1
12
FREEDMAN, LEVY, KROLL & SIMONDS
WASHINGTON SQUARE
1050 CONNECTICUT AVENUE, NW
WASHINGTON, DC 20036-5366
June 23, 1999
AIM VARIABLE INSURANCE FUNDS, INC.
GT GLOBAL VARIABLE INVESTMENT SERIES
GT GLOBAL VARIABLE INVESTMENT TRUST
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
RE: PROPOSED FUND REORGANIZATIONS
Dear Directors and Trustees:
You have requested our opinion about certain United States Federal
income tax consequences of the reorganization of each of the five investment
portfolios of GT Global Variable Investment Series ("GT Series") and each of the
nine investment portfolios of GT Global Variable Investment Trust ("GT Trust")
(collectively, the "Acquired Funds") into a corresponding portfolio of AIM
Variable Insurance Funds, Inc. (collectively, the "Acquiring Funds").
We are rendering this opinion in connection with the transaction
described in the Agreement and Plan of Reorganization (the "Agreement") by and
among (a) GT Series and GT Trust (collectively, the "GT Funds"), acting on
behalf of each of their respective and separate series, (b) AIM Variable
Insurance Funds, Inc. ("AVIF"), acting on behalf of each of certain of its
series, and (c) A I M Advisors, Inc., ("AIM"), as entered into as of June 23,
1999. We adopt the applicable terms in the Agreement.
This opinion is for delivery to the Acquired Funds, the Acquiring
Funds, and their applicable shareholders. Only the Acquired Funds, the Acquiring
Funds, and their applicable shareholders may rely on this opinion.
Facts
In rendering this opinion, we have assumed the truth and accuracy of
the following:
2
GT Series and GT Trust are each a business trust under Delaware law and
an open-end management investment company operating as a series fund under the
Investment Company Act of 1940 ("1940 Act"). AVIF is a corporation under
Maryland law and an open-end management investment company operating as a series
fund under the 1940 Act. Each of the Acquired Funds and each of the Acquiring
Funds (except for AIM V.I. Global Growth and Income Fund and AIM V.I.
Telecommunications Fund, which, as of this date, have not commenced operations)
is taxed as a separate regulated investment company ("RIC") under Subchapter M
of the Internal Revenue Code of 1986, as amended ("Code").
Shares of each of the Acquired Funds and the Acquiring Funds (except
for AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund,
which, as of this date, have not commenced operations) are sold exclusively to
separate accounts of life insurance companies (the "separate accounts") in
connection with the sale by those companies of variable annuity contracts and
variable life insurance contracts ("Contracts") to "Contract Owners," and the
payment by those Contract Owners of initial and additional premiums to those
companies for those Contracts. Accordingly, with the exception of certain "seed
money" invested by AIM Advisors, Inc. in certain of the Acquiring Funds, all
shares of the Acquired and Acquiring Funds (except for AIM V.I. Global Growth
and Income Fund and AIM V.I. Telecommunications Fund, which, as of this date,
have not commenced operations) are owned by separate accounts of life insurance
companies.
Proposed Transaction
The Agreement contemplates the following transaction for each Acquired
Fund. Each transaction will constitute a separate "Reorganization" under the
Code:
(a) the acquisition of substantially all of the assets and the
assumption of all of the liabilities of each of the Acquired
Funds by the corresponding Acquiring Fund, as set forth in the
following table, in exchange solely for shares of voting stock
of those Acquiring Funds (the "voting stock");
(b) the distribution of that voting stock to shareholders of the
corresponding Acquired Fund; and
(c) the termination of each Acquired Fund as a series of either
the GT Series or the GT Trust.
GT Series and GT Trust
Funds (Acquired Funds) AVIF Funds (Acquiring Funds)
- ---------------------- ----------------------------
GT Global Variable Growth & Income Fund AIM V.I. Global Growth and Income Fund
GT Global Variable America Fund AIM V.I. Capital Appreciation Fund
3
GT Global Variable International Fund
GT Global Variable Europe Fund
GT Global Variable Natural Resources Fund
GT Global Variable Infrastructure Fund AIM V.I. International Equity Fund
GT Global Variable New Pacific Fund
GT Global Variable Latin America Fund
GT Global Variable Emerging Markets
Fund
GT Global Variable Telecommunications AIM V.I. Telecommunications Fund
Fund
GT Global Variable Strategic Income Fund
GT Global Variable Global Government AIM V.I. Diversified Income Fund
Income Fund
GT Global Variable U.S. Government AIM V.I. Government Securities Fund
Income Fund
GT Global Money Market Fund AIM V.I. Money Market Fund
Each shareholder of an Acquired Fund will receive that number of the
corresponding Acquiring Fund voting stock representing interests with an
aggregate net asset value equal to the aggregate net asset value of its shares
of the Acquired Fund ("Acquired Fund shares").
Representations
In rendering our opinion, we have examined and relied on the truth and
accuracy of the Agreement and such other documents, records, and instruments as
we have deemed necessary to enable us to render the opinion. In addition, we
have relied on the following representations of GT Funds and AVIF, as set forth
in the Agreement and in the proxy statement/prospectus included in the
registration statement that AVIF will file with the SEC on Form N-14 under the
Securities Act of 1933, that the following facts and circumstances will exist as
of the applicable closing date of each Reorganization ("Closing Date"):
(A) The fair market value of the voting stock of each Acquiring
Fund received by each shareholder of a corresponding Acquired
Fund will be approximately equal to the fair market value of
the Acquired Fund shares that such shareholder held before
the Reorganization.
(B) There is no plan or intention by the shareholders of any of
the Acquired Funds to redeem a number of shares of the voting
stock of a corresponding Acquiring Fund received in the
Reorganization that would reduce an Acquired Fund
shareholder's ownership of the voting stock to a number of
shares having a value, as of the Closing Date, of less than
50% of the value of all of the formerly outstanding
4
Acquired Fund shares as of the Closing Date. In the case of GT
Global Variable Growth & Income Fund and GT Global Variable
Telecommunications Fund, "100 percent" shall be substituted
for "50 percent" if the corresponding Acquiring Fund has not
commenced operations or issued voting stock (other than to its
investment adviser in connection with its creation) prior to
the Closing Date.
(C) Following the Reorganizations, each Acquiring Fund will
continue the historic business of the corresponding Acquired
Fund or use a significant portion of such Acquired Fund's
historic business assets in its business.
(D) At the direction of each of the Acquired Funds, each
corresponding Acquiring Fund will issue directly to each
Acquired Fund's shareholders pro rata the voting stock that
each Acquired Fund constructively receives in the
Reorganization, and each Acquired Fund will distribute its
other properties (if any) to its shareholders, on or as
promptly as practicable after the Closing Date.
(E) No Acquiring Fund has any plan or intention to reacquire any
of its voting stock issued in the Reorganization, except to
the extent that the Acquiring Fund is required by the 1940 Act
to redeem any of its shares of voting stock presented for
redemption.
(F) No Acquiring Fund plans or intends to sell or otherwise
dispose of any of the assets of the corresponding Acquired
Fund acquired in the Reorganization, except for dispositions
made in the ordinary course of its business or dispositions
necessary to maintain its status as a RIC under the Code.
(G) Each Acquiring Fund, each Acquired Fund, and each shareholder
of each Acquired Fund will pay its respective expenses, if
any, incurred in connection with the Reorganization.
(H) Each Acquiring Fund will acquire at least 90 percent of the
fair market value of the net assets, and at least 70 percent
of the fair market value of the gross assets, held by each
corresponding Acquired Fund immediately before the
Reorganization, including for this purpose any amounts used by
the Acquired Fund to pay its Reorganization expenses and all
redemptions and distributions made by the Acquired Fund
immediately before the Reorganization (other than redemptions
pursuant to a demand of a shareholder in the ordinary course
of the Acquired Fund's business as a series of an open-end
management investment company under the 1940 Act and regular,
normal dividends not in excess of the requirements of Section
852 of the Code). This representation does not apply to AIM
V.I. Global Growth and Income Fund or AIM V.I.
Telecommunications Fund, if, in the case of each such Fund,
the Fund has not commenced operations or issued voting stock
(other than to its investment adviser in connection with its
creation) prior to the Closing Date.
5
(I) Each Acquiring Fund (except for either AIM V.I. Global Growth
and Income Fund or AIM V.I. Telecommunications Fund if, in the
case of such Fund, the Fund has not commenced operations or
issued voting stock (other than to its investment adviser in
connection with its creation) prior to the Closing Date) and
each Acquired Fund has elected to be taxed as a RIC under
Section 851 of the Code and will each have qualified for the
special Federal tax treatment afforded RICs under the Code for
all taxable periods. These taxable periods include the taxable
year of each Acquiring Fund that includes the Closing Date and
the last short taxable period of each Acquired Fund ending on
the Closing Date (except for GT Global Variable Growth &
Income Fund or GT Global Variable Telecommunications Fund, if,
in the case of such Fund, the corresponding Acquiring Fund has
not commenced operations or issued voting stock (other than to
its investment adviser in connection with its creation prior
to the Closing Date)).
(J) The liabilities of each Acquired Fund assumed by the
corresponding Acquiring Fund and the liabilities to which the
transferred assets of each Acquired Fund are subject were
incurred by the Acquired Fund in the ordinary course of its
business.
(K) There is no intercorporate indebtedness existing between any
Acquiring Fund and a corresponding Acquired Fund that was
issued, acquired, or will be settled at a discount.
(L) No Acquiring Fund owns, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any
shares of an Acquired Fund from which it is receiving assets
in the Reorganization.
(M) The fair market value of the assets of each Acquired Fund
transferred to the corresponding Acquiring Fund will equal or
exceed the sum of the liabilities assumed by the corresponding
Acquiring Fund, plus the amount of liabilities, if any, to
which the transferred assets are subject.
(N) No Acquired Fund is under the jurisdiction of a court in a
United States Code Title 11 or similar case within the meaning
of Section 368(a)(3)(A) of the Code.
(O) Not more than 25 percent of the value of the total assets of
any Acquiring Fund or any Acquired Fund or any Acquired Fund
has been, is, or will be invested in the stock or securities
of any one issuer, and not more than 50 percent of the value
of the total assets of any Acquiring Fund or any Acquired Fund
has been, is, or will be invested in the stock or securities
of five or fewer issuers.
(P) Each Acquiring Fund and each Acquired Fund will have satisfied
the investment diversification requirements of Section 817(h)
of the Code for all taxable quarters since its inception,
including the last short taxable period of each Acquired Fund
ending on the Closing Date and taxable quarter of each
Acquiring Fund that includes the Closing Date. In the case of
GT Global Variable Growth & Income
6
Fund and GT Global Variable Telecommunications Fund, if the
corresponding Acquiring Fund has not commenced operations or
issued voting stock (other than to its investment adviser in
connection with its creation) prior to the Closing Date, "last
short taxable period" shall read "taxable quarter."
(Q) Immediately following the Reorganizations, the shareholders of
GT Global Variable Growth & Income Fund and GT Global Variable
Telecommunications Fund will own all of the outstanding voting
stock of the corresponding Acquiring Funds and will own such
stock solely by reason of their ownership of GT Global
Variable Growth & Income Fund and GT Global Variable
Telecommunications Fund, where the corresponding Acquiring
Fund has not commenced operations or issued voting stock
(other than to its investment adviser in connection with its
creation) prior to the Closing Date.
(R) Immediately following the Reorganizations, either AIM V.I.
Global Growth and Income Fund or AIM V.I. Telecommunications
Fund will, if it has not commenced operations or issued voting
stock (other than to its investment adviser in connection with
its creation) prior to the Closing Date, possess the same
assets and liabilities, except for assets used to pay expenses
incurred in the Reorganizations, as those possessed by the
corresponding Acquired Funds immediately prior to the
Reorganizations.
Opinion
Solely based on the foregoing facts, assumptions, and representations,
and our consideration of other questions we have deemed necessary or appropriate
for such purposes, and based on the assumption that the Reorganizations are
consummated in accordance with the terms of the Agreement, we are of the opinion
that, under current United States Federal income tax laws and regulations,
including official interpretations of the laws, in effect as of this date:
(1) The transfer of the assets of each Acquired Fund to each
corresponding Acquiring Fund in exchange for voting stock of
the Acquiring Fund distributed directly to the shareholders of
the Acquired Fund, as provided in the Agreement, will
constitute a "reorganization" within the meaning of Section
368(a)(1) of the Code, and each Acquired Fund and each
Acquiring Fund will be a "party to a reorganization" within
the meaning of Section 368(b) of the Code.
(2) In accordance with Section 361(a) and Section 361(c)(1) of the
Code, no gain or loss will be recognized by an Acquired Fund
on the transfer of its assets to the corresponding Acquiring
Fund solely in exchange for voting stock of the Acquiring Fund
and the Acquiring Fund's assumption of the Acquired Fund's
liabilities, or on the distribution of the voting stock to the
Acquired Fund's shareholders.
7
(3) In accordance with Section 1032 of the Code, no gain or loss
will be recognized by any Acquiring Fund on the receipt of
assets of its corresponding Acquired Fund in exchange for
Acquiring Fund voting stock and the Acquiring Fund's
assumption of the Acquired Fund's liabilities.
(4) In accordance with Section 354(a)(1) of the Code, no gain or
loss will be recognized by shareholders of any Acquired Fund
on the receipt of voting stock of the corresponding Acquiring
Fund in constructive exchange for their Acquired Fund shares.
(5) In accordance with Section 362(b) of the Code, the basis to
each Acquiring Fund of the assets of each corresponding
Acquired Fund transferred to it will be the same as the basis
of those assets in the hands of such Acquired Fund immediately
before the Reorganization.
(6) In accordance with Section 358(a) of the Code, an Acquired
Fund shareholder's basis for voting stock of the corresponding
Acquiring Fund received by the Acquired Fund shareholder will
be the same as the Acquired Fund shareholder's basis for
Acquired Fund shares constructively exchanged therefor.
(7) In accordance with Section 1223(1) of the Code, an Acquired
Fund shareholder's holding period for voting stock of a
corresponding Acquiring Fund will include the Acquired Fund
shareholder's holding period for the Acquired Fund shares
constructively exchanged therefor, provided that the Acquired
Fund shareholder held the Acquired Fund shares as a capital
asset.
(8) In accordance with Section 1223(2) of the Code, the holding
period for assets of an Acquired Fund transferred to its
corresponding Acquiring Fund in the Reorganizations will
include the holding period for those assets in the hands of
the Acquired Fund.
(9) For purposes of Section 381 of the Code, AIM V.I. Global
Growth and Income Fund and AIM V.I. Telecommunications Fund
will each be treated as if there had been no Reorganization,
if, in the case of each such Fund, the Fund has not commenced
operations or issued voting stock (other than to its
investment adviser in connection with its creation) prior to
the Closing Date.
(10) Each Acquired Fund and each corresponding Acquiring Fund will
be a RIC under Subchapter M and will comply with the
investment diversification requirements of Section 817(h) of
the Code. Accordingly, the Reorganizations will not produce
adverse Federal income tax consequences by reason of income or
gain for any Contract Owner.
------------------------
8
The opinion expressed in this letter represents our considered judgment
as to the status of the law at the time we render the opinion. However, the
opinion is not binding on the Internal Revenue Service or any court that could
ultimately determine the taxation of the items referred to herein. We do not
express, nor should the reader infer, any other opinion.
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement on Form N-14.
Very truly yours,
/s/ Freedman, Levy, Kroll & Simonds
-----------------------------------
Freedman, Levy, Kroll & Simonds