)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
ALLMERICA INVESTMENTS, INC.
TABLE OF CONTENTS
DESCRIPTION PAGE
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Timely Pricing and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . .9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Notice to LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Notice Requirement for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Funds To Remain Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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DESCRIPTION PAGE
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6.4 Survival of Warranties and Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Continuance of Agreement for Certain Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Parties To Cooperate Respecting Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.3 Effect of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 13. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 16. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 27th day of July, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM") Allmerica Financial Life Insurance and Annuity Company, a Delaware life insurance company ("LIFE 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 Allmerica Investments, Inc., 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 thirteen separate series ("Series"), shares ("Shares") of 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, 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 Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("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 Directors of AVIF 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 Directors 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.
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.
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 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 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 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.
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) 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 Participant, 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 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 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Delaware 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 Section 2932 of the Delaware 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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 Delaware 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) 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 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for
the Board of Directors 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 of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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, 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"). 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 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 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 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, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
440 Lincoln Street
Worcester, Massachusetts 01653
Facsimile: (508) 855-6641
Attn: Richard M. Reilly, President
ALLMERICA INVESTMENTS, INC.
440 Lincoln Street
Worcester, Massachusetts 01653
Facsimile: (508) 855-6641
Attn: Stephen Parker
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 directors 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 directors 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 directors 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) 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------- ------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
------------------------- ------------------------------
Title Assistant Secretary Title: President
------------------------- ------------------------------
|
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
------------------------- ------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
------------------------- ------------------------------
Title: Assistant Secretary Title: President
------------------------- ------------------------------
|
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY, on behalf of itself
and its separate accounts
Attest: /s/ JACQUELINE E. ESTEVES By: /s/ RICHARD M. REILLY
------------------------- ------------------------------
Name: Jacqueline E. Esteves Name: Richard M. Reilly
------------------------- ------------------------------
Title: Administrator Title: President
------------------------- ------------------------------
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ALLMERICA INVESTMENTS, INC.
Attest: /s/ ELAINE ALLEN By: /s/ STEPHEN PARKER
------------------------- ------------------------------
Name: Elaine Allen Name: Stephen Parker
------------------------- ------------------------------
Title: Admin. Asst. Title: President
------------------------- ------------------------------
|
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Fulcrum Account of Allmerica Financial Life
Insurance and Annuity Company
Fulcrum Variable Life Account of Allmerica Financial Life Insurance and Annuity Company
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Value Fund
o AIM and Design
[AIM LOGO APPEARS HERE]
SCHEDULE C
EXPENSE ALLOCATIONS
====================================================== ======================================================
LIFE COMPANY AVIF / AIM
====================================================== ======================================================
preparing and filing the Account's registration preparing and filing the Fund's registration
statement statement
------------------------------------------------------ ------------------------------------------------------
text composition for Account prospectuses and text composition for Fund prospectuses and
supplements supplements
------------------------------------------------------ ------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
------------------------------------------------------ ------------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus
supplements
------------------------------------------------------ ------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
------------------------------------------------------ ------------------------------------------------------
mailing and distributing Account SAIs to policy mailing and distributing Fund SAIs to policy
owners upon request by policy owners owners upon request by policy 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, mailing, text composition of annual and semi-annual
and distributing annual and semi-annual reports reports (Fund)
for Account (Fund and Account as, applicable)
------------------------------------------------------ ------------------------------------------------------
text composition, printing, mailing, distributing, text composition, printing, mailing, distributing
and tabulation of proxy statements and voting and tabulation of proxy statements and voting
instruction solicitation materials to policy owners instruction solicitation materials to policy owners
with respect to proxies related to the Account with respect to proxies related 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
====================================================== ======================================================
|
EXHIBIT 9(xx)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
AMERICAN GENERAL LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AMERICAN GENERAL SECURITIES INCORPORATED
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Timely Pricing and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . . 9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Notice to LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Notice Requirement for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Funds To Remain Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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DESCRIPTION PAGE
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6.4 Survival of Warranties and Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Continuance of Agreement for Certain Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Parties To Cooperate Respecting Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.3 Effect of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 13. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 16. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of June, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); A I M Distributors, Inc. ("AIM"); American General Life Insurance Company, a Texas life insurance company ("LIFE 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"); American General Securities Incorporated, 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 nine separate series ("Series"), shares ("Shares") of 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, 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 Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("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 Directors of AVIF 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 Directors 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.
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 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) 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 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 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.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial account designated by AVIF by 3:00 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 3:00 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 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 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 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.
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 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) 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 Participant, 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 (except for its parent company, affiliates, accounting and legal representatives on a need to know basis), 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 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;
(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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Texas 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 Article 3.75 of the Texas Insurance Code 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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 Texas 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) 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 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 camera ready or computer diskette copies 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, any of its affiliates or related entities, 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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, 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"). 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 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 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 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:
AMERICAN GENERAL LIFE INSURANCE COMPANY
AMERICAN GENERAL SECURITIES INCORPORATED
c/o American General Independent Producer Division
2727-A Allen Parkway
Houston, Texas 77019
Facsimile: (713) 831-3071
Attn: Steven Glover, Esquire
AIM VARIABLE INSURANCE FUNDS, INC.
AIM DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esquire
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 directors 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, and their respective affiliates, and each person, if any, who controls
AVIF, AIM, and their respective affiliates within the meaning of Section 15 of
the 1933 Act and each of their respective directors 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 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 "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 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, 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.
(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 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 directors 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 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 and AIM or their respective affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF and AIM or their respective affiliates or persons under its control (including, without limitation, their employees and "Associated Persons" as that term is defined in Section (n) 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 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 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 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 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 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 and/or AIM's election
to assume the defense thereof, the Indemnified Party will cooperate fully with
AVIF and/or AIM and shall bear the fees and expenses of any additional counsel
retained by it, and neither AVIF nor 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 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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 or on behalf of LIFE COMPANY, 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 or LIFE COMPANY Protected Parties, as the case may be. 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 LIFE COMPANY or 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------------ -------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
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A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
------------------------------ ------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
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AMERICAN GENERAL LIFE INSURANCE
COMPANY, on behalf of itself and its
separate accounts
Attest: /s/ PAULETTA P. COHN By: /s/ DON M. WARD
------------------------------ ------------------------------
Name: Pauletta P. Cohn Name: Don M. Ward
Secretary Title: Senior Vice President -
Variable Products
|
AMERICAN GENERAL SECURITIES
INCORPORATED
Attest: /s/ PAULETTA P. COHN By: /s/ FRANK P. KOVACH, JR.
------------------------------ ------------------------------
Name: Pauletta P. Cohn Name: Frank P. Kovach, Jr.
Title: Secretary Title: President
|
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. International Equity Fund AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
American General Life Insurance Company Separate Account VL-R Established: May 1, 1997
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS INCLUDING THE CORRESPONDING FUNDS AVAILABLE THEREUNDER
Platinum Investor I Flexible Premium Life Insurance Policy - Policy Form No.
97600
AIM Variable Insurance Funds, Inc.
o AIM V.I. International Equity Fund
o AIM V.I. Value Fund
Platinum Investor II Flexible Premium Life Insurance Policy - Policy Form No.
97610
AIM Variable Insurance Funds, Inc.
o AIM V.I. International Equity Fund
o AIM V.I. Value Fund
Legacy Plus Flexible Premium Life Insurance Policy - Policy Form No. 98615
AIM Variable Insurance Funds, Inc.
o AIM V.I. Value Fund
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. International Equity Fund AIM V.I. Value Fund
o AIM and Design
[AIM LOGO APPEARS HERE]
SCHEDULE C
EXPENSE ALLOCATIONS
=============================================================================================================
AMERICAN GENERAL LIFE AVIF / AIM
preparing and filing the Account's registration preparing and filing the Fund's registration
statement statement
-------------------------------------------------------------------------------------------------------------
text composition for Account prospectuses and text composition for Fund prospectuses and
supplements supplements
-------------------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
printing Account and Fund prospectuses and a camera ready Fund prospectus (the prospectus shall
supplements be limited to those Funds listed on Schedule A)
-------------------------------------------------------------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
-------------------------------------------------------------------------------------------------------------
mailing and distributing Account SAIs to policy mailing and distributing Fund SAIs to policy owners
owners upon request by policy owners upon request by policy 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 and printing (Account), printing, text composition and printing of annual and semi-
mailing, and distributing annual and semi-annual annual reports (Fund)
reports for Account (Fund and Account as,
applicable)
-------------------------------------------------------------------------------------------------------------
text composition, printing, mailing, distributing, text composition, printing, mailing, distributing
and tabulation of proxy statements and voting and tabulation of proxy statements and voting
instruction solicitation materials to policy owners instruction solicitation materials to policy owners
with respect to proxies related to the Account with respect to proxies related 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
=============================================================================================================
|
EXHIBIT 9(yy)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
ALLMERICA INVESTMENTS, INC.
TABLE OF CONTENTS
DESCRIPTION PAGE
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Timely Pricing and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . .9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Notice to LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Notice Requirement for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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DESCRIPTION PAGE
----------- ----
6.3 Funds To Remain Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.4 Survival of Warranties and Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Continuance of Agreement for Certain Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Parties To Cooperate Respecting Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.3 Effect of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 13. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 16. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 27th day of July, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM") First Allmerica Financial Life Insurance Company, a Delaware life insurance company ("LIFE 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 Allmerica Investments, Inc., 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 thirteen separate series ("Series"), shares ("Shares") of 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, 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 Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("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 Directors of AVIF 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 Directors 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.
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.
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 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 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 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.
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) 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 Participant, 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 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 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Massachusetts 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 M.G.L.A. c. 175,
Section 132G of the Massachusetts 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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 Massachusetts 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)
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 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for
the Board of Directors 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 of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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, 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"). 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 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 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 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, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
440 Lincoln Street
Worcester, Massachusetts 01653
Facsimile: (508) 855-6641
Attn: Richard M. Reilly, Vice President
ALLMERICA INVESTMENTS, INC.
440 Lincoln Street
Worcester, Massachusetts 01653
Facsimile: (508) 855-6641
Attn: Stephen Parker
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 directors 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 directors 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 directors 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) 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM Name: NANCY L. MARTIN Name: Robert H. Graham Title: Assistant Secretary Title: President |
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO Name: NANCY L. MARTIN Name: Michael J. Cemo Title: ASSISTANT SECRETARY Title: President |
FIRST ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY, on behalf of itself
and its separate accounts
Attest: /s/ JACQUELINE E. ESTEVES By: /s/ RICHARD M. REILLY Name: Jacqueline E. Esteves Name: Richard M. Reilly Title: Administrator Title: V.P. |
ALLMERICA INVESTMENTS, INC.
Attest: /s/ ELAINE ALLEN By: /s/ STEPHEN PARKER Name: ELAINE ALLEN Name: STEPHEN PARKER Title: Admin. Asst. Title: PRESIDENT |
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Fulcrum Account of First Allmerica Financial Life Insurance Company
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Value Fund
o AIM and Design
[AIM LOGO APPEARS HERE]
SCHEDULE C
EXPENSE ALLOCATIONS
============================================================================================================
LIFE COMPANY AVIF / AIM
------------------------------------------------------------------------------------------------------------
preparing and filing the Account's registration preparing and filing the Fund's registration
statement statement
------------------------------------------------------------------------------------------------------------
text composition for Account prospectuses and text composition for Fund prospectuses and
supplements supplements
------------------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
------------------------------------------------------------------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus
supplements
------------------------------------------------------------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
------------------------------------------------------------------------------------------------------------
mailing and distributing Account SAIs to policy mailing and distributing Fund SAIs to policy owners
owners upon request by policy owners upon request by policy 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, mailing, and text composition of annual and semi-annual reports
distributing annual and semi-annual reports for (Fund)
Account (Fund and Account as, applicable)
------------------------------------------------------------------------------------------------------------
text composition, printing, mailing, distributing, text composition, printing, mailing, distributing
and tabulation of proxy statements and voting and tabulation of proxy statements and voting
instruction solicitation materials to policy owners instruction solicitation materials to policy owners
with respect to proxies related to the Account with respect to proxies related 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
============================================================================================================
|
EXHIBIT 9(zz)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
FORTIS BENEFITS INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
FORTIS INVESTORS, INC.
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....................................................................................4
3.1 General.........................................................................................4
3.2 Parties to Cooperate............................................................................4
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...........................................9
4.5 LIFE COMPANY To Provide Documents; Information About AVIF
...............................................................................................9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY
..............................................................................................10
Section 5. Mixed and Shared Funding.............................................................................12
5.1 General........................................................................................12
5.2 Disinterested Directors........................................................................12
5.3 Monitoring for Material Irreconcilable Conflicts...............................................12
5.4 Conflict Remedies..............................................................................13
5.5 Notice to LIFE COMPANY.........................................................................14
5.6 Information Requested by Board of Directors....................................................14
5.7 Compliance with SEC Rules......................................................................15
5.8 Other Requirements.............................................................................15
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DESCRIPTION PAGE
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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
6.6 Reimbursement of Expenses......................................................................17
Section 7. Parties To Cooperate Respecting Termination..........................................................18
Section 8. Assignment...........................................................................................18
Section 9. Notices..............................................................................................18
Section 10. Voting Procedures...................................................................................19
Section 11. Foreign Tax Credits.................................................................................19
Section 12. Indemnification.....................................................................................19
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER........................................................19
12.2 Of LIFE COMPANY 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...........................................................................25
Section 15. Severability........................................................................................25
Section 16. Rights Cumulative...................................................................................25
Section 17. Headings............................................................................................25
Section 18. Confidentiality.....................................................................................25
Section 19. Trademarks and Fund Names...........................................................................26
Section 20. Parties to Cooperate................................................................................27
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of May, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"); Fortis Benefits Insurance Company, a Minnesota life insurance company ("LIFE 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 Fortis Investors, Inc., 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 nine separate series ("Series"), shares ("Shares") of 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, 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");
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 Directors of AVIF 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 Directors 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.
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.
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 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 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 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.
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 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. Except as otherwise specifically provided herein, each Party will bear all expenses incident to its performance under this Agreement.
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) 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 Participant, 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 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 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Minnesota 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 Section 61A.14 of the Minnesota Insurance Code 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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 Minnesota 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) 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 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b- 1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 camera ready or computer diskette copies 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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; or
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, 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"). 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 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 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).
6.6 REIMBURSEMENT OF EXPENSES.
In the event that this Agreement is terminated without cause as to one or more Funds by AVIF pursuant to Section 6.1(a) hereof, and provided that LIFE COMPANY has at least fifty million dollars ($50,000,000) of Account assets invested in such Funds at the time of such termination, AIM agrees to reimburse LIFE COMPANY for its reasonable expenses, not to exceed, in the aggregate, fifteen thousand dollars ($15,000), incurred in connection with the substitution of interest in another investment company or companies for those of the affected Funds. The reimbursable expenses associated with any such substitution shall include: (a) reasonable attorney fees related to obtaining an exemptive order from the Securities and Exchange Commission, to the extent required; and (b) printing and mailing costs of any required form of notification to affected Contract owners.
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, INC.
A I M ADVISORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
FORTIS BENEFITS INSURANCE COMPANY
FORTIS INVESTORS, INC.
P.O. Box 64284
St. Paul, Minnesota 55164
Facsimile: (612) 738-5262
Attn: General Counsel
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 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 directors
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 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, its affiliates, and each person, if any, who controls AVIF or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors 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 a 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 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 "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 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, 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.
(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 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 directors 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) 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 a 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 or its
affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct
of AVIF or its affiliates or persons under its control
(including, without limitation, their employees and
"Associated Persons" as that term is defined in Section
(n) 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 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) 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 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 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, 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
----------------------------- -----------------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
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A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
----------------------------- -----------------------------
Nancy L. Martin Name: Michael J. Cemo
Assistant Secretary Title: President
FORTIS BENEFITS INSURANCE COMPANY, on
behalf of itself and its separate
accounts
Attest: /s/ DOUGLAS R. LOWE By: /s/ DAVID A. PETERSON
----------------------------- -----------------------------
Name: Douglas R. Lowe Name: David A. Peterson
Title: Vice President Title: Vice President
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FORTIS INVESTORS, INC.
Attest: /s/ SCOTT R. PLUMMER By: /s/ JOHN ERIC HITE
----------------------------- -----------------------------
Name: Scott R. Plummer Name: John Eric Hite
Title: Vice President Title: Vice President
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SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Value Fund
AIM V.I. International Equity Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Separate Account D
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
Norwest Passage Variable Annuity
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
o AIM and Design
[AIM LOGO APPEARS HERE]
SCHEDULE C
EXPENSE ALLOCATIONS
===================================================================================================================
FORTIS LIFE AVIF / AIM
===================================================================================================================
preparing and filing the Account's registration preparing and filing the Fund's registration
statement statement
-------------------------------------------------------------------------------------------------------------------
text composition for Account prospectuses and text composition for Fund prospectuses and
supplements supplements
-------------------------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
-------------------------------------------------------------------------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus, printing costs
supplements of Fund prospectus to existing policy owners
with amounts allocated to the Fund
-------------------------------------------------------------------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
-------------------------------------------------------------------------------------------------------------------
mailing and distributing Account SAIs to policy mailing and distributing Fund SAIs to policy
owners upon request by policy owners owners upon request by policy 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, mailing, text composition of annual and semi-annual
and distributing annual and semi-annual reports reports (Fund)
for Account (Fund and Account as, applicable)
-------------------------------------------------------------------------------------------------------------------
text composition, printing, mailing, distributing, text composition, printing, mailing, distributing
and tabulation of proxy statements and voting and tabulation of proxy statements and voting
instruction solicitation materials to policy owners instruction solicitation materials to policy owners
with respect to proxies related to the Account with respect to proxies related 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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EXHIBIT 9(aaa)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
GUARDIAN INVESTOR SERVICES CORPORATION
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 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Processing Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Timely Pricing and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Timely Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Applicable Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Book Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3. Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Other (Non-Sales-Related) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Other (Sales-Related) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . 10
4.5 Guardian To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . 11
4.6 AVIF To Provide Documents; Information About Guardian . . . . . . . . . . . . . . . 12
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . 13
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 Notice to Guardian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . 16
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
|
DESCRIPTION PAGE
---- ----
Section 6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Notice Requirement for Termination . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Funds To Remain Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 Survival of Warranties and Indemnifications . . . . . . . . . . . . . . . . . . . . 18
6.5 Continuance of Agreement for Certain Purposes . . . . . . . . . . . . . . . . . . . 18
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 Guardian and GISC . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 Of Guardian and GISC 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
|
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 2nd day of February, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM"); The Guardian Insurance & Annuity Company, Inc., a Delaware life insurance company ("Guardian"), 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 Guardian Investor Services Corporation, A New York corporation ("GISC"), an affiliate of Guardian and the principal underwriter of the Contracts (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 nine separate series ("Series"), shares ("Shares") of 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, Guardian 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, Guardian 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, Guardian 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, Guardian intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, AIM 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 it will sell and distribute the Shares in accordance with all applicable state and federal securities laws;
WHEREAS, GISC 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 it will sell and distribute the Contracts in accordance with all applicable state and federal securities laws;
WHEREAS, each Party hereto represents that it has full power and authority under applicable law, and has taken all action necessary, to enter into and perform this Agreement;
WHEREAS, each Party hereto represents that it is not aware of any pending or threatened litigation matter or claim or regulatory proceeding, investigation or inquiry involving it or any of its affiliates, the outcome of which could have a material adverse effect on this Agreement or the transactions contemplated hereunder.
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 Guardian for purchase and redemption at net asset value and with no sales charges, subject to the terms and conditions of this Agreement and the prospectus and statement of additional information for the Funds. The Board of Directors of AVIF 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 Directors 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.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to
provide Guardian 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) Guardian is open for
business.
(b) Guardian 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. Guardian 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 Guardian 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 Guardian.
(c) With respect to payment of the purchase price by Guardian and of redemption proceeds by AVIF, Guardian 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), Guardian 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 Guardian.
2.2 TIMELY PAYMENTS.
Guardian 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 Guardian 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 Guardian 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 Guardian receives
prior to the close of regular trading on the New York Stock Exchange 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), Guardian shall be the designated agent of AVIF
for receipt of orders relating to Contract transactions 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 Guardian 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 Guardian of any income dividends or capital gain distributions payable on the Shares of any Fund. Guardian 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 Guardian 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. Guardian 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 Guardian. Shares ordered from AVIF will be recorded in an appropriate title for Guardian, on behalf of its Account.
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) Guardian 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) Guardian 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) Guardian will print in quantity and deliver to existing Participants the documents described in Section 3.3(b) above. AVIF will bear, or arrange for others to bear, the costs of printing the Funds' prospectuses, statement of additional information, proxy materials relating to AVIF and periodic reports of AVIF.
3.4 OTHER (SALES-RELATED).
Guardian 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, the 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 Guardian 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 Guardian 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) Guardian agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of Guardian or, to Guardian's knowledge, of any Participant, that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or Guardian 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) Guardian shall promptly notify AVIF of such assertion or potential claim (subject to the Confidentiality provisions of Section 18 as to any Participant);
(ii) Guardian shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure;
(iii) Guardian 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) Guardian 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 Guardian will retain control of the conduct of such conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by Guardian
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 Guardian 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 Guardian to any such person without the express
written consent of AVIF which shall not be
unreasonably withheld;
(vi) Guardian 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 Guardian) 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) Guardian 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 Guardian 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 Guardian 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, Guardian may, in its discretion, authorize AVIF or its affiliates to act in the name of Guardian 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 Guardian 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) Guardian 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; Guardian 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) Guardian 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. Guardian 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 Guardian, including, the furnishing of information not otherwise available to Guardian which is required by state insurance law to enable Guardian to obtain the authority needed to issue the Contracts in any applicable state.
(b) Guardian 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 Delaware 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 Section 2932 of the Delaware Insurance Code
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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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) Guardian 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 Delaware 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) Guardian 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 will immediately notify Guardian 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 Guardian. AVIF 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) Guardian 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. Guardian 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 GUARDIAN TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) Guardian 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) Guardian 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 Guardian in the manner required by Section 9 hereof.
(c) Neither Guardian 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) Guardian 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 GUARDIAN.
(a) AVIF will provide to Guardian 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 Guardian camera ready or computer diskette copies of all AVIF prospectuses and printed copies, in an amount specified by Guardian, 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 Guardian in a timely manner so as to enable Guardian, 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 Guardian or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which Guardian, 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 Guardian 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. Guardian 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 Guardian, 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 Guardian for distribution; or (iii) in sales literature or other promotional material approved by Guardian or its affiliates, except with the express written permission of Guardian.
(e) AVIF shall cause its principal underwriter to adopt and implement procedures reasonably designed to ensure that information concerning Guardian, 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 Guardian, 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 Guardian, 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 Guardian 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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"). Guardian agrees to inform the Board of Directors 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, Guardian will assist the Board of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by Guardian to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors that a material irreconcilable conflict exists, Guardian 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 Directors), 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 Guardian's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, Guardian 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 Guardian that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by Guardian 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 Guardian conflicts with the majority of other state regulators, then Guardian will withdraw each Account's investment in AVIF within six (6) months after AVIF's Board of Directors informs Guardian 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 Guardian for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) Guardian 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 Directors 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. Guardian 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 GUARDIAN .
AVIF will promptly make known in writing to Guardian the Board of Directors' 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 DIRECTORS.
Guardian and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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 Guardian or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding Guardian'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 Guardian 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, Guardian 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 Guardian, 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 Guardian; or
(e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of Guardian if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if Guardian reasonably believes that the Fund may fail to so qualify; or
(g) at the option of Guardian if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if
Guardian reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by Guardian 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, AVIF will, at the option of Guardian, 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."). 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 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 Guardian 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, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
THE GUARDIAN INSURANCE & ANNUITY COMPANY, INC.
GUARDIAN INVESTOR SERVICES CORPORATION
201 Park Avenue South
New York, New York 10003
Facsimile: (212) 353-1845
Attn: Mr. John M. Smith Executive Vice President
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, Guardian 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. Guardian will vote
Shares in accordance with timely instructions received from Participants.
Guardian 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 Guardian 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. Guardian reserves the right to vote shares
held in any Account in its own right, to the extent permitted by law. Guardian
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 Guardian 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
directors and with whatever rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Guardian 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 GUARDIAN AND GISC.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, Guardian and GISC agree to indemnify and hold harmless AVIF, its affiliates (including AIM), and each person, if any, who controls AVIF or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors 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 Guardian and GISC) 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 Guardian or GISC 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 Guardian, GISC or their respective affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of Guardian, GISC 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 or its affiliates by Guardian, GISC 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 a material failure by Guardian or GISC 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 Guardian or GISC in this Agreement or arise out of or result from any other material breach of this Agreement by Guardian or GISC; or
(v) arise as a result of failure by the Contracts issued by Guardian 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 Guardian nor GISC 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 Guardian nor GISC shall be liable under this Section 12.1 with respect to any action against an Indemnified Party unless AVIF or AIM shall have notified Guardian and GISC 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 Guardian and GISC of any such action shall not relieve Guardian and GISC 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, Guardian and GISC 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 Guardian or GISC to such Indemnified Party of Guardian's or GISC's election to assume the defense thereof, the Indemnified Party will cooperate fully with Guardian and GISC and shall bear the fees and expenses of any additional counsel retained by it, and neither Guardian nor GISC 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 GUARDIAN AND GISC 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 Guardian,
GISC, their respective affiliates, and each person, if any, who controls
Guardian, GISC or their respective affiliates within the meaning of Section 15
of the 1933 Act and each of their respective directors 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 Guardian, GISC 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 or AIM
or their respective affiliates and on which such
persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of AVIF or AIM or their
respective affiliates or persons under its 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 Guardian, GISC or their respective affiliates by 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 a material 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) 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 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 Guardian 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 Guardian of Shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that Guardian 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 Guardian, GISC, 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 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 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 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 either AVIF or AIM be liable under the
indemnification provisions contained in this Agreement to any individual or
entity, including, without limitation, Guardian, GISC 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 Guardian or
GISC hereunder or by any Participating Insurance Company under an agreement
containing substantially similar representations, warranties and covenants;
(ii) the failure by Guardian 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 Guardian 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 Maryland 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 Guardian or any of its affiliates (collectively, the "Guardian 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 Guardian Protected Parties or any of their employees or agents in connection with Guardian's performance of its duties under this Agreement are the valuable property of the Guardian Protected Parties. AVIF agrees that if it comes into possession of any list or compilation of the identities of or other information about the Guardian Protected Parties' customers, or any other information or property of the Guardian Protected Parties, other than such information as may be independently developed or compiled by AVIF from information supplied to it by the Guardian 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 Guardian's prior written consent; or (b) as required by law or judicial process. Guardian 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. Guardian 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 Guardian from information supplied to it by the AVIF Protected Parties' customers who also maintain accounts directly with Guardian, Guardian 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to Guardian (the "AIM licensed marks" or the "licensor's licensed marks") and is authorized to use and to license other persons to use such marks. Guardian and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with Guardian'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 to Guardian 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 Guardian 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, Guardian 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 Guardian 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------- ------------------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
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A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
------------------------- ------------------------------
Nancy L. Martin Name: Michael J. Cemo
Assistant Secretary Title: President
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THE GUARDIAN INSURANCE & ANNUITY
COMPANY, INC., on behalf of itself
and its Separate Accounts
Attest: /s/ SHERI KOCEN By: /s/ JOHN M. SMITH
------------------------- ------------------------------
Name: Sheri Kocen Name: John M. Smith
------------------------- ------------------------------
Title: Counsel Title: Executive Vice President
------------------------- ------------------------------
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GUARDIAN INVESTOR SERVICES
CORPORATION
Attest: /s/ SHERI KOCEN By: /s/ JOHN M. SMITH
------------------------- ------------------------------
Name: Sheri Kocen Name: John M. Smith
------------------------- ------------------------------
Title: Counsel Title: President
------------------------- ------------------------------
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SCHEDULE A
CONTRACT SEPARATE ACCOUNT FUNDS AVAILABLE
-------- ---------------- ---------------
Park Avenue Life Separate Account K AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
Park Avenue VUL Separate Account M AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
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SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Value Fund
o AIM and Design
[AIM LOGO APPEARS HERE]
EXHIBIT 9(bbb)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
HARTFORD LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
HARTFORD SECURITIES DISTRIBUTION COMPANY, INC.
TABLE OF CONTENTS
DESCRIPTION PAGE
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Timely Pricing and Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . . 9
4.6 AVIF or AIM To Provide Documents; Information About LIFE COMPANY . . . . . . . . . . . . . . . . . . 10
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Notice to LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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
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DESCRIPTION PAGE
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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 LIFE COMPANY and UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12.3 Effect of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _________, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); A I M Distributors, Inc., a Delaware Corporation ("AIM"); Hartford Life Insurance Company, a Connecticut life insurance company ("LIFE 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 Hartford Securities Distribution Company, Inc., 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 thirteen separate series ("Series"), shares ("Shares") of 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, AIM is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 (the "1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, AIM currently serves as the distributor for the Shares; 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");
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 Directors of AVIF 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 Directors 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.
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.
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 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 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 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.
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 and AIM represent and warrant 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 and warrants that it will 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 and AIM represent and warrant that they will comply and 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) 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 Participant, 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 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 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 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 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Connecticut 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 Section
38(a)-433 of the Connecticut General Statutes 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a Delaware Corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power, authority and right to execute, deliver and perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) LIFE COMPANY and UNDERWRITER represent and warrant 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 Connecticut 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)
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 will at all
times comply in all material respects with the requirements of the 1933 Act and
the rules thereunder.
(b) AVIF and AIM represent and warrant 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 (first use for "standardized material" as defined hereafter, unless more frequent review is specifically requested by AVIF or its designated agent or unless such material is amended in any respect other than to provide updated performance figures or dates) or such shorter period as the Parties hereto may, from time to time, agree upon. For purposes of this paragraph, "standardized material" shall include material that is identical in format and content to material that AVIF or its designated agent has reviewed and approved pursuant to this paragraph with the exception of updated dates and performance figures. LIFE COMPANY agrees to bear all responsibility and liability for any error in any standardized material (e.g., transposition of numbers) to the extent any information contained therein does not conform to the information provided to LIFE COMPANY by AIM or the Fund. No such material (including the initial approval of standardized material) shall be used if AVIF or its designated agent reasonably 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 OR AIM 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 camera ready copy of all AVIF Prospectuses and printed copies, in an amount specified by LIFE COMPANY, of AVIF Prospectuses (to the extent that AIM is responsible for printing and LIFE COMPANY has not requested camera ready copy), 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) None of AVIF, AIM, or any of their 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) AIM shall 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors 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 of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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; or
(k) at the option of the LIFE COMPANY in the event A I M Advisors, Inc. terminates the Administrative Services Agreement between A I M Advisors, Inc. and the LIFE COMPANY, for any reason.
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, 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"). 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 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 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 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, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
HARTFORD LIFE INSURANCE COMPANY
HARTFORD SECURITIES DISTRIBUTION COMPANY, INC.
200 Hopmeadow Street
Simsbury Ct. 06089
Facsimile: (860) 843-8665
Attn: Thomas Marra, Executive Vice President
Lynda Godkin, General Counsel
George Jay
SECTION 10. VOTING PROCEDURES
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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
directors 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 directors 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 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 "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 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 directors 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 its control (including, without limitation, their employees and "Associated Persons" as that term is defined in Section (n) 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) 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------- ----------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
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A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
------------------------- ----------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
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HARTFORD LIFE INSURANCE COMPANY, on behalf
of itself and its separate accounts
Attest: /s/ LEWIS F.BEERS By: /s/ STEPHEN T. JOYCE
------------------------- ----------------------------------
Name: Lewis F. Beers Name: Stephen T. Joyce
Title: Assistant General Counsel Title: Vice President
|
HARTFORD SECURITIES DISTRIBUTION
COMPANY, INC.
Attest: /s/ LEWIS F. BEERS By: /S/ STEPHEN T. JOYCE
------------------------- ----------------------------------
Name: Lewis F. Beers Name: Stephen T. Joyce
Title: Assistant General Counsel Title: Assistant Secretary
|
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. High Yield Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Hartford Life Separate Account Two
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
Nations Variable Annuity Contract
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. High Yield Fund
AIM V.I. Value Fund
o AIM and Design
[AIM LOGO]
SCHEDULE C
EXPENSE ALLOCATIONS
=================================================================================================================
LIFE COMPANY AVIF
-----------------------------------------------------------------------------------------------------------------
preparing, maintaining and filing the Account's preparing, maintaining and filing the Fund's
registration statement with the SEC and State registration statement with the SEC and State
Regulators Regulators
-----------------------------------------------------------------------------------------------------------------
text composition for Account prospectuses and text composition for Fund prospectuses and supplements
supplements
-----------------------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and supplements
supplements (Account) (Fund)
-----------------------------------------------------------------------------------------------------------------
printing Account and Fund prospectuses and supplements a camera ready Fund prospectus, printing costs of Fund
prospectus to existing policy owners with amounts
allocated to the Fund
-----------------------------------------------------------------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
mailing and distributing Account SAIs to policy mailing and distributing Fund SAIs to policy owners
owners upon request by policy owners upon request by policy owners
-----------------------------------------------------------------------------------------------------------------
mailing and distributing prospectuses (Account and mailing and distribution of prospectuses and
Fund) and supplements (Account and Fund) to policy supplements (Fund) to policy owners of record. Life
owners of record as required by Federal Securities Company to advise if it wants either (1) printed Fund
Laws and to prospective purchasers prospectuses or (2) camera ready copy with
reimbursement by Fund of its pro rata share of printing
expense
-----------------------------------------------------------------------------------------------------------------
text composition (Account), printing, mailing, and text composition of annual and semi-annual reports
distributing annual and semi-annual reports for (Fund) and pro rata share of expense of printing,
Account (Fund and Account as, applicable) mailing and distributing reports (Fund) to policy
owners of record participating in the Fund
-----------------------------------------------------------------------------------------------------------------
text composition, printing, mailing, distributing, and text composition, printing, mailing, distributing and
tabulation of proxy statements and voting instruction tabulation of proxy statements and voting instruction
solicitation materials to policy owners with respect solicitation materials to policy owners with respect to
to proxies related to the Account proxies related 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
=================================================================================================================
|
EXHIBIT 9(ccc)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
KEYPORT LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
KEYPORT FINANCIAL SERVICES CORP.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Other (Non-Sales-Related) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Other (Sales-Related) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 LIFE COMPANY To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . 10
4.6 AVIF To Provide Documents; Information About LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . 11
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 Notice to LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
|
DESCRIPTION PAGE
----------- ----
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 6. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Notice Requirement for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Funds To Remain Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Survival of Warranties and Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Continuance of Agreement for Certain Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7. Parties To Cooperate Respecting Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
|
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 21st day of April, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); Keyport Life Insurance Company, a Rhode Island life insurance company ("LIFE 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 Keyport Financial Services Corp., 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 nine separate series ("Series"), shares ("Shares") of 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, 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");
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 Directors of AVIF 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 Directors 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.
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.
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 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 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 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.
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 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) LIFE 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) LIFE 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) LIFE 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).
LIFE 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, the 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 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) 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 Participant, 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 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 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Rhode Island 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 Rhode Island 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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 Rhode Island 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) 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 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 camera ready or computer diskette copies 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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, 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"). 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 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 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 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, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
KEYPORT LIFE INSURANCE COMPANY
KEYPORT FINANCIAL CORP.
125 High Street
Boston, MA 02110
Facsimile: (617) 526-1618
Attn: Bernard R. Beckerlegge, Esq.
General Counsel
James J. Klopper, Clerk
SECTION 10. VOTING PROCEDURES
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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 directors 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 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, its affiliates, and each person, if any, who controls AVIF or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors 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 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 "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 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, 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.
(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 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.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF agrees 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 directors 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) 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 or its
affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of
AVIF or its affiliates or persons under its control
(including, without limitation, their employees and
"Associated Persons" as that term is defined in Section
(n) 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 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) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF agrees 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 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) AVIF shall not 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) AVIF shall not be liable under this Section 12.2 with respect to any action against an Indemnified Party unless the Indemnified Party shall have notified AVIF 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 of any such action shall not relieve AVIF 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 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 to such Indemnified Party of AVIF's election to assume the defense thereof, the Indemnified Party will cooperate fully with AVIF and shall bear the fees and expenses of any additional counsel retained by it, and AVIF 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 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------ ------------------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
KEYPORT LIFE INSURANCE COMPANY, on behalf
of itself and its separate accounts
Attest: /s/ JAMES J. KLOPPER By: /s/ JACOB M. HERSCHLER
-------------------------- ------------------------------
Name: James J. Klopper Name: Jacob M. Herschler
Title: Secretary Title: Vice President
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KEYPORT FINANCIAL SERVICES CORP.
Attest: /s/ DONALD A. TRUMAN By: /s/ JAMES J. KLOPPER
-------------------------- -------------------------------
Name: Donald A. Truman Name: James J. Klopper
Title: Assistant Clerk Title: Clerk
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SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. International Equity Fund AIM V.I. Capital Appreciation Fund AIM V.I. Growth Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Variable Account A
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
DVA
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
o AIM and Design
[AIM LOGO]
EXHIBIT 9(ddd)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
KEYPORT BENEFIT LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
KEYPORT FINANCIAL SERVICES, CORP.
TABLE OF CONTENTS
DESCRIPTION PAGE
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . .9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Notice to LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.2 Notice Requirement for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.3 Funds To Remain Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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DESCRIPTION PAGE
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6.4 Survival of Warranties and Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Continuance of Agreement for Certain Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Parties To Cooperate Respecting Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.3 Effect of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 13. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 16. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 13th day of July, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); Keyport Benefit Life Insurance Company, a New York life insurance company ("LIFE 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 Keyport Financial Services Corp., 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 nine separate series ("Series"), shares ("Shares") of 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, 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");
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 Directors of AVIF 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 Directors 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.
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.
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 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 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 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.
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) 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 Participant, 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 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 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Section 4240 of the 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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 New York 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) 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 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors 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 of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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, 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"). 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 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 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 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, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
KEYPORT BENEFIT LIFE INSURANCE COMPANY
KEYPORT FINANCIAL SERVICES CORP.
125 High Street
Boston, MA 02110
Facsimile: (617) 526-1618
Attn: Bernard R. Beckerlegge, General Counsel
James J. Klopper, Clerk
SECTION 10. VOTING PROCEDURES
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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 directors 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 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, its affiliates, and each person, if any, who controls AVIF or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors 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 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 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, 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.
(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 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.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF agrees 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 directors 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) 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 or its affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF or its affiliates or persons under its 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 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) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF agrees 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 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) AVIF shall not 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) AVIF shall not be liable under this Section 12.2 with respect to any action against an Indemnified Party unless the Indemnified Party shall have notified AVIF 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 of any such action shall not relieve AVIF 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 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 to such Indemnified Party of AVIF's election to assume the defense thereof, the Indemnified Party will cooperate fully with AVIF and shall bear the fees and expenses of any additional counsel retained by it, and AVIF 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 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time
to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------- ---------------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title Assistant Secretary Title: President
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KEYPORT BENEFIT LIFE INSURANCE
COMPANY, on behalf of itself and its separate
accounts
Attest: /s/ JAMES J. KLOPPER By: /s/ JACOB M. HERSCHLER
------------------------ ---------------------------------------
Name: James J. Klopper Name: James J. Klopper
Title: Assistant Clerk Title: Vice President
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KEYPORT FINANCIAL SERVICES, CORP.
Attest: /s/ DONALD A TRUMAN By: /s/ JAMES J. KLOPPER
----------------------- ---------------------------------------
Name: Donald A. Truman Name: James J. Klopper
Title: Asst. Clerk Title: Clerk (Secretary)
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SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Variable Account A
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
DVA
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
o AIM and Design
[AIM LOGO]
SCHEDULE C
EXPENSE ALLOCATIONS
===============================================================================================================
LIFE COMPANY AVIF
---------------------------------------------------------------------------------------------------------------
preparing and filing the Account's registration preparing and filing the Fund's registration
statement statement
---------------------------------------------------------------------------------------------------------------
text composition for Account prospectuses and text composition for Fund prospectuses and
supplements supplements
---------------------------------------------------------------------------------------------------------------
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
---------------------------------------------------------------------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus
supplements
---------------------------------------------------------------------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
---------------------------------------------------------------------------------------------------------------
mailing and distributing Account SAIs to policy mailing and distributing Fund SAIs to policy owners
owners upon request by policy owners upon request by policy 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, mailing, and text composition of annual and semi-annual reports
distributing annual and semi-annual reports for (Fund)
Account (Fund and Account as, applicable)
---------------------------------------------------------------------------------------------------------------
text composition, printing, mailing, distributing, text composition, printing, mailing, distributing
and tabulation of proxy statements and voting and tabulation of proxy statements and voting
instruction solicitation materials to policy owners instruction solicitation materials to policy owners
with respect to proxies related to the Account with respect to proxies related 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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EXHIBIT 9(eee)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
AND
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . .9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Notice to LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Notice Requirement for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 Funds To Remain Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
|
DESCRIPTION PAGE
6.4 Survival of Warranties and Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.5 Continuance of Agreement for Certain Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 7. Parties To Cooperate Respecting Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.1 Of AVIF and AIM by LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
12.2 Of LIFE COMPANY by AVIF and AIM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.3 Effect of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
12.4 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 13. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 16. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 16th day of June, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"), The Lincoln National Life Insurance Company, an Indiana life insurance company ("LIFE 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 the principal underwriter of the Accounts and the Contracts (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 thirteen separate series ("Series"), shares ("Shares") of 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 policies; 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" or Policies") as set forth on Schedule A hereto, as the Parties hereto may amend from time to time, which 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 Policies 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 Policies; and
WHEREAS, LIFE COMPANY 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");
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 Directors of AVIF 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 Directors 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 Policies, 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 or Fund resulting from a deletion or modification. 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 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 and (ii) AVIF calculates the Fund's net asset value.
(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.
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
Policies (collectively, "Policy transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange 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 Policy transactions 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 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.
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 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) 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 Participant, 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 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 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 policies 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 under the laws of the State of Indiana 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 Indiana 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power, authority and 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 Indiana 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 (to the extent required), 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 any registration statement for its Contracts under the 1933 Act and for its Accounts under the 1940 Act from time to time to the
extent required in order to effect the continuous offering of its Policies 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 against AVIF, AIM or the investment adviser to AVIF 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 Policies issued or to be issued by LIFE COMPANY. AVIF 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 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 Policies 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 Policies, 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 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 and to one (1) or more Funds, within twenty (20) calendar days of 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
ten (10) 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 Policies 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 or AIM.
(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 Policies (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 one
(1) or more Funds, within twenty (20) calendar days of the filing of such
document with the SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready copies of all AVIF prospectuses relating to the Funds 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 Policies, at least ten (10) 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) AIM shall 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 Policies (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 policies, 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 such an exemptive order granted to AVIF. AVIF hereby notifies LIFE COMPANY that AVIF has implemented Mixed and Shared Funding and 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors, upon their request, with all information reasonably necessary for the Board of Directors 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 of Directors or a majority of the Disinterested Directors 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 Directors), 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, but not limited to, 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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 Policies, 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 (i.e., a substitution order) 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, AIM or the Fund's 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 Policies 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 Policies issued by LIFE COMPANY cease to qualify as annuity contracts or life insurance policies 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 such registration is 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, 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 Policies in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Policies"). Specifically, without limitation, the owners of the Existing Policies 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 Policies. The parties agree that this Section 6.3 will not apply to any 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 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 Policies 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, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185 Attn: Nancy L. Martin, Esq.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
1300 S. Clinton Street
Fort Wayne, IN 46802
Facsimile: (219) 455-1773 Attn: Kelly D. Clevenger Vice President
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. Notwithstanding the foregoing, 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 directors 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.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, LIFE COMPANY agrees 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 directors 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 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 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 LIFE COMPANY or its affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of LIFE COMPANY or its 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 or its 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 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 LIFE COMPANY in this Agreement or arise out of or result from any other material breach of this Agreement by LIFE COMPANY; or
(v) arise as a result of failure by the Policies issued by LIFE COMPANY to qualify as annuity contracts or life insurance policies 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) LIFE COMPANY shall not 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) LIFE COMPANY shall not 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 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 of any such action shall not relieve
LIFE COMPANY from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.1. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, LIFE COMPANY shall be entitled to participate, at
its 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 to such Indemnified Party of LIFE COMPANY's election
to assume the defense thereof, the Indemnified Party will cooperate fully with
LIFE COMPANY and shall bear the fees and expenses of any additional counsel
retained by it, and LIFE COMPANY 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.
12.2 OF LIFE COMPANY 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, its affiliates, and each person, if any, who controls LIFE COMPANY or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors 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 or its 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 its 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 or its 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) 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, 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 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 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 hereunder or by any Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE COMPANY or any Participating Insurance Company to maintain its variable annuity contracts or life insurance policies (with respect to which any Fund serves as an underlying funding vehicle) as annuity contracts or life insurance policies 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, owns all right, title and interest in and to the name, trademark and service mark "AIM" and such other trade names, trademarks and service marks as may be set forth on Schedule B, as amended from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE COMPANY and its affiliates shall immediately cease to issue any new annuity or life insurance Policies 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 LIFE 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, the IRS 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------ -------------------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
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A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
------------------------ -------------------------------
Nancy L. Martin Name: Michael J. Cemo
Assistant Secretary Title: President
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THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY, on behalf of itself and its
separate accounts and as principal
underwriter for its separate accounts
Attest: /s/ STEVEN M. KLUEVER By: /s/ KELLY D. CLEVENGER
------------------------ -------------------------------
Name: Steven Kluever Name: Kelly D. Clevenger
Title: Assistant Vice President Title: Vice President
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SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Lincoln Life Flexible Premium Variable Life Account M Lincoln Life Flexible Premium Variable Life Account R
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
The Lincoln National Life Insurance Company:
Flexible Premium Variable Life Insurance Policy
LN605LL/LN615LL/LN617LL
and state variations thereof
The Lincoln National Life Insurance Company:
Flexible Premium Variable Life Insurance Policy On the Lives of Two
Insureds LN650LL
and state variations thereof
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM ___________________________ Fund
o AIM and Design
[AIM LOGO]
SCHEDULE C
EXPENSE ALLOCATIONS
==========================================================================================================
DESCRIPTION LIFE COMPANY AIM/AVIF
----------------------------------------------------------------------------------------------------------
Registration
Prepare and file registration Account registration statements Fund registration statements
statements(1)
Account fees
Payment of fees Fund fees
----------------------------------------------------------------------------------------------------------
Prospectuses
Typesetting Account Prospectuses Fund Prospectuses
Account Prospectuses, and Fund Prospectuses distributed to
Printing Fund Prospectuses (but not for existing Participants(2)
existing Participants)
----------------------------------------------------------------------------------------------------------
SAIs
Typesetting Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
----------------------------------------------------------------------------------------------------------
Supplements (to
Prospectuses or SAIs
Typesetting and Printing Account Supplements, and Fund Fund Supplements to existing
Supplements (but not for existing Participants(2)
Participants)
==========================================================================================================
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(1) Includes all filings and costs necessary to keep registrations current and effective; including, without limitation, filing Forms N-SAR and Rule 24F-2 Notices as required by law.
(2) With respect to any AVIF material printed in combination with any non-AVIF materials, total costs of typesetting and printing shall be prorated as between AIM/AVIF on the one hand and LIFE COMPANY on the other based on (a) the ratio of the number of pages of the combined prospectus, report, or other document, for each Fund listed on Schedule A hereto to the total number of pages in such combined prospectus, report, or other document; and (b) the ratio of the number of Participants who invest in all Funds of AVIF to the total number of Participants.
==========================================================================================================
DESCRIPTION LIFE COMPANY AIM/AVIF
----------------------------------------------------------------------------------------------------------
Financial Reports
Typesetting Account Reports Fund Reports to existing
Participants(2)
Printing Account Reports, and Fund Reports
(not to existing Participants)
----------------------------------------------------------------------------------------------------------
Mailing and Distribution
To Contract owners Account and Fund Prospectuses,
SAIs, Supplements and Reports
Account and Fund Prospectuses,
To Offerees SAIs, Supplements and Reports
----------------------------------------------------------------------------------------------------------
Proxies
Typesetting, printing and Account and Fund Proxies where the Fund Proxies where the matters
mailing of proxy solicitation matters submitted are solely submitted are solely Fund-related
materials and voting Account-related
instruction solicitation
materials and tabulation of Account Proxies even where the
proxies to Participants matters submitted are solely Fund-
related
----------------------------------------------------------------------------------------------------------
Other (Sales-Related)
Contract owner communication Account-related items and\
Fund-related items
Distribution
Policies
Administration
Account (Policies)
==========================================================================================================
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(2) With respect to any AVIF material printed in combination with any non-AVIF materials, total costs of typesetting and printing shall be prorated as between AIM/AVIF on the one hand and LIFE COMPANY on the other based on (a) the ratio of the number of pages of the combined prospectus, report, or other document, for each Fund listed on Schedule A hereto to the total number of pages in such combined prospectus, report, or other document; and (b) the ratio of the number of Participants who invest in all Funds of AVIF to the total number of Participants.
EXHIBIT 9(fff)
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated May 1, 1998, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware corporation, PFL Life Insurance Company, an Iowa life insurance company and AFSG Securities Corporation, a Pennsylvania 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 SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
--------------------------------- --------------------- ----------------------
AIM V.I. Capital Appreciation PFL Retirement Builder PFL Life Insurance Company
Fund Variable Annuity Account Policy Form No. AV288-
AIM V.I. Government Securities 1010-95-796 (including
Fund successors forms, addenda
AIM V.I. Growth & Income and endorsements may vary by
Fund state under marketing names:
AIM V.I. International Equity "Retirement Income Builder
Fund Variable Annuity," "First
AIM V.I. Value Fund Union Variable Annuity" or
successor marketing
names.)"
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All other terms and provisions of the Agreement not amended herein shall remain in full force and effect.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
---------------------- ---------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
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(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
---------------------- ------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
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(SEAL)
PFL LIFE INSURANCE COMPANY
Attest: /s/ FRANK A. CAMP By: /s/ WILLIAM L. BUSLER
---------------------- ------------------------------
Name: Frank A. Camp Name: William L. Busler
Title: VP & Division General Title: President
Counsel
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(SEAL)
AFSG SECURITIES CORPORATION
Attest: /s/ FRANK A. CAMP By: /S/ LISA A. WACHENDORF
---------------------- ------------------------------
Name: Frank A. Camp Name: Lisa A. Wachendorf
Title: Secretary Title: Vice President
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(SEAL)
EXHIBIT 9(ggg)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.,
PFL LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
AFSG SECURITIES CORPORATION, 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 .............................. 4
3.1 General .......................................... 4
3.2 Parties To Cooperate ............................. 4
Section 4. Legal Compliance ................................ 4
4.1 Tax Laws ......................................... 4
4.2 Insurance and Certain Other Laws ................. 7
4.3 Securities Laws .................................. 7
4.4 Notice of Certain Proceedings and Other
Circumstances .................................... 8
4.5 LIFE COMPANY To Provide Documents;
Information About AVIF ........................... 9
4.6 AVIF To Provide Documents; Information
About LIFE COMPANY ............................... 10
Section 5. Mixed and Shared Funding ........................ 12
5.1 General .......................................... 12
5.2 Disinterested Directors .......................... 12
5.3 Monitoring for Material Irreconcilable
Conflicts ........................................ 12
5.4 Conflict Remedies ................................ 13
5.5 Notice to LIFE COMPANY ........................... 14
5.6 Information Requested by Board of Directors ...... 14
5.7 Compliance with SEC Rules ........................ 15
5.8 Other Requirements ............................... 15
Section 6. Termination ..................................... 15
6.1 Events of Termination ............................ 15
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Description Page
----------- ----
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 .............................................. 17
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 LIFE COMPANY and UNDERWRITER .... 19
12.2 Of LIFE COMPANY 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 ............................................... 25
Section 18. Confidentiality ........................................ 25
Section 19. Trademarks and Fund Names .............................. 25
Section 20. Parties to Cooperate ................................... 27
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of May, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"), PFL Life Insurance Company, an Iowa life insurance company ("LIFE 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 AFSG Securities Corporation, 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 nine separate series ("Series"), shares ("Shares") of 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, 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");
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 Directors of AVIF 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 Directors 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.
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.
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 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 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 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.
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 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) 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 Participant, 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 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 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Iowa 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 the Iowa Insurance Code 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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 Iowa 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) 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 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 camera ready or computer diskette copies 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"). AVIF will provide a complete copy of such order to LIFE COMPANY upon execution of this Agreement. 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 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 Directors.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 Directors.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request in writing so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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 breach of any material 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, 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"). 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 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 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 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, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
PFL LIFE INSURANCE COMPANY
AFSG SECURITIES CORPORATION
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499-0001
Facsimile: (319) 297-8290
Attn: Frank A. Camp, Esq.
Financial Markets Division General Counsel
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 directors 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, its affiliates, and each person, if any, who controls AVIF or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors 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 "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 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, 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.
(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 directors 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 its affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF, AIM, or its affiliates or persons under its control (including, without limitation, their employees and "Associated Persons" as that term is defined in Section (n) 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) 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
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 either 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, owns all right, title and interest in and to the name, trademark and service mark "AIM" and such other
trade names, trademarks and service marks as may be set forth on Schedule B, as amended from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
---------------------- ----------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
|
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
---------------------- ----------------------
Nancy L. Martin
Assistant Secretary Name: Michael J. Cemo
----------------------
Title: President
----------------------
PFL Life Insurance Company, on behalf of
itself and its separate accounts
Attest: /s/ RONALD L. ZIEGLER By: /s/ WILLIAM L. BUSLER
---------------------- ----------------------
Name: Ronald L. Ziegler Name: William L. Busler
---------------------- ----------------------
Title: VP & Actuary Title: President
---------------------- ----------------------
AFSG Securities Corporation
Attest: /s/ FRANK A. CAMP By: /s/ LARRY N. NORMAN
---------------------- ----------------------
Name: Frank A. Camp Name: Larry N. Norman
---------------------- ----------------------
Title: Secretary Title: President
---------------------- ----------------------
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SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Value Fund
AIM V.I. International Equity Fund
AIM V.I. Growth & Income Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
PFL Retirement Builder Variable Annuity Account
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
PFL Life Insurance Company
Policy Form No. AV288-101-95-796
(including successor forms, addenda and endorsements may vary by
state under marketing names: "Retirement Income Builder Variable
Annuity," "First Union Variable Annuity" or successor marketing
names.)
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM Fund
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o AIM and Design
[AIM LOGO]
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Schedule C
EXPENSE ALLOCATIONS
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Life Company AVIF / AIM
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preparing and filing the Account's registration preparing and filing the Fund's registration statement
statement
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text composition for Account prospectuses and text composition for Fund prospectuses and supplements
supplements
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text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and supplements
supplements (Account) (Fund)
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printing Account and Fund prospectuses and a camera ready Fund prospectus; printing costs of Fund
supplements prospectus to existing policy owners with amounts
allocated to the Fund
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text composition and printing Account SAIs text composition and printing Fund SAIs
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mailing and distributing Account SAIs to policy mailing and distributing Fund SAIs to policy owners upon
owners upon request by policy owners request by policy owners
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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
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text composition (Account), printing, mailing, and text composition of annual and semi-annual reports (Fund)
distributing annual and semi-annual reports for Account
(Fund and Account as, applicable)
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text composition, printing, mailing, distributing, text composition, printing, mailing, distributing
and tabulation of proxy statements and voting and tabulation of proxy statements and voting
instruction solicitation materials to policy owners instruction solicitation materials to policy owners
with respect to proxies related to the Account with respect to proxies related to the Fund
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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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EXHIBIT 9(hhh)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.),
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
CLARENDON INSURANCE AGENCY, INC.
TABLE OF CONTENTS
DESCRIPTION PAGE
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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Sun Life To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 AVIF To Provide Documents; Information About Sun Life . . . . . . . . . . . . . . . . . . . . . . . 10
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.5 Notice to Sun Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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DESCRIPTION PAGE
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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 Sun Life and Clarendon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 Of Sun Life and Clarendon 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 21. Access to Information by Sun Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 17th day of February, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM"); Sun Life Assurance Company of Canada (U.S.), a Delaware life insurance company ("Sun Life"), 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 Clarendon Insurance Agency, Inc. ("Clarendon"), a Massachusetts corporation, a subsidiary of Sun Life and the principal underwriter of the Contracts (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 nine separate series ("Series"), shares ("Shares") of 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, Sun Life 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, Sun Life 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, Sun Life 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, Sun Life intends to purchase Shares of one or more of the Funds on behalf of the Accounts to fund the Contracts; and
WHEREAS, Clarendon 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");
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 Sun Life 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 Directors of AVIF 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 Directors 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.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to
provide Sun Life 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) Sun Life is open for
business.
(b) Sun Life 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. Sun Life 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 Sun Life in the event that AVIF is unable to meet the 5:30 p.m. Central 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 Sun Life.
(c) With respect to payment of the purchase price by Sun Life and of redemption proceeds by AVIF, Sun Life 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), Sun Life 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 Sun Life.
2.2 TIMELY PAYMENTS.
Sun Life 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 Sun Life 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 Sun Life 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 Sun Life receives
prior to the close of regular trading on the New York Stock Exchange 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), Sun Life shall be the designated agent of AVIF
for receipt of orders relating to Contract transactions 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. AVIF will acknowledge and verify receipt of such orders
by 12:00 p.m. Central Time on each business day on which orders are received.
(b) All other Share purchases and redemptions by Sun Life 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 Sun Life of any income dividends or capital gain distributions payable on the Shares of any Fund. Sun Life 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 Sun Life 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. Sun Life 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 Sun Life. Shares ordered from AVIF will be recorded in an appropriate title for Sun Life, on behalf of its Account, as directed by Sun Life.
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 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. Except as otherwise specifically provided herein, each Party will bear all expenses incident to its performance under this Agreement.
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 qualify and maintain qualification of each Fund as a RIC.
AVIF will notify Sun Life 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 comply and 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 Sun Life 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 Section 12.2 of this Agreement, Sun Life agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of Sun Life or, to Sun Life's knowledge, of any Participant, that any Fund has failed to comply with the diversification requirements of Subchapter M or Section 817(h) of the Code or Sun Life 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) Sun Life shall promptly notify AVIF of such assertion or potential claim (subject to the confidentiality provisions of Section 18 as to any Participant);
(ii) Sun Life shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure;
(iii) Sun Life shall, in good faith and to the extent not
inconsistent with its fiduciary duties to its
Contract owners, 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) Sun Life shall permit AVIF, its affiliates and their legal and accounting advisors to participate, at their sole expense, 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 Sun Life will retain control of the conduct of such conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by Sun Life 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 Sun Life 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 Sun Life to any such person
without the express written consent of AVIF which
shall not be unreasonably withheld; provided, that in
any event, each Party shall use its best efforts to
make, as promptly as possible, the submissions to the
Commissioner of the IRS contemplated by paragraph
(c)(iii) above;
(vi) Sun Life 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 Sun Life) 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) Sun Life 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 after exhausting all administrative remedies, in the event of an adverse judicial decision, Sun Life shall either (a) appeal such decision, provided, that to the extent requested by Sun Life, AVIF or its affiliates provides an opinion of independent counsel to the effect that a reasonable basis exists for taking such appeal, in which case the costs of such appeal shall be borne equally by the Parties hereto, or (b) permit AVIF and its affiliates to act in the name of Sun Life and to control the conduct of such appeal pursuant to the last paragraph of this Section 4.1(c), in which case the costs of such appeal shall be borne by AVIF or its affiliates pursuant to that paragraph; and
(viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if Sun Life 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, Sun Life may, in its discretion, authorize AVIF or its affiliates to act in the name of Sun Life 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 Sun Life have any liability resulting from AVIF's refusal to accept the proposed settlement or compromise with respect to any failure to comply with the requirements of Subchapter M or Section 817(h) of the Code 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) AVIF agrees to cooperate with Sun Life with respect to the matters described in paragraphs (c)(i) through (vii) above. AVIF further agrees that it shall provide or cause to be provided to Sun Life, on a quarterly basis, written confirmation of each Fund's compliance with the diversification requirements of Subchapter M and Section 817(h) of the Code.
(e) Sun Life 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 maintain such treatment; Sun Life 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.
(f) Sun Life 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. Sun Life will 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 by Sun Life, including, the furnishing of information not otherwise available to Sun Life which is required by state insurance law to enable Sun Life to obtain the authority needed to issue the Contracts in any applicable state.
(b) Sun Life 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 Delaware 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 Delaware 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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) Sun Life 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 Delaware 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)
Sun Life 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 will immediately notify Sun Life 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 Sun Life. AVIF 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) Sun Life 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. Sun Life 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 SUN LIFE TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) Sun Life 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) Sun Life 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 ten (10) 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 ten (10) 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 Sun Life in the manner required by Section 9 hereof.
(c) Neither Sun Life 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) Sun Life 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 SUN LIFE.
(a) AVIF will provide to Sun Life at least one (1) complete copy of all SEC registration statements, AVIF Prospectuses, statements of additional information reports, any preliminary and final proxy material, applications for exemptions, exemptive orders, 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 Sun Life or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which Sun Life, or any of its respective affiliates is named, or that refers to the Contracts, at least ten (10) 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 Sun Life or its designated agent objects to such use within ten (10) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. Sun Life 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.
(c) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning Sun Life, 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 Sun Life for distribution; or (iii) in sales literature or other promotional material approved by Sun Life or its affiliates, except with the express written permission of Sun Life.
(d) AVIF shall cause its principal underwriter to adopt and implement procedures reasonably designed to ensure that information concerning Sun Life, 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 Sun Life, 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.
(e) 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 Sun Life, 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 Sun Life 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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"). Sun Life agrees to inform the Board of Directors 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, Sun Life will assist the Board of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by Sun Life to disregard voting instructions of Participants. Sun Life'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 of Directors or a majority of the Disinterested Directors that a material irreconcilable conflict exists, Sun Life 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 Directors), 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 Sun Life's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, Sun Life 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 Sun Life that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by Sun Life 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 Sun Life conflicts with the majority of other state regulators, then Sun Life will withdraw each Account's investment in AVIF within six (6) months after AVIF's Board of Directors informs Sun Life 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 Sun Life for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) Sun Life 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 Directors 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. Sun Life 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 SUN LIFE.
AVIF will promptly make known in writing to Sun Life the Board of Directors' 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 DIRECTORS.
Sun Life and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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 one (1) year's 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 Sun Life or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding Sun 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 Sun Life 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, Sun Life 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 Sun Life, 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 Sun Life; or
(e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or
(f) at the option of Sun Life if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if Sun Life reasonably believes that the Fund may fail to so qualify; or
(g) at the option of Sun Life if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if Sun
Life reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Contracts issued by Sun Life 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; or
(j) at the option of Sun Life or AVIF upon receipt of any necessary regulatory approvals and/or the vote of the Contract owners having an interest in the account (or any Subaccount) to substitute the shares of another investment for the corresponding AVIF Shares in accordance with the terms of the Contracts for which those Shares had been selected to serve as the underlying investment media. Sun Life will give thirty (30) days' prior written notice to AVIF of the date of any proposed vote or other action taken to replace the AVIF Shares; or
(k) at the option of Sun Life, if Sun Life determines in its sole judgment exercised in good faith, that either AVIF or AVIF's investment adviser has suffered a material adverse change in its business, operations or financial condition since the date of this Agreement or is the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of Sun Life; or
(l) at the option of AVIF, if AVIF determines in its sole judgment exercised in good faith, that Sun Life has suffered a material adverse change in its business, operations or financial condition since the date of this Agreement or is the subject of material adverse publicity which is likely to have a material adverse impact upon the business and operations of AVIF.
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, AVIF will, at the option of Sun Life, 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"). 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 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 Sun Life 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, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.)
CLARENDON INSURANCE AGENCY, INC.
One Copley Place, Suite 200
Boston, Massachusetts 02116
Facsimile: (617) 348-1586
Attn: Margaret Hankard, Esq.
Senior Associate Counsel
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof, Sun Life 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. Sun Life will vote Shares in accordance with timely instructions received from Participants. Sun Life 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 Sun Life 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. Sun Life reserves the right to vote shares held in any Account in its own right, to the extent permitted by law. Sun Life 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 in the manner required by the Mixed and Shared Funding exemptive order obtained by AVIF. AVIF will notify Sun Life 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 directors and with whatever rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with Sun Life 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 SUN LIFE AND CLARENDON.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, Sun Life and Clarendon agree to indemnify and hold harmless AVIF, its affiliates, and each person, if any, who controls AVIF or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors and officers, (collectively, the "Indemnified Parties" for purposes of this Section 12.1) against any and all losses, costs, expenses, claims, damages, liabilities (including amounts paid in settlement with the written consent of Sun Life and Clarendon) 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, costs, expenses, 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 Sun Life or Clarendon 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 Sun Life, Clarendon or their respective affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of Sun Life, Clarendon 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 or its affiliates by or on behalf of Sun Life, Clarendon 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 Sun Life or Clarendon 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 Sun Life or Clarendon in this Agreement or arise out of or result from any other material breach of this Agreement by Sun Life or Clarendon; or
(v) arise as a result of failure by the Contracts issued by Sun Life 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 Sun Life nor Clarendon shall be liable under this
Section 12.1 with respect to any losses, costs, expenses, 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 Sun Life nor Clarendon shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless
AVIF or AIM shall have notified Sun Life and Clarendon 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 Sun Life and Clarendon of any such action shall not relieve Sun Life and Clarendon 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, Sun Life and Clarendon 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 Sun Life or Clarendon to such Indemnified Party of Sun Life's or Clarendon's election to assume the defense thereof, the Indemnified Party will cooperate fully with Sun Life and Clarendon and shall bear the fees and expenses of any additional counsel retained by it, and neither Sun Life nor Clarendon 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 SUN LIFE AND CLARENDON 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 Sun Life,
Clarendon, their respective affiliates, and each person, if any, who controls
Sun Life, Clarendon or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, costs, expenses, 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, costs, expenses, 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 Sun Life, Clarendon 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 or AIM or their affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF or AIM or their affiliates or persons under its control (including, without limitation, their employees and "Associated Persons" as that term is defined in Section (n) 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 Sun Life, Clarendon 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) 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 interest and penalties, rescission charges, liability under state law to Participants asserting liability against Sun Life 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 Sun Life of Shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that Sun Life 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, costs, expenses, 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 Sun Life, Clarendon, 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 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 either AVIF or AIM be liable under the indemnification provisions contained in this Agreement to any individual or entity, including, without limitation, Sun Life, Clarendon 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 Sun Life or Clarendon hereunder or by any Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by Sun Life 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 Sun Life 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 Maryland 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 Sun Life or any of its affiliates (collectively, the "Sun Life 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 Sun Life Protected Parties or any of their employees or agents in connection with Sun Life's performance of its duties under this Agreement are the valuable property of the Sun Life Protected Parties. AVIF agrees that if it comes into possession of any list or compilation of the identities of or other information about the Sun Life Protected Parties' customers,
or any other information or property of the Sun Life Protected Parties, other
than such information as may be independently developed or compiled by AVIF
from information supplied to it by the Sun Life 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 Sun Life's prior
written consent; or (b) as required by law or judicial process. Sun Life
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. Sun Life 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 Sun Life from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with Sun Life,
Sun Life 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to Sun Life (the "AIM licensed marks" or the "licensor's licensed marks") and is authorized to use and to license other persons to use such marks. Sun Life and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with Sun Life'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 to Sun Life 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 Sun Life 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, Sun Life 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 Sun Life shall have the right to continue to service outstanding Contracts bearing any of the AIM licensed marks and to use AIM licensed marks in such materials as may be necessary for filing with any regulatory authority where required by law or regulation or to enable Sun Life to quote performance to existing Contract owners.
(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 and may be obtained in connection with approval of sales materials as provided in Section 4.5(b) hereof (i.e., approvals obtained under Section 4.5 hereof shall be deemed approval pursuant to this Section 19).
(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, upon receiving notice of such failure by the licensor. 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, based upon the representations of the licensor set forth herein and without making any independent inquiry thereof, that, to the best of the knowledge of the licensee, the licensor's licensed marks are valid and enforceable trademarks and/or service marks; (ii) acknowledges and stipulates that such licensee does not own the licensor's licensed marks and claims no rights therein other than as a licensee under this Agreement; (iii) agrees never to contend otherwise in legal proceedings or in other circumstances; and (iv) 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. ACCESS TO INFORMATION BY SUN LIFE
During ordinary business hours, AVIF shall afford Sun Life, directly or through its authorized representatives, reasonable access to all files, books, records and other materials of AVIF (except for confidential or proprietary materials) which directly relate to transactions arising in connection with this Agreement and to make available appropriate personnel familiar with such items for the purpose of explaining the form and content of such items. This Section 21 shall survive the termination of this Agreement.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
------------------------- ---------------------------
Nancy L. Martin
Assistant Secretary Name: Robert H. Graham
---------------------------
Title: President
---------------------------
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A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
------------------------- ---------------------------
Nancy L. Martin
Assistant Secretary Name: Michael J. Cemo
---------------------------
Title: Vice President
---------------------------
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SUN LIFE ASSURANCE COMPANY OF
CANADA (U.S.), on behalf of itself and
its separate accounts
Attest: /s/ MARGARET SEARS MEAD By: /s/ ROBERT K. LEACH
------------------------- ---------------------------
Name: Margaret Sears Mead Name: Robert K. Leach
-------------------------- ---------------------------
Title: Assistant Vice President Title: Vice President
------------------------- ---------------------------
and Secretary
--------------
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CLARENDON INSURANCE AGENCY, INC.
Attest: /s/ ROY P. CREEDON By: /s/ JANE MANCINI
------------------------- ---------------------------
Name: Roy P. Creedon Name: Jane Mancini
------------------------- ---------------------------
Title: Secretary Title: President
------------------------- ---------------------------
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SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International
SEPARATE ACCOUNTS UTILIZING THE FUNDS
SUN LIFE OF CANADA (U.S.) VARIABLE ACCOUNT F
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
FUTURITY VARIABLE ANNUITY CONTRACT
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International
o AIM and Design
[AIM LOGO]
SCHEDULE C
EXPENSE ALLOCATIONS
========================================================== =================================================
SUN LIFE AVIF / AIM
---------------------------------------------------------- -------------------------------------------------
preparing and filing the Account's registration preparing and filing the Fund's registration
statement statement
---------------------------------------------------------- -------------------------------------------------
text composition for Account prospectuses text composition for Fund prospectuses and
and supplements supplements
---------------------------------------------------------- -------------------------------------------------
text alterations of prospectuses (Account) text alterations of prospectuses (Fund) and
and supplements (Account) supplements (Fund)
---------------------------------------------------------- -------------------------------------------------
printing Account and Fund prospectuses and a camera ready Fund prospectus
supplements
---------------------------------------------------------- -------------------------------------------------
text composition and printing Account SAIs text composition and printing Fund SAIs
(if any)
---------------------------------------------------------- -------------------------------------------------
mailing and distributing Account SAIs (if any) mailing and distributing Fund SAIs to policy
to policy owners upon request by policy owners upon request by policy owners
owners
---------------------------------------------------------- -------------------------------------------------
mailing and distributing prospectuses
(Account and Fund) and supplements
(Account and Fund) to policy owners of
record as required by or appropriate under
the Federal Securities Laws and to
prospective purchasers
---------------------------------------------------------- -------------------------------------------------
text composition (Account), printing, mailing, text composition and printing of annual and
and distributing annual and semi-annual semi-annual reports (Fund)
reports for Account
---------------------------------------------------------- -------------------------------------------------
text composition, printing, mailing, text composition, printing, mailing,
distributing, and tabulation of proxy distributing and tabulation of proxy
statements and voting instruction solicitation statements and voting instruction solicitation
materials to policy owners with respect to materials to policy owners with respect to
proxies related to the Account proxies related 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
========================================================== =================================================
|
EXHIBIT 9(iii)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
UNITED LIFE & ANNUITY INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
UNITED VARIABLE SERVICES, INC.
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Other (Non-Sales-Related) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.4 Other (Sales-Related) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.5 Parties To Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4. Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.1 Tax Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.2 Insurance and Certain Other Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Notice of Certain Proceedings and Other Circumstances . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 LIFE COMPANY To Provide Documents; Information About AVIF . . . . . . . . . . . . . . . . . . . . . 10
4.6 AVIF To Provide Documents; Information About LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . 11
Section 5. Mixed and Shared Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.2 Disinterested Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.3 Monitoring for Material Irreconcilable Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.4 Conflict Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 Notice to LIFE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.6 Information Requested by Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.7 Compliance with SEC Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.8 Other Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
|
DESCRIPTION PAGE
----------- ----
Section 6. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.1 Events of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 Notice Requirement for Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Funds To Remain Available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Survival of Warranties and Indemnifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Continuance of Agreement for Certain Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7. Parties To Cooperate Respecting Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 9. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 10. Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 11. Foreign Tax Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 12. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.1 Of AVIF by LIFE COMPANY and UNDERWRITER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
12.3 Effect of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
12.4 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 13. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 14. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 15. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 16. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 17. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 19. Trademarks and Fund Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 20. Parties to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
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PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of April, 1998 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); United Life & Annuity Insurance Company, a Louisiana life insurance company ("LIFE 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 United Variable Services, Inc., 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 nine separate series ("Series"), shares ("Shares") of 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, 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");
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 Directors of AVIF 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 Directors 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.
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 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) 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 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 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.
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 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 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 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.
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 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) LIFE 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) LIFE 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) LIFE 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).
LIFE 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, the 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 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) 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 Participant, 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 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 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, including, the furnishing of information not otherwise available to LIFE COMPANY which 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 Louisiana 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 Louisiana 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 a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland 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 Louisiana 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) 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 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 Maryland 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 currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses.
(e) 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 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 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 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 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 camera ready or computer diskette copies 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 such an 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 DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") 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 of Directors 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 Directors 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 of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors 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 of Directors or a majority of the Disinterested Directors 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 Directors), 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 of Directors 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 Directors 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 of Directors' 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 DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors 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 of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors 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 of Directors 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, 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"). 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 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 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 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, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
UNITED LIFE & ANNUITY INSURANCE COMPANY
UNITED VARIABLE SERVICES, INC.
851 S.W. Sixth Avenue, Ninth Floor
Portland, Oregon 97204
Facsimile: (503) 220-3322
Attn: Mr. Joel Kaplan, 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 directors 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 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, its affiliates, and each person, if any, who controls AVIF or its affiliates within the meaning of Section 15 of the 1933 Act and each of their respective directors 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 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 "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 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, 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.
(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 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.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF agrees 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 directors 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) 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 or its affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF or its affiliates or persons under its control (including, without limitation, their employees and "Associated Persons" as that term is defined in Section (n) 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 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) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF agrees 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 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) AVIF shall not 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) AVIF shall not be liable under this Section 12.2 with respect to any action against an Indemnified Party unless the Indemnified Party shall have notified AVIF 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 of any such action shall not relieve AVIF 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 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 to such Indemnified Party of AVIF's election to assume the defense thereof, the Indemnified Party will cooperate fully with AVIF and shall bear the fees and expenses of any additional counsel retained by it, and AVIF 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 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 Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by LIFE 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 LIFE 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 Maryland 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) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of AVIF, 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 from time to time by written notice from AIM to LIFE 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. LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to use the AIM licensed marks in connection with LIFE 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 to LIFE 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 LIFE 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, LIFE 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 LIFE 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.
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, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
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Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
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UNITED LIFE & ANNUITY INSURANCE
COMPANY, on behalf of itself and its
separate accounts
Attest: /s/ SUSAN H. LAPINSKI By: /s/ JOEL S. KAPLAN
---------------------- -------------------------------
Name: Susan H. Lapinski Name: Joel S. Kaplan
Title: Secretary Title: EVP
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UNITED VARIABLE SERVICES, INC.
Attest: /s/ Joel S. Kaplan By: /s/ JOEL S. KAPLAN
---------------------- -------------------------------
Name: Joel S. Kaplan Name: Joel S. Kaplan
Title: Secretary Title: EVP
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SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Growth and Income Fund
AIM V.I. International Equity Fund
AIM V.I. Diversified Income Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
United Life & Annuity Separate Account One
FORM NUMBERS AND CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
UCV-AN-6000 - Master Contract
UCV-AN-6001 - Master Contract
UCV-AN-6002 - SpectraDirect (Group)
UCV-AN-6003 - SpectraSelect (Group)
UCV-AN-6004 - SpectraDirect (Individual)
UCV-AN-6005 - SpectraSelect (Individual)
ULV-AN-6008 - IntegraPreferred (Individual)
ULV-AN-6009 - IntegraGold (Individual)
SCHEDULE B
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM __________________________ Fund
o AIM and Design
[AIM LOGO]
EXHIBIT 10(e)
[LETTERHEAD OF FREEDMAN, LEVY, KROLL & SIMONDS]
October 1, 1998
OPINION AND CONSENT OF COUNSEL
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 1919
Houston, Texas 77046-1173
Executives:
This opinion is given in connection with the filing with the Securities and Exchange Commission ("SEC") by AIM Variable Insurance Funds, Inc., a Maryland corporation (the "Fund"), of Post-Effective Amendment No. 10 under the Securities Act of 1933 ("1933 Act") and Amendment No. 11 under the Investment Company Act of 1940 ("1940 Act") to the Fund's Registration Statement on Form N-1A (File No. 33-57340 and No. 811-7452, the "Registration Statement"), relating to an indefinite number of the Fund's four billion authorized shares of common stock, par value $.001 per share, which includes, among others, 250 million authorized shares of each of the AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund (collectively, the "Portfolios"), respectively, each Portfolio being a separate series of the Fund's common stock. The Fund's authorized shares of common stock relating to these Portfolios are hereinafter referred to collectively as the "Shares."
We have examined the following: the Fund's Articles of Incorporation, dated January 22, 1993; the Fund's Articles of Amendment, as filed with the State of Maryland on April 13, 1993, April 15, 1993, and April 12, 1995; the Fund's Articles Supplementary, as filed with the State of Maryland on April 12, 1994, February 4, 1998, and September 30, 1998; the Fund's By-Laws; relevant resolutions of the Fund's Board of Directors, dated September 26, 1998 and certified by the Fund's Assistant Secretary on September 30, 1998, authorizing the creation of each Portfolio and the issuance of the Shares, and minutes of certain meetings of the Board of Directors related thereto, including draft minutes of meetings of the Board of Directors held on August 6, 1998 and September 26, 1998; the Notification of Registration on Form N-8A filed with the SEC
FREEDMAN, LEVY, KROLL & SIMONDS
AIM Variable Insurance Funds, Inc.
October 1, 1998
under the 1940 Act on January 25, 1993; the Registration Statement as originally filed with the SEC under the 1933 Act and the 1940 Act on the same date, and the amendments thereto filed with the SEC, including Post-Effective Amendment No. 10 to the Registration Statement substantially in the form in which it is to be filed with the SEC; a Certificate of Good Standing issued by the State of Maryland on September 29, 1998; pertinent provisions of the laws of Maryland; and such other records, certificates, documents and statutes that we have deemed relevant in order to render the opinion expressed herein.
Based on the foregoing examination, we are of the opinion that:
1. The Fund is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland; and
2. The Shares to be offered for sale by the Fund, when issued in the manner contemplated by the Registration Statement, as amended, will be legally issued, fully-paid, and non-assessable.
This letter expresses our opinion as to the Maryland General Corporation Law, addressing matters such as due formation and, in effect, the authorization and issuance of shares of common stock, but does not extend to the securities or "Blue Sky" laws of Maryland or to federal securities or other laws.
We consent to the use of this opinion as an Exhibit to the Registration Statement, as amended.
Very truly your,
/s/ FREEDMAN, LEVY, KROLL & SIMONDS Freedman, Levy, Kroll & Simonds |
EXHIBIT 10(f)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our reports each dated February 3, 1998 on the financial statements and financial highlights of AIM V.I. Capital Appreciation Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Utilities Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. International Equity Fund, AIM V.I. Money Market Fund, and AIM V.I. Value Fund, each a series of AIM Variable Insurance Funds, Inc. Such financial statements and financial highlights are included in the Post-Effective Amendment No. 10 to the Registration Statement on Form N-1A of AIM Variable Insurance Funds, Inc. We also consent to the references to our Firm in such Registration Statement.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
September 28, 1998
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EXHIBIT 13(a)
April 29, 1998
Board of Directors
AIM Variable Insurance Funds, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Re: Initial Capital Investment in Four New Portfolios of AIM Variable Insurance Funds, Inc. (the "Fund")
Gentlemen:
We are purchasing shares of the Fund for the purpose of providing initial investment for the four new investment portfolios of the Fund. The purpose of this letter is to set out our understanding of the conditions of and our promises and representations concerning this investment.
1. We hereby agree to purchase shares equal to the following dollar
amount for each portfolio:
AIM V.I. Aggressive Growth Fund $ 1,000,000
AIM V.I. Balanced Fund 1,000,000
AIM V.I. Capital Development Fund 1,000,000
AIM V.I. High Yield Fund 3,000,000
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2. We understand that the initial net asset value per share for each of the portfolios named above will be $10.00.
3. We hereby represent that we are purchasing these shares solely for our own account and solely for investment purposes without any intent of distributing or reselling said shares. We further represent that disposition of said shares will only be by direct redemption to or repurchase by the Fund.
4. We hereby agree that the Fund shares purchased pursuant to this letter will be redeemed on the earlier of (i) one year from the date invested or (ii) such time as the total assets for each portfolio equal or exceed the amounts specified below:
AIM V.I. Aggressive Growth Fund $ 26,000,000
AIM V.I. Balanced Fund 26,000,000
AIM V.I. Capital Development Fund 26,000,000
AIM V.I. High Yield Fund 26,000,000
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Board of Directors April 29, 1998 Page 2 |
We further agree to provide the applicable Fund with at least 10 days' advance written notice of any intended redemption and agree that we will work with the Fund with respect to the amount of such redemption so as not to place a burden on the Fund and to facilitate normal portfolio management of the Fund.
Sincerely yours,
A I M ADVISORS, INC.
By: /s/ ROBERT H. GRAHAM
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